In this never-ending period of uncertainty, the question on everyone’s mind is where do we go from here. 2020 is almost over and it has likely been the most hectic and confusing year for everyone across all walks of life. Covid-19 has reshaped the world and a second shutdown is possibly on the horizon.
Despite this tragic pandemic and no clear end yet in sight, the real estate industry is performing well, and the economy is poised for continued growth. What could be driving this?
Is it the rise of the stock market, a low interest rate environment, the election finally out of the way or vaccine optimism? I believe it is all of the above.
With regard to the stock market, the DOW is fluctuating around 30,000 and is coming off its best monthly gain of 11% since 1987. The Nasdaq and the S&P are at all-time highs and portfolios are back to Pre-Corona levels or better. This is going to provide liquidity to companies and individuals alike, which in turn will need to be reinvested, most likely with real estate being a major beneficiary.
A dovish approach to interest rates will also be very important to sustaining a strong economic comeback. A 7-yr. commercial loan can currently be obtained for 2.5% with excellent credit and a 15-yr. loan can be around 3.5%. The Fed funds rate is expected to remain near zero throughout 2021. This will contribute to a 4% rise in GDP as predicted for 2021 and a 3.5% rise in 2022.
But perhaps the biggest growth story of all for the near future and beyond will be that we now have a divided political party. With a Democratic President and a Republican Senate and Supreme Court, wise investors instantly realized that this is the best scenario for the country. New laws and taxes cannot be easily passed by either party. It will provide stability and a basis for bipartisanship. This will continue to regain investor confidence and create strong inflows of all investments.
Expect 2021 to perform across all sectors. We are finally getting optimistic results from the Covid vaccines and will be back to business as usual in no time.
Stay healthy and remain positive. Next year will be much different.