The United States is big country. Multifamily is a big industry housing millions of people. There are things occurring now that will significantly impact investment properties in the multifamily business. Sustaining your business through macro-economic occurances requires fiscal and managerial staying power.
I sometimes wonder who really controls the news flow. Mind you, it doesnt keep me up at night. However I do wonder, as in recent weeks, what news items are NOT presented based on the incident in the gulf of Mexico. British Petroleum (BP) has probably never had more press. What things are we NOT hearing about because of the the media focus on BP? What macro-economic storylines are below the radar screen? Here are some things I think about.
As with BP, none of us can predict the future
Economic uncertainty (jobs jobs jobs). Jobs are growing, but jobs are growing slowly. If Gross Domestic Product (GDP) revisions continue reflecting 1% or 2% annualized growth, well then, job growth will continue at a snails pace, meaning unemployment will remain high. With high unemployment and Mr. & Mrs. Main Street at break-even or worse on their personal residence, people will continue to be less likely to relocate (like being tied to a very heavy rock- maybe you can move it, maybe not). Investment properties in the shadow rental market persist (meaning homes that are usually owner occupied are renter occupied). The world can no longer place their bets on the American consumer bailing out the world economy.
Municipal sustainability. Depending on whether you listen to Fox News or MSNBC the dismal level of fiscal pall that states and municipalities are in varies. Regardless of the degrees, we can presume that many social services will dwindle as the costs of essential services increase even as tax revenues fall or remain flat. That said, government supplied utility costs will continue to rise. Perhaps not at the same rate as medical (inflationary) rates, but certainly at rates higher than nominal inflation. This directly impacts the costs of operating multifamily assets.
Interest rate increases. While not presumed to increase “any time soon” this is an undefined timetable. It would be better for the country as a whole to see rates rise some as the artificial rates we have now are just not sustainable nor healthy for a sustainable business sector.
Insurance Premium Velocity. While insurance premiums seem to have taken a momentary break in their trajectory this will not hold. Wind, rain, snow and floods remain.
Multifamily Occupancy Levels. Vigilance. Property’s compete on a local level. While it is necessary to keep an eye on regional and national happenings so as not to get completely blindsided by impending trends, both hands must remain on the wheel in your local marketplace to retain competitiveness.
One last thing. The mid-term elections are this coming November. That’s all well and fine. Unfortunately, presidential politics (for 2012!) will no doubt rev up soon thereafter. Political activism is great, its part of living in a free country where we elect our leaders. Just remember there is a myriad of other events occurring that effect your business, and very likely more so, than a single election day two years out from now. Remember to Vote. Remember also to keep your eyes squarely on the prize in front of you.