International trade uncertainties are making some people nervous, but overall the economy is in great shape and we can expect good things for the national land market in 2020.
Now that the New Year is here and the spring market is around the corner, I thought this would be a good time to check in with a national land market updated. (FULL DISCLOSURE: This is a summary of a recent blog post over at the Realtors Land Institute).
To get started, let’s take a look at consumer confidence.
So, the bottom line is this – even though we’re more politically polarized than ever, consumer confidence is exceptionally high. This is largely due to the very low unemployment rate and record high real estate values.
Because of the high levels of consumer confidence, consumers are spending money, which is fueling GDP growth. On top of that, there is virtually no over-borrowing on personal consumable goods. Instead, all of this consumer spending is backed by employment growth and rising wages.
This is all good for consumers, but on the corporate side of things, there is some uncertainty related to the current international trade environment.
So, while corporate profits remain strong and companies have benefited from corporate tax rate cuts, corporate executives are publicly expressing caution related to international trade uncertainties.
From a real estate perspective, this has translated to a reduction in commercial leasing activity and a decline in commercial construction spending.
However, there is reason to be optimistic about the residential construction sector and the overall demand for land for new residential construction.
You might have noticed that home prices and rents have been rising for several years now. This is related to the fact that we are facing a housing a shortage—especially when it comes to affordable housing.
Vacancy rates are near historic lows, and new construction is struggling to keep up with the demand for new housing units. According to some estimates, at normal rates of construction, it would take another 3 to 4 years to fulfill the current demand for housing.
This suggests that builders need to accelerate the rate of construction, but in order to do that, they need additional labor, land, financing, and materials. And the fact is, there just isn’t enough of all of these things to match the demand.
All of this should be pretty good for residential and transitional land values.
In the commercial space, with the growing demand for distribution centers to support e-commerce sales, industrial properties are doing well – especially warehouse space removed from urban centers and located near major transportation arteries.
This bodes well for land values in certain outlying industrial areas.
Finally, interest rates remain near historic lows, which means buyers still have good purchasing power. And most experts expect the Federal Reserve to keep interest rates low at least through the end of 2020.
All in all, despite some uncertainties related to the international trade environment, the national land and real estate market is doing very well.
Thinking about buying selling land in 2020? Take a look at our land for sale in Northern Virginia and contact Jonathan at 202-750-4050 if you have any questions about the local market.