For a fifth consecutive year, millennials led home purchase activity, comprising 36 percent of the buyers in 2017.  The oldest millennials are now 37, and as this generation ages and starts families, a wave of potential new buyers are moving into the market.  Approximately two-thirds of first-time buyers in 2017 were millennials, but housing affordability remains a concern in 2018 as home listings under $200,000 continue to shrink.  Homes in this price tranche have fallen… Read More

Year-to-date employment growth signals economic acceleration.  Employment additions in the first four months of 2018 outpaced the previous two years over the same time frame, with 799,000 jobs added.  The quickened pace of job growth should accelerate commercial real estate demand across all sector, as companies expand payrolls and operations. Increased employment setting stage for escalating apartment demand.  The number of workers unemployed or working part-time involuntarily moved to the lowest level in the expansion,… Read More

Rising interest rates spark fear from investors but reflect persistently strong economic growth that underpins commercial real estate performance.  The 10-year Treasury rate inched past 3 percent for the first time since late 2013 following the “taper tantrum.”  Though many investors fear the rising rates will erode their investment yields, they must consider the strength and durability of the current economic cycle and how it will continue to support commercial real estate performance.

Broad-based hiring and more than 8.5 million residents are driving significant net absorption in the apartment sector, particularly due to the high cost of single-family homes.  As the pace of construction soared, net absorption outpaced new supply every year since 2012, fostering a metrowide vacancy rate that reached 2 percent by the end of 2017.  Meanwhile, development will roll over from the cycle high reached last year, providing a tailwind to the overall market.  Rent… Read More

Commercial real estate investors look to the coming year with increased optimism thanks in large part to the approval of new tax legislation. Details are still unfolding on some of the finer points of the recently passed Tax Cuts & Jobs Act.  The country is still waiting for guidance from the IRS and the Treasury Department on exactly how the new rules will be applied in a variety of situations.

Robust housing demand spurred by steady employment gains and wage growth ticked up the homeownership rate by 60 basis points to 64.2 percent at the end of 2017.  The increase was driven by a 220-basis-point advance in the homeownership rate for those under age 35 to 36.4 percent.  Though it is encouraging that this age group is actively purchasing homes, this segment remains below its pre-recession rate of 40 percent, indicating there is still room… Read More

Fed raises benchmark interest rate, plots path for additional increases.  The Federal Reserve increased the federal funds rate by 25 basis points, lifting the overnight lending rate to 1.5 percent.  While the Fed noted that the inflation outlook had moderated in recent months, an upgraded economic forecast factoring in recent tax cuts and a rollback in regulation strengthened growth projections for the next two years.  As a result, the Fed has guided toward two additional… Read More

Labor market at turning point as wage growth hits recovery high.  Meaningful wage growth has been a missing ingredient in the expansion for the past eight years.  Yet now, with unemployment holding steady at 4.1 percent, employers are finally feeling the pressure to increase wage hikes to attract and maintain their human capital.  Further evidence of tight labor conditions can be found in job openings at or near record levels of 6 million positions over… Read More

Existing single-family home sales increased a modest 1 percent over 2017 as limited for-sale inventory kept the market from gaining traction.  While many of the factors contributing to a restriction in sales velocity remain the same, changes to the tax code remove some of the incentives to home-ownership, and anticipated interest rate increases this spring will bring additional challenges to the future of the housing market.

The highly anticipated tax reform recently signed into law by President Trump retained numerous key commercial real estate provisions.  The 1031 tax-deferred exchange, the mortgage interest deduction for investment real estate and asset depreciation had few material changes.  This consistency in tax law will enable investors to move forward with most of their existing investment strategies.