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January 11, 2019 at 02:16 PM
Calvin Schnure and Brad Case, economists at Nareit, this week published their outlooks for the U.S. economy and for the REIT market in 2019.
Schnure, senior vice president for research and economic analysis, downplays concerns about a major economic slowdown, and makes the case that solid fundamentals will provide the impetus for the economy and the real estate market to keep growing.
He sees a likely slowing of GDP growth, but not a sharp letup given healthy business activity and consumer demand that can handle moderately higher interest rates. He puts the odds of slowing to less than 2.5% at 20%, slight easing to between 2.5% and 3% at 60% and accelerating above 3% at 20%.
He notes, however, that energy prices and trade wars are wildcards.
Inflation, according to Schnure, is likely to rise only between 1.7% and 2.2% by the end of 2019, which would be in line with the Federal Reserve’s target.
He says there is a seven in 10 chance that the Fed will limit itself to just one more rate increase in 2019, likely in the first half of the year. This will result in a federal funds rate of 2.75% or less by year-end.
Schnure sees a 50% chance that long-term interest rates will end the year at between 3.25% and 3.75%. “Even with modest increases, these financing rates are still low and are favorable for real estate,” he says.
“The next year is likely to be a good but not great one for real estate, with solid job growth, consumer spending and business activity driving demand for nearly all types of commercial real estate.”
