Written by: Cade Polter
What’s in the News
The United States economy may not be in as much trouble as believed to be at the start of this year. After showing two percent growth in the first quarter of the year, the economy tacked on a few more percentage points in the second quarter. The 2.4 percent annual growth rate in the second quarter gives people something to be optimistic about, as we’ve so far avoided the economic downturn. The Federal Reserve raised the rates once again at their latest meeting following the June rate pause. The latest hiccup in the economy has been the recent heat wave. Not only can the hot temperatures be dangerous to outdoor workers, but workers are also less productive in extremely hot settings. Considering that Phoenix has been up over 110 degrees and water off the coast of Florida has been measured up to 101 degrees, we are witnessing extreme heat.
What's Next for CRE
Looming ahead of the commercial real estate industry is the large number of loans maturing between 2023 and 2025. With the current state of the economy, renegotiating loan terms will be difficult due to the extremely high interest rates being faced.
A major increase in apartment supply has begun to help with the cost of rent throughout the country. Even in New York City, many luxury condo towers are allowing units to close with discounted rents. Demand for office space continues to decline, now nearing a 16 percent drop-off this year.
Looking Ahead
The consumer price index has decreased significantly from nine percent to nearly three percent over the past year. Consumer spending is down, along with workers in the labor market and the manufacturing industry. During all of this, stocks have stayed steady and mainly have continued to grow, which seems promising. However, analysts are warning that this may be a sign of a future downturn in the stock market.
Another thing to watch for is the Fed’s decision on interest rate hikes and at what point they stop since we are already in record-high territory. Currently, they are taking it meeting by meeting to assess the state of the economy to make sure the rate pauses and hikes are correct.
Sources: Globe St, WSJ, First Trust, Federal Reserve.