The Counselors of Real Estate has identified the current and emerging issues expected to have the most significant impact on real estate in 2019 and 2020, with U.S. infrastructure being a primary concern of the 1,100-member organization.
The University of Michigan Survey bumped up in May and returned to the high point it had achieved in September 2018. Similarly, The Conference Board’s index bounced back in May to Fall 2018 levels, which was near an 18-year high. Both measures, however, had plummeted severely over the winter months. While the confidence polls did not follow the patterns of the overall economy, as measured by GDP (very strong through the period 2nd quarter 2018 through 1st quarter 2019, albeit with deceleration toward the end of last year), they did move in close parallel with the stock market, which plummeted from mid-September through year-end.
What the impact of May 2019’s 6.4 percent plunge on Wall Street will have remains unclear (especially with a rebound in early June). The deceleration in employment over the first five months of 2019, which averaged just 164,000 jobs added per month (versus 223,000 in 2018, and the slowest rate of job gains since 2010) may combine with financial market jitters over tariffs and the inverted yield curve to weaken confidence. End-of-cycle discussions are now becoming more prominent in the business and popular press. Taken together, high but volatile levels of confidence have captured the attention of the Counselors responding to our May 2019 survey.
Comments from CREs are focusing not so much on confidence per se but on the impact of shaky confidence on behaviors. “Confidence is fundamental for decisions to invest, spend or not spend, increase or decrease activity. It is based – correctly or incorrectly – on all other information,” said one Counselor. Another CRE, focused on commercial real estate demand, noted, “A business leader’s confidence drives hiring decisions and capital expenditure commitments for the future.” The comments of other Counselors recognized the tight linkage between both consumer and business confidence on other topics on our list of Top 10 issues.
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