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Property Managers Seek Clues on Economy and Local Real Estate Valuations

Knowledge is power, especially in the field of property management. Behind the scenes insights about the direction of interest rates, the national economy and housing values can make a lucrative difference.

 

Recent news that home prices relative to personal income are soaring again is a good example. When the price of buying a condo or house goes ballistic compared to renting, smart managers take note. Also the direction of mortgage interest rates which are determined by the yield on the 10-Year U.S. Treasury bond is a vital economic tipping point. So is the direction of short-term interest rates. Don’t just parrot the popular mainstream media. Do like the independent reporters do and gather your own anecdotal clues and real world data.

 

As an example, the Federal Reserve and the Department of Labor keep tabs on the unemployment rate. Officially they claim it’s hovering at about a 5.5% level. Is that the way it really is in the “real world”?

 

Back in 1994, the discouraged long-term unemployed — meaning those who haven’t had a job for more than two years and are no longer collecting unemployment benefits — were defined out of existence. In other words, since 1994 when the government tabulates the number of American adults who aren’t working, they pretend that the long-term unemployed who have stopped looking don’t count.

 

According to my research, when these disenfranchised unemployed are factored into the equation, the real unemployment number is more like 22%. Savvy property managers know why that’s important! When screening rental applications you’ll want to know the sources of income and employment history of potential residents. Most local, state and federal laws permit landlords to ask.
So if more than one out of every four people who should be employed isn’t, do we really have a healthy, vibrant economy? This is a big reason why the Federal Reserve is reluctant to raise interest rates. It also explains why 47 million people depend on government assistance programs like food stamps … a rate that is increasing at an alarming rate. Are you aware of how this impacts your work region?

 

As a property manager your economic IQ will become more critically vital as clients rely on you to gauge the condition of your local economy. Now may be an opportune time to create an awareness campaign. If you’ve been a property for 15 years or more you remember the challenges your clients faced in the economic recessions of 2001-2003 and 2008-2011. Your owners and residents also remember. Contingency plans for the eventuality of another possible financial crisis during the next 24 months are both timely and instructive. Ask your clients for their thoughts, feedback and questions.

 

If real estate values are reaching a crescendo and your property values are “toppy,” now may be the right time to discuss 1031 exchanges or other tax-friendly strategies. The current economic cycle is approaching its 8th year. Zero interest rate policy (ZIRP) and Quantitative Easing (QE) programs still haven’t had enough positive results to fix all the problems.

 

You’re one of the key people your clients and residents will be looking at to help them deal with the economic challenges that lie ahead. Remember the lessons of history. Looking back over the past 30 years we’d be wise to remember what the final year of a 2-term presidency and the first year of a new presidency feels like financially.

From 1981 all the way to 2008-2009 we find important clues on the potential for major economic hurdles we’re likely to face sometime during 2016-2017. We can hope for the best, plan for the worst. In the meantime I’ll be interviewing top trend spotters, real estate analysts, and long-time veterans of the property management business. Expect more articles to help hone your economic IQ and expertise.

 

Source: http://www.propertymanager.com/2015/09/property-managers-seek-clues-on-economy-and-local-real-estate-valuations/