5 Trends to Watch

Here are five market trends to monitor this week in the context of your real estate portfolio:

1. Motor City Motion

Recent headlines (1, 2, 3) make it seem like post-pandemic America is facing a Mad Max scenario. These “doom loops” evoke some sort of spiral into unstoppable decline. There certainly has been some pullback in urban vibrancy especially as populations have reshuffled and work-from-home has become an expected part of corporate life. But far from being irreversible, some positive news from Detroit appears to show what the long term for urban revival could look like. A recent article points to a recovery in the Motor City a decade after the city declared bankruptcy. Although it was far from a smooth ride, the new vibrancy shows how no city is unsaveable and that enterprising, motivated developers can bring back life to cities in decline.

2. Scope Creep

The US Federal Reserve has a dual mandate: stable prices and full employment. Generally, the former is a steady, predictable rate of inflation to stimulate the economy, and the latter is unemployment at a tolerable level in line with a job market in motion. The clear and simple mandate is elegant in that it allows for flexible solutions unburdened by partisan or populist whims. In fact a politicized Fed could erode trust or, worse, turn the economy away from a market approach and much closer to a centrally planned economy. The European Central Bank functions similarly for the Eurozone member states. But recently French president Emmanuel Macron pushed the ECB to use its powers to support a transition to green energy. Although reducing carbon emissions is a noble goal, the ends don’t justify the means. Opening the box of politicizing monetary policy could creep Europe even closer to a non-market based economy and destabilize the natural function of markets.

3. And Now for My Next Trick

What a saga for WeWork. From tech darling, to apparent burning-pile-of-money, it now looks like WeWork’s property manager is stepping in for a try at the helm. Yardi brings a very different management style as compared to Adam Neumann, the high profile CEO of yore. The deal is viewed positively by industry experts, who believe Yardi's experience and data-driven approach could stabilize WeWork and possibly lead it to profitability by 2025. This new leadership could also mean a shift towards a more conservative, data-informed strategy for WeWork versus the high growth hope when WeWork launched.

4. Fired Up

If you’re like most Americans you want financial stability and security. More than that, you probably don’t want to work for the rest of your life. Naturally, we tend to work for a few decades, save for retirement, and then enjoy the last several years comfortably pursuing our interests (hopefully). Taken to its extreme, saving for retirement could allow you to retire significantly sooner than the typical 60-something. The recent trend of achieving financial independence and retiring early (FIRE) has caught on with Millennials. The idea is to cut costs, boost income, and max out savings vehicles like IRA and 401(k) accounts. Some have even been able to retire in their 30s. Although the FIRE movement tends to focus on investing in stocks and bonds, if you are looking for ways to invest for financial independence and income, you might look at our investments at EquityMultiple.

5. Have an IRA?

Speaking of retirement, look out for new rules around IRA fiduciaries. Previously, an advisor selling you an IRA or investments for your retirement did not necessarily need to be a fiduciary. A few years ago, Regulation Best Interest shifted the standard towards making decisions that were in the best interest of the customer, taking into account the unique situation of the investor. Now, the fiduciary standard shifts this even more to having the advisor invest in the best interest of an investor and to manage the money with the highest standard of care regardless of fees or compensation received.?

Many investors start with a 401(k) for retirement planning and then add an IRA to supplement the savings. Although most investors are familiar with stocks and mutual funds in retirement accounts, you might not know that you can use a self-directed IRA to invest in real estate like the investments offered by EquityMultiple. Our director of investor relations, Daniel Brereton, recently did a webinar with Rocket Dollar, a self-directed IRA custodian. You can watch the video here to learn more about investing in industrial real estate.