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At Resource, understanding the economy allows us to make more informed investment decisions. I’m going to touch on a few key areas that we focus on.
The unemployment rate is a popular benchmark to understand the economy, and it’s generally been improving since the Great Recession. Continued low unemployment improves all sectors of real estate, specifically retail and hotels.
Hourly wage growth had been flat following the Recession, but it’s started to improve at a modest pace. It’s a good indicator that jobs are being added to the economy, and more money is being paid for those jobs.
GDP (gross domestic product) has been growing modestly since 2009 coming out of the Great Recession, but the growth rate is far off its growth from the late 1990s. We’ve had very little overbuilding in real estate in the United States, except for a few areas like expensive apartments and condominiums in high price cities. Other than that, real estate markets remain in check. The continued increase in construction in real estate trades helps support solid economic expansion.
Interest rates are an important factor in understanding the real estate markets and the economy. Currently, we are in a 30-year downward trend in interest rates. This was preceded by a 30-year upward trend. Generally, real estate performs well as the economy grows. And as rates are likely to remain low for some time, we expect that this is good for real estate markets.
At Resource, we focus our real estate investment strategies on understanding what’s happening in the economy and how it impacts real estate markets.