Investor Intel: Economy in Slow Mo, but Americans are Happy

Contributing Writer, B2R Finance | News,Real Estate,Real Estate Investment

The U.S. economy has continued its modest growth over the past six weeks, with the housing market and consumer spending as the main driver, according to data released by the Fed Wednesday in its periodical “Beige Book,” which offers an anecdotal snapshot of current economic conditions. Activity picked up “moderately” in three of 12 regional bank districts: Minneapolis, Dallas and San Francisco. This is a slight downgrade from its previous report, which said the economy expanded moderately in six regions. Nearly all Fed districts reported rising residential home prices and more sales volume since the previous report was issued.

The U.S. labor market is also strong, as jobless claims for the week ending Oct. 10th declined to 255,000, bringing the monthly average to its lowest level since December 1973. However, job openings did fall in August thanks to slowing global economic growth.

Consumer attitudes appear to be rising along with rebounding stock prices. The Bloomberg Consumer Comfort Index rose to 45.2 in the period that ended Oct. 11 from 44.8. The measure is up 5 points over the past four weeks, the largest increase for any comparable period since May 2009. A measure of Americans’ sentiment about their finances also climbed to the second-highest level since October 2007. Further, the Thomson Reuters/University of Michigan’s preliminary October reading on the index was 92.1. That was higher than the previous month’s reading of 87.2 and Reuters’ estimates for 89.

Does this mean raising rents for 2016 will be easier for tenants to absorb? Perhaps. In what could very well be a parallel trend for the single-family rental market, 88 percent of apartment property managers nationwide raised the rent in the past 12 months, according to a recent survey. Of these property managers, 68 percent predict that rental rates will continue to rise in the next year by an average of 8 percent. Unsurprising, given that national vacancy rates in the second quarter of 2015 were 6.8 percent for rental housing, according to the U.S. Census. That’s down nearly a full percentage point from the same time in 2014. The last time vacancy rates dipped below 6.8 percent was the fourth quarter of 1985.

So where are real estate investors putting their money? In PricewaterhouseCoopers and Urban Land Institute’s annual “Emerging Trends in Real Estate 2016” report, top cities were Dallas, Austin, Charlotte, Seattle, Atlanta, Denver and Nashville. In BiggerPockets’ 2015 Real Estate Investment Market Index, top performers for residential returns were Dallas, Denver, Miami, Houston, Atlanta, Tampa and Detroit. The worst? Hartford, Salt Lake City, Louisville and Milwaukee.

As the colder months approach and we enter a seasonal period of housing-activity hibernation, we’ll see how the U.S. economy fares.

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