Since the doldrums of the Great Recession, the U.S. economy has rebounded nicely and has been on stable footing in recent years. In one of the most-anticipated sessions at this year’s MFE Conference (MFEC) in Las Vegas in September, two well-known economists predicted that trend will continue in the next 12 to 18 months.
John Sebree, first vice president and national director of Marcus & Millichap’s National Multi Housing Group, and Ryan Severino, chief economist at JLL, each voiced optimism during the “Annual Economic Outlook and State of the Industry Report” session at the MFEC.
“We’re in the Goldilocks economy,” Severino said toward the tail end of the session. “It’s not too hot, it’s not too cold. We could continue on at this 2%-ish real GDP growth without it triggering the imbalances that usually build up in the economy that cause an expansion to end. We’re not seeing excessive leverage; we’re not seeing inflation run rampant; we’re not seeing the wage price spiral … so, as a consequence of that, I still think we have some pretty good runway here before we have to seriously start to think about the next recession.”
With respect to multifamily housing, Sebree said there aren’t any markets he’s overly concerned about, adding that some markets may be softer than others depending on how quickly new units are absorbed. “Outside of a big surprise, a global or natural big surprise, I think we’re kind of continuing to move along in the same direction,” he said.
Barring anything unforeseen, Sebree said he doesn’t think “there’s any market where there’s blood in the streets. I don’t think there’s any market that hits a big downfall.”
The conference took place a few days before Hurricane Maria devastated Puerto Rico, but the impacts of hurricanes Harvey and Irma in Texas and Florida were discussed. Economically, Severino said, the storms’ short-term effects will be worked out in about a year. But their true impact won’t be realized for decades.
Severino focused most of his presentation on demographics and their impact on the economy. On average, he said, 10,000 people are retiring every day in the U.S. and there aren’t enough Gen Xers to fill those positions. Moreover, young workers are concentrated in certain cities, most notably Austin, Texas; Salt Lake City; and Columbus, Ohio. Companies will be drawn to cities with a higher concentration of young workers, thereby impacting the entire economy, he said.
Sebree said there aren’t any markets in danger of being overbuilt, and, from a national perspective, the U.S. has experienced a housing undersupply over the past decade or so.
“I’ve seen people lose money in every market in every cycle,” Sebree said. “There are no hidden gems left, but there’s still plenty of opportunity out there.”
According to Sebree, the U.S. is on track to deliver about 370,000 units this year and about 300,000 units in 2018. But, with natural disasters fresh in everyone’s mind, nothing is certain.
“What’s going to happen to the time lines on stuff that’s under construction right now as materials and labor get sucked into Houston’s and South Florida’s rebuilding efforts?” Sebree asked rhetorically.
We’ll wait and see.
