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ULI’s Real Estate Economic Outlook

Posted on July 11, 2019

If we all could predict the future, everyone would be jumping into real estate investment and development. Although no one has a crystal ball, the Urban Land Institute has an impressive track record when it comes to forecasting for trends in the global real estate industry. ULI’s most recent Real Estate Economic Forecast was presented at its Spring Convention in Nashville. A member of the ULI Recreational Council, Stephann Cotton, sat with us to break down what those predictions mean for the industry.

Real Estate Market Stability

“If you look at the different sectors of the real estate market, and you look at the projected growth, virtually all sectors are almost flatlined from 2019 to 2021. Housing inventory has stabilized with between 850,000 and 900,000 new residential units being developed per year for the next three years.” A stabilized market can go either way for sellers and buyers. Optimists believe that it shows younger buyers catching up and spending on necessities such as homes and 401(k)s. Pessimists believe that buyers remember the ‘08 recession and are spending more cautiously, thus reducing the amount that they spend on large purchases and add-ons. How the market will respond to this stabilization is another story.

For now, ULI’s real estate economic outlook predicts some slight price increases, but for Cotton, what’s worth paying attention to is seeing where the market stops. “If you look at the different sectors of the real estate market, and you look at the projected growth…virtually all sectors are nearly flat. Industrial real estate is slightly improved due to the rebound of US manufacturing and retail is slightly lower due to the continued pressure from online retailers.” So if the market is stable, what is the real takeaway from this information?

Real Estate Market Knowledge

“Understanding that one market will stabilize at a lower percentage than another lets both buyers and sellers recognize the true value of a piece of real estate,” Cotton explained. “As we reach the peak of pricing, people are wondering, ‘Am I getting ready to buy at the beginning of another cycle?’”

Real Estate Outlook is Good

“The prediction of stability should calm these fears. No one is predicting a drastic cycle, and if everything remains stable, inventories will continue to decline and the cost to build will increase.”

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