Uncertainty, Globalization, Real Estate, and a Little Trump
â˘Download as PPTX, PDFâ˘
1 likeâ˘185 views
The document discusses how uncertainty affects real estate markets. It notes that markets dislike uncertainty created by political events, security issues, and macroeconomic factors. This induces "commitment problems" where people wait to make real estate decisions. Factors like a homebuyer's social network can also impact their perceptions of risk. However, programs like the first-time homebuyer tax credit can help overcome inertia by coordinating buyers and signaling a stabilizing market. While some places benefit from globalization, others are negatively impacted, creating income inequality. Overall, uncertain times provide opportunities for those who obtain objective information to make decisions with confidence.
Recommended
Recommended
More Related Content
Similar to Uncertainty, Globalization, Real Estate, and a Little Trump
Similar to Uncertainty, Globalization, Real Estate, and a Little Trump (20)
More from Inman News
More from Inman News (20)
Recently uploaded
Recently uploaded (20)
Uncertainty, Globalization, Real Estate, and a Little Trump
- 1. Uncertainty, Globalization, Real Estate, and a Little Trump Professor Christopher Palmer Fisher Center for Real Estate and Urban Economics University of California at Berkeley, Haas School of Business
- 2. Markets Hate Uncertainty ⢠Political uncertainty, security uncertainty ⢠Brexit, elections, regulation ⢠Terrorist attacks, coup in Turkey ⢠Macroeconomic uncertainty ⢠What will happen to interest rates? ⢠What will happen with the debt ceiling? ⢠True for Wall St. traders and Fortune 500 businesses
- 3. Uncertainty and Real Estate ⢠Whatâs so bad about uncertainty? ⢠Induces commitment problems! ⢠âLetâs wait and see how this shakes outâŚâ ⢠True for residential real estate! Think through the psyche of a⌠⢠First-time homebuyer: buy vs. rent + household formation ⢠Family trading up ⢠Second-home buyer ⢠Add to it all the micro-economic uncertainty of a given family
- 4. Whatâs Facebook got to do with it? ⢠Your perceptions of real estateâs riskiness is highly correlated with who your friends are! ⢠Extra source of uncertainty/volatility in personal perceptions ⢠Describe this study from friends of mine with a map or graphic or two ⢠(Covered by Inman here: http://www.inman.com/2016/06/01/can-facebook- friends-nudge-you-into-homeownership/) ⢠Something to be aware of when talking with clientsâopportunity to bring objective information when they are being heavily influenced by their far-flung network
- 5. Can Commitment Problems be Overcome? ⢠1-2 slides on First-time Homebuyer Tax Credit: pushed by a former- RealtorÂŽ then-Senator Isaacson. Actually pretty successful. My research on its effectiveness along with recent Berger/Zwick evidence. Show graph of sales. Quick contrast with Cash-for-Clunkers. ⢠Only $8,000. Why was it so effective? Most of us donât get excited about a 4% discount off jeans at the mall. Because it served as a coordination point between buyers and signals and a strong signal that the market was stabilizing and now is the time to be opportunistic again.
- 6. Winners and Losers from Globalization
- 7. The Geography of Globalization
- 8. Income Inequality and Globalization
- 9. The Silver Lining of Missing out on a Boom
- 10. Summing Up 1. Uncertain times are incredible opportunities 2. Your own situation biases you. Get objective 411! 3. Little things can help overcome inertia 4. There are silver linings to turmoil 5. Stress test your own situation for reality check and the confidence to be opportunistic in the face of uncertainty.
Editor's Notes
- Talk through why markets hate uncertainty. Iâm going to make a decision today, and I donât know what the rules of the game are going to be tomorrow. Dillutes the expected payoff, constitutes some extra risk.
- Will reformat into 1-2 slides with a map and very few bullet points.
- Will reformat into 1-2 slides with a graph and very brief bullet points.
- Other sources of uncertainty. The Trump slide. Almost everyone has seen tremendous gains in income over the last 20 years. This now-famous graph from former-World Bank Economist Brank Milanovic shows how much your standard of living has grown in the past 20 years based on where you were in the world income distribution. The poorest 25 percent saw their incomes grow by 15-40%. The segment of the world income distribution that corresponds to the Asian Middle Class? They saw their income grow by almost 80% during the past 20 years. Ditto with the top 1% in the U.S. You know who hasnât seen basically any growth in standard of living? The lower middle class in the U.S. Their formerly high-paying manufacturing jobs have been automated and outsourced and they arenât coming back. They grew up and prepared for a specific world that now doesnât exist anymore.
- Source: Autor et al. (2013) AER piece. Talk through the following: for the average person, globalization is great. Cheaper prices, more variety, more opportunities. But while good on average, not good for everybody. Low-skill occupations have particularly suffered from globalization, in large part because at lower skill levels, itâs not terribly hard to find someone else in the world that will do it for cheaper, even when you factor in shipping. If your job was making the thing that is now made in China, you are worse off. That burden falls very differently across the country. Some places were very exposed to the impact of trade with China, other placesânot so much.
- Source: Chetverikov, Larsen and Palmer (2015) And within those affected areas? Much much worse for low-income people. They were twice as affected as high-income people. Change x-axis label: delete âRankâ
- Going to simplify and reformat this slide. Silver lining! Those most affected by globalization had quieter housing markets which means they didnât crash nearly as much. Not as much âexuberanceâ means they were protected from downside.
- Dodd-Frank Act mandates that the Fed âstress testâ big banks. They take the bankâs data and models and run them through hypothetical situations. We can do that in our own lives. I can do that for my business. I can do that for my âfamily balance sheet.â If XYZ happened, could I handle that? How close to the edge am I? How secure is my income stream? Doing that brings us confidence/fortitude Incredible opportunity: M&A activity in UK