Curbed reports that the Urban Land Institute recently unveiled its Emerging Trends report, prepared in conjunction with PricewaterhouseCoopers. The methodology involved interviewing 750 industry members, and surveying another 1,450. The report recommends preparing for a housing market soft landing, not a sudden crash. The institute believes confidence is high, the market is in good shape to correct itself and there is no oversupply or over-leverage issues similar to what started the Great Recession.
The market has flashed warning signs—the last year has witnessed a decline in residential permits, a softening of housing starts, and languid car sales—but instead of a precipitous drop, the real estate world may enter a sustained slow down. With unemployment already relatively low and growth expected to just inch up over the next few years—just under 2 percent annually, according to the Congressional Budget Office—we may see homeownership levels plateau. The new normal, in other words, might be a slightly small, less active version of what we see today.
Underscoring the broad feelings of uncertainty—and in some cases, surprise that the economy is still performing well—there’s a worldwide search for safe investments that in many cases is coming up short. One investor told Emerging Trends researchers that there’s “a continued shortage of deals with desirable yields; there are more investors chasing deals than there are good deals available.”
There’s a paradox of plenty taking place in the capital market, with too much money looking for a place to invest, yet most institutional investors have taken a conservative approach. The abundance of capital is a blessing and a curse; there’s liquidity on the market, but there’s also a temptation to yield to the pressure and “invest anywhere, somewhere,” which could lead to bad bets and more uncertainty.
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