0
0
0

Consumer confidence and strong investor interest: Miami’s strengths in 2020

by Meg White

Every year, the Urban Land Institute examines an important element of the market for readers of Miami Agent magazine: the intersection of American cities and real estate. Their Emerging Trends in Real Estate report offers a forecast of what exactly municipalities have going for them, and where possible threats lurk in the near future.

 Who’s driving the bus?

One important element of economic forecasting is understanding where both growth and potential instability will come from in the near and far terms. At an economic forecast event held in Chicago dedicated to dissecting the report, Mark Eppli, director of the James A. Graaskamp Center at the University of Wisconsin-Madison predicted that GDP will slow over the next year, but that much of the decrease in activity will come from cautious business investors, not worried consumers.

“GDP will migrate from 2 per to 1 percent across 2020,” he said. “Business investment will remain narrowly negative… [but] I don’t see a trigger that will have consumers pull back.”

Eppli noted that business owners had a golden opportunity to demonstrate optimism with the most recent tax reform bill. “They have the money. What did they do with the money? …They end up buying back their own shares,” he said. “Their actions indicate that they aren’t that confident” in the economy.

Instead of being driven by the business world, Eppli noted that the economy is running on high consumer sentiment. While the business community is focused on political instability, he said, “That’s just noise to most consumers.”

But how the public is feeling is not a great measure of future growth, because it’s more of a lagging indicator than a leading one. “Consumer sentiment changes like that,” Eppli added.

The local POV

In terms of its overall real estate prospects, Miami ranked 21 out of 80, which puts it just behind ULI’s “strong” category, but significantly ahead of the organization’s “average” category. The area fell to No. 50 when it comes to homebuilding prospects, however.

Still, researchers noted that Miami should feel emboldened to boast of its ability to attract investor demand, noting that between 2016 and early 2019 the area secured investment volumes of 1.4 percent of the national total, which is considerably higher than its 0.8 percent share of the country’s population.

Still, despite positive economic numbers and Miami’s international reputation as a market worth investing in, there are also reasons to be concerned, according to the report: “Storm clouds are no strangers here. Geopolitical tensions are biting, with restrictive immigration compromising the labor force, tariffs affecting trade flows, and the already consequential sea-level rise pressing local governments and the real estate community to concentrate immediate attention on resilience.”

Looming problems in the residential sector

Despite an overall positive economic outlook, affordability problems threaten the residential market. The ULI report referred to residential real estate as “the great unraveling” and noted that “housing is a mess and getting worse.”

The researchers noted that the high cost of housing is causing municipalities and states to look for solutions. Some are turning to partnerships with large employers to create workforce housing, while others are looking at rent control as a solution. “Politics? Sure. But the politics only arise as a result of the market conditions,” the report quipped. Still, researchers noted that many cash-strapped residents in high-cost areas can’t wait for such fixes and are exploring avenues such as co-living as a solution.

Whatever the case, ULI’s study maintained a sunny disposition when it comes to the ability of the industry to evolve to meet market needs. “If we are at a critical moment for housing, perhaps that is not entirely such a bad thing,” researchers said. “The real estate industry can be counted on to adapt, and the trend in housing is almost assuredly not the ‘same old’ extension of the direction taken in the decade just past.”

Read More Related to This Post

Join the conversation

New Subscribe

  • This field is for validation purposes and should be left unchanged.