The Residential Real Estate Market: Insight into the Future
May 12, 2017
Over time, real estate is often one of the safest and most lucrative investments. But the key phrase is “over time.”
Markets fluctuate, recessions come and go, and downturns often hit real estate markets the hardest. All of which begs the question: Are we headed for a recession or any kind of real estate correction any time soon?
It seems as though the Great Recession was just yesterday, but it ended in Massachusetts in 2009. That’s eight years ago.
History suggests that means another one is on the way. It’s worth noting that the United States has experienced a total of 47 recessions in the last 200 years. From the end of one recession to the beginning of the next one, that time span for the last dozen has been about six years. The longest span was about 10 years.
Recently, Mass. tax revenues dipped and unemployment crept up. In January, state tax revenue collections totaled $2.70 billion, fell to $1.18 billion in February, and came back up to $2.28 billion in March (however, still lower than January’s revenue). In April 2016, the unemployment rate in Massachusetts has consistently gone down — until January 2017. At this time, the unemployment rate increased from 3.1% to 3.2%, and then up to 3.4% in February.
Are we headed for a recession already? According The Boston Globe’s Evan Horowitz, this means that “either we’re on track to break the record for the longest period of sustained economic growth, or there will be a recession under President Donald Trump.”
Some experts say Boston, with its rich and diverse knowledge economy, is recession-proof. Our unemployment rate is among the best in the nation, and the city has seen an unparalleled building boom, whether it is residential, office space, retail, or hospitality. Additionally, the city’s colleges and universities bring in many international students, and the city itself is generally a beneficiary of a rich, global mix, which brings more economic activity to the city. And we certainly see strength in today’s economy.
JM Electrical has worked on a number of multiresidential developments, ranging from small-scale, five-story buildings like Hub 25 in Dorchester, to skyscrapers like the 60-story Millennium Tower in downtown Boston. And we continue to be busy working on residential buildings, as we are currently onsite at Serenity Apartments in Mission Hill and Lovejoy Wharf — both expected to be complete within the next two months.
However, those in the development and construction business would be wise to be ready. A slowdown in 2019 or 2020 seems inevitable (and the continued tumult in D.C. could prompt one earlier). That means be careful with expenses, invest wisely in expansion, and realize that the ROI may not be so quick.