The U.S. Economy: Good, Bad, or Ugly? Economists Examine What’s Ahead for Real Estate


Chicago, IL – May 16, 2014 – (RealEstateRama) — Economic positives outweigh negatives according to real estate economists who addressed a standing-room only audience last week at The Counselors of Real Estate’s Midyear conference in Austin, Texas. The three-day event is noted for bringing together thought leaders from around the world, offering balanced perspectives on the most critical issues affecting real estate.

K.C. Conway, CRE, chief economist – USA, Colliers International; Mark Dotzour, Ph.D., chief economist, Real Estate Center of Texas A & M University; and Richard Voith, Ph.D., CRE, president, Econsult Solutions, Inc. dissected the economy with moderator Hugh Kelly, Ph.D., CRE, clinical professor of real estate, Schaak Institute of Real Estate, New York University. The consensus: for most of the U.S., real estate continues to recover and opportunities exist in many sectors. Categorizing the high number of available government and private sector economic reports into memorable categories reflecting the 1966 Hollywood western movie “The Good, The Bad, and The Ugly,” the panel mostly agreed that the U.S. economy is on the upswing.

The Good

“The U.S. is not experiencing high inflation or high mortgage interest rates,” said Voith. “This is a time that it would make sense to begin infrastructure investment, including roads.” Dotzour noted that the Federal Reserve interest rate at zero has created an environment where Americans can again buy, which especially bodes well for retail spending – and investment.

Kelly polled the audience by asking those in attendance if they expect their business to do well this year and/or in 2015. Only two of the members who participated in the poll indicated a negative response.

Conway pointed to the most recent Gross Domestic Product report. “It’s an amazing report showing GDP increased at an annual rate of 0.1 percent in the first quarter,” he said. He believes it will be higher later in the year, and also noted that major corporations are planning major capital investments.

Manufacturing is also returning to the U.S., according to Dotzour, who said a number of U.S. manufacturers have announced they are bringing back manufacturing after less than optimal experiences offshore. He said patent protection is more readily available in the U.S., contributing to renewed interest in domestic manufacturing and the addition of jobs.

The influx of population into major metropolitan centers is also creating more service-sector job opportunities, according to Kelly, who used the example of New York City, where there are 1.3 million more people today than in 1980. “They need services,” he said.

Conway said real estate opportunity follows population, and that baby boomers are still driving real estate trends as they move into more densely populated cities to be near airports, healthcare facilities and activity. “Not only do the baby boomers want this, so do their children,” he said, “noting that millennials (children born between the early 1980s and about 2000) are choosing not to live in the ‘dream house in the suburbs’ but in smaller spaces in major urban areas.”

The Bad

Panelists cited the trend toward urban living as causing concern for some suburbs where housing is not selling rapidly. If young professionals are locating in cities, and their parents have moved on – either to cities or amenity-laden active-senior communities – the question must be asked: who will buy their vacated suburban housing?

Despite the encouraging economic picture portrayed by the panel, and job growth in the private sector, Voith pointed to lagging employment opportunities in the public sector as an example of the “bad.” Conway noted that technology is rapidly changing the service sector, citing as an example an impending change for the fast food industry — front-end self-service kiosks. While highly efficient, the effect on employment will be dramatic. Conway asked, “What do we do with the 40 percent of kids who don’t graduate from high school when this job category is eliminated – how do we absorb them into the labor force?”

He explained that despite economic recovery, there is a large segment of the American population that does not share the wealth. He said wages are not increasing, and this is reflected in earnings reports of retailers such as Target and dollar stores, where consumer purchasing of lower-margin basic household goods is increasingly outpacing purchases of higher-margin items such as toys.

The Ugly

While not taking a political position, the panelists noted that government officials have deferred action on a number of significant economic issues including that of the U.S. debt ceiling until March 2015. The “no compromise” culture in Washington is also viewed as problematic.

A Call to Action:

Noting that the U.S. currently has a shortage of skilled labor, Dotzour called for a change in high school counseling to direct more students toward careers in mechanics, welding, HVAC repair, and related job categories. This could potentially contribute to absorption of workers displaced by technology in the service or manufacturing sectors in years to come.

In conclusion, Kelly challenged the panelists and real estate executives in the audience to create opportunities for young people. He cited an overall decline in internships, the time-tested entry level position that provides training in the real estate industry, and asked the audience to consider offering a promising young person an internship now.

Conway also called for the industry to make efforts to help entrepreneurs obtain space to house innovative companies. He noted that some of the great ideas that will shape our future will be conceived by young entrepreneurs starting companies on shoestring budgets today. He said they will need help from industry leaders to find appropriate and affordable office and manufacturing space, and assistance navigating the intricacies of commercial mortgages and leases, to be able to move their ideas forward.

The Counselors of Real Estate®, established in 1953, is an international group of high profile professionals including members of prominent real estate, financial, legal and accounting firms as well as leaders of government and academia who provide expert, objective advice on complex real property situations and land-related matters. Membership is selective, extended by invitation only. The organization’s CRE® (Counselor of Real Estate) credential is granted to all members in recognition of superior problem solving ability in various areas of real estate counseling. Only 1,100 people in the world hold the CRE credential. For more information, contact The Counselors of Real Estate, 430 N. Michigan Avenue, Chicago, IL 60611; 312/329.8427;

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