Thoughts on recent CRE & Economy Presentation by Dr Ted Jones

Earlier this week, I was invited to attend a presentation by Dr Ted Jones.  As always, Dr Jones never disappoints with his entertaining and candid conversation on the economy and how it impacts real estate.  I have always appreciated his insight and high level take on the economy and how those changes really funnel into the real estate markets.

Here are some of my key takeaways that I found very insightful for those involved in the commercial real estate industry specifically:
-Hurricanes(Irma and Harvey) have a short run pain but long run help the economy.
-There is roughly 91 million Millennials aged from 16-35 (Boomers are 76 million)
-Millennials make up the number 1 home buying segment
-70% of Millennials shopping is done in stores
-Retail should see a boom run for the next 13 years as more Millennials buy homes because of all the additional items they will need to purchase along with the home (think Home Furnishings)
-Retail sales is about 50% of the economy and a potential recession in this section would occur 12+ years at this point
-Commercial Sales Volume is down 21.2% from last year

Regarding some of the proposed Tax Changes:
-If corporate tax is cut from 35% to 20% – that could easily bring back almost $3 trillion to the US economy
-Carried Interest has a high probability of elmination
-Basically, the “fatcats” that own real estate are in the crosshairs because of the current President being heavy in real estate
-The uncertainty of the tax changes has put the brakes on the High-End Housing market because of potential interest deduction removal
-Ending the 1031 exchange is very possible
-Reducing the Capital Gains Tax to 15% is very possible
-Potential of elimination of Component Depreciation and Accelerated Depreciation

Phoenix Metro Specific:
-Phoenix is doing 40% better than the rest of the US as it relates to job growth
-We have a strong job market and a good/stable housing market
-This will have a positive impact on commercial real estate demand for the foreseeable future
-Phoenix has one of the strongest CRE markets in the entire country
-We are the biggest benefactor of the negative cost of housing/taxes/etc in CA

Ending thoughts:
-If there is a recession, it would be very short lived
-Interest rates (specifically the 10 year) will eventually get to the 3-3.5% range and that is where it will probably top out
-US is almost energy independent because of Natural Gas/Oil production
-Concerns are over 1-Return of the ARMs and 2nd loans 2-Inflation (UPS raised rates by 4.9%, FedEx doing the same)

Overall, it was very positive news even with all the recent challenges of natural disasters and political unrest in Washington DC.