MAY 2018 REAL ESTATE OUTLOOK PREDICTIONS

“Los Angeles, California” In recent times, we have seen a whirlwind of economic and political events and changes that have had an impact on the real estate business. The total impact of these advancements has resulted in considerably increased probabilities of adverse outcomes. Our projections for growth and inflation over the last month have not been met by the data that we have collected. In our opinion, the contradictory data points to a momentary halt in the expansion process. If inflation numbers are lower, this might in fact indicate that labor costs are somewhat higher, and it could also indicate that the pollyanna effect will continue. The efforts of the federal government to tighten monetary policy are now underway. For our part, we see an increase in a number of hazards. To begin, there is the possibility that the inquiry into Chinese intellectual property abuses may lead to an increase in the level of tensions in the trade sector. Secondly, the dangers that are present in the Middle East are once again increasing. In the third place, the escalating tensions with European nations may make an already challenging reform process much more challenging. In addition to this, the rates on the United States Treasury are becoming more stable. As of right now, we do not believe that these changes will have a significant impact on the real estate markets. Nevertheless, if there is a return to a scenario in which the risk associated with the United States dollar is increasing, this disturbance may lead prices to become volatile once again. Treasury rates have plateaued once again, although they are still quite near to the lows that they reached recently. We are of the opinion that there is not a significant reason to be concerned at this time. The negative adjustment of the first quarter of 2018 in the United States is somewhat offset by modest higher revision for the fourth quarter of 2017, and employment has remained solid during this period. Overall, it seems that growth in the first quarter continued to be at a rate of three percent, and it is anticipated that growth would go up later in the year as a result of the benefits of the fiscal stimulus that the United States is implementing. We feel that this has sustained values of the business over the last several years. This is owing to the fact that the industry has had solid growth and low inflation. It is important to bear in mind that there are questions during the time of modest volatility in global financial markets. The pollyanna effect may continue for a little while longer, according to the most current data that has been collected. As a result, we are continuing to adhere to our premise that economic development is possible. Despite the fact that trade tensions are still there, it is still too early to draw any conclusions about when the current upswing will ultimately come to an end. According to statistics provided by amherst holdings, the Los Angeles Times recently revealed that institutional investors purchased a greater number of single-family rental houses in 2017 than they did in prior years. This represents the first rise in the number of such purchases since 2013. Wall Street companies such as Blackstone Group and Tom Barrack’s Colonial Capital Inc. surged into the single-family rental sector when the housing markets in the United States were hurting from the foreclosure crisis and properties were available at low prices. Shortly after the feeding frenzy began, it ended. Large landlords had already begun to reduce their acquisitions by the year 2014, as the number of foreclosures had decreased and they were confronted with the issue of managing a large number of residences. Now, they are purchasing once again, despite the fact that landlords of single-family homes are increasing rents at a quicker rate than those of apartment owners. While landlords of multifamily properties are experiencing price pressure as a result of increased supply, relatively few single-family houses are constructed with the intention of being rented out. In an interview, Gary Berman, the chief executive officer of Tricon Capital Group Inc., said that the demand for rental properties “feels like it’s insatiable for the time being.” According to amherst, which studied data from corelogic inc., Tricon, which is the third-largest publicly listed owner of rental houses in the United States, purchased around 850 properties in the previous year. Invitation Homes Inc. and American Homes 4 Rent are second and third, respectively. According to estimates, Cerberus Capital Management was the most significant buyer, purchasing around 5,100 homes. Through its business, Main Street Renewal, Amherst personally purchased about 4,900 residential properties. Another aspect is contributing to the increased acquisitiveness that may be seen on Wall Street. Greg Rand, the chief executive officer of ownamerica, an online platform that facilitates the buying and selling of rental residences, said that major landlords are finding it simpler to get finance for their acquisitions now that their enterprises have reached a more mature stage. Due to the fact that rental properties are often more stable than other major property kinds, they should continue to be in a position of superiority. This consistency may be attributed to three very significant factors: First, in comparison to other forms of real estate investments, they are less susceptible to fluctuations in economic cycles in terms of occupancy. It makes no difference whether loan rates and property prices are high or low; rental properties are often more inexpensive than other types of real estate. 2. The leases on rental properties are shorter, which means that they provide a higher level of protection against inflation in comparison to the long-term leases that are linked with other assets. In other words, rents are more likely to be subject to negotiation. 3. The pool of potential renters for rental properties is much larger than the pool for other kinds of properties. When compared to industrial and commercial buildings, which often have a limited number of tenants from whom to pick, this provides a more steady occupancy rate. in regard to the author: The center for real estate studies is a research organization that focuses on real estate, and Eugene E. Vollucci serves as the director of the Institute. He has written a number of articles and four books that have become bestsellers, all of them are on real estate rental income investment and taxes. Please visit our website at calstatecompanies.com in order to get a subscription to market cycles and to acquire other information on the center for real estate research on our website.