How Macro Trends Impact Your Local Real Estate Market
The skyline of St. Paul, Minnesota. St.Paul, the capital and second-most populous city in Minnesota. ... More AFP PHOTO / KAREN BLEIER (Photo credit should read KAREN BLEIER/AFP via Getty Images)
While knowing the neighborhood where you are investing is certainly an essential component to real estate success, following macro trends can give you a competitive advantage. You may be able to better understand how your local market could be impacted. In a recent podcast, I spoke with Lonnie Hendry, Chief Product Officer at Trepp and host of The TreppWire Podcast, a weekly show which offers insights on commercial real estate, structured finance, and banking news and trends. Lonnie shared the value of keeping the big picture in mind as you operate in your local market.
Most recently, the impacts of new tariffs have hit the headlines; as important as it is to account for their effect in your investing decision-making, sometimes tariffs fall into the category of waiting and see what the ultimate implication will be on commercial real estate.
As we wait for this to unfold, here are other macro issues to consider as you move forward with real estate investing.
Whether you're buying a small multifamily in the suburbs or underwriting a large office building in a major metro area, your transaction will likely involve some level of capital. Those resources, especially funds coming from banks, private equity, or institutional lenders, will typically be deeply influenced by macro trends. When the Federal Reserve raises interest rates, for example, it immediately affects borrowing costs. Another effect relates to lenders, as they typically react by tightening their underwriting standards. For this reason, even if your local market is performing well, you might find fewer lenders willing to finance deals—or the terms become more expensive.
In recent years, insurance premiums in commercial real estate have been influenced by natural disasters and the claims that follow. In some markets, especially where insurance used to be a minimal cost, there could now be higher associated charges. Similarly, macro policies like tariffs and taxes can drive up the cost of building materials, labor, and imported equipment. If you're involved in ground-up development or value-add renovations, this could lead to increases in your project's budget.
Macro trends also influence how people view the real estate market and the decisions they make. When rates rise, buyers often opt for the sidelines and wait for price corrections. At the same time, sellers might get nervous if deal activity slows down. Conversely, when rates drop or a favorable economic policy is announced, markets may respond by an increase in transactions. Investors may step forward and sellers might raise their prices.
You can set up a routine to follow macro trends and be aware of how they could impact your area. You might start by subscribing to newsletters and listening to podcasts which report on large-scale changes. Key indicators like the 10-year Treasury, inflation rates, unemployment data, and major policy announcements can also provide clues.
You may also choose to follow the decisions lenders are making and trends in the debt market. You can check CMBS (Commercial Mortgage Backed Security) delinquency rates, for instance. CMBS is effectively a pool of loans which get bundled together and sold as a bond on the secondary market. The underwriting process and mechanics of the loan are effectively the same as a bank loan; however, there are some nuances. CMBS loans are typically non-recourse so they don't have a personal guarantee attached to them. They often get fixed rate financing for a 10-year term and are covenant driven, so there isn't as much of a relationship component as you might find with a local lender.
Your deal may be in your neighborhood, but ultimately your success will depend on your ability to interpret and act on what's happening globally. Real estate is cyclical and macro trends do more than influence your market—they often set the tone. To stay ahead, you can follow the bigger picture to see what effects may come your way. This will help you be prepared to make informed decisions and take advantage of upcoming opportunities.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CNBC
4 hours ago
- CNBC
Asian markets set to open higher as investors await Beijing-Washington trade meeting and China data
China Shenzhen Real444 | E+ | Getty Images Asian markets were set to climb Monday as investors awaited trade talks between the U.S. and China later in the day, following accusations between the two over breaching deal terms agreed in Geneva last month. Trade tensions are seemingly easing as China has reportedly granted temporary approvals for the export of rare earths, while jetliner Boeing Co has begun commercial jet deliveries to the Asian superpower. China is also slated to release a slew of data, including its consumer and wholesale inflation readings for May. Economists polled by Reuters expect consumer prices to have fallen by 0.2% year on year, while PPI is forecast to have declined by 3.2% from a year earlier.. Futures for Hong Kong's Hang Seng index stood at 23,801 pointing to a marginally higher open compared to the HSI's last close of 23,792.54. Japan's benchmark Nikkei 225 was set to open higher, with the futures contract in Chicago at 37,975 while its counterpart in Osaka last traded at 37,980, against the index's Friday close of 37,741.61. Australian markets are closed for a public holiday. U.S. equity futures were mostly flat in early Asian trade. All three key benchmarks on Wall Street jumped last Friday, after the non-farm payrolls data came in better-than-expected. U.S. payrolls climbed 139,000 in May, the Bureau of Labor Statistics reported Friday, above the Dow Jones forecast of 125,000 for the month but less than the downwardly revised 147,000 in April. The Dow Jones Industrial Average popped 443.13 points, or 1.05%, to close at 42,762.87. The blue-chip index was up more than 600 points at its highs of the session. Meanwhile, the the broad-based S&P 500 also gained 1.03% — surpassing the 6,000 level for the first time since late February — and settling at 6,000.36, while the Nasdaq Composite rallied 1.20%, to end at 19,529.95. — CNBC's Sean Conlon and Jesse Pound contributed to this report.
New York Post
7 hours ago
- New York Post
WH press secretary brushes off reports Musk ‘body-checked' Treasury chief: ‘Robust disagreement'
White House press secretary Karoline Leavitt on Sunday downplayed reports Elon Musk 'body-checked'' Treasury Secretary Scott Bessent in a heated meeting, calling their dispute simply a 'robust disagreement.'' Leavitt acknowledged to Fox News' 'Sunday Morning Futures' that she wasn't in the room when the April dust-up took place but contended she wouldn't call it a 'fistfight' based on what she heard second-hand about the scrum — which supposedly included Musk ramming into Bessent's rib cage 'like a rugby player.' 'I certainly wouldn't describe it as a fistfight, Maria,' Leavitt told host Maria Baritomo after the journalist characterized it as such. 'It was definitely a disagreement, although I was not there. I didn't witness it with my own eyes. Advertisement 'When this story originally broke, I said from the podium that there have definitely been healthy disagreements amongst the cabinet and Elon Musk,' Leavitt said. 3 White House press secretary Karoline Leavitt on Sunday downplayed reports of Treasury Secretary Scott Bessent and Elon Musk coming to blows. Getty Images 'There were times in which they got frustrated with one another, but I think that really speaks to the heart of this Cabinet and the president's team, that they can have these robust disagreements and then still come together to do what's right for the people they are serving. Advertisement 'We have moved on from that,' Leavitt said. 'The president has moved on from it. 'And the entire administration is focusing on passing this bill,' she added of the proposed sweeping One Big Beautiful Bill Act. 'Cutting waste, fraud and abuse from our government remains a critical component of this administration's agenda.' After Musk publicly went nuclear over the bill — and onetime ally President Trump — last week, presidential buddy Steve Bannon claimed the world's richest man had scrapped with the Treasury secretary two months ago. 3 Musk exploded at President Trump publicly last week amid a series of frustrations, including over the deficit. AP Advertisement 'Scott said [to Musk], 'You're a fraud. You're a total fraud,' ' Bannon told the Washington Post, recalling how Musk then rammed into Bessent's rib cage 'like a rugby player.' Eventually, multiple bystanders in the room supposedly intervened and pulled them apart. 'President Trump heard about it and said, 'This is too much,' ' Bannon added. Bannon, a former top strategist for Trump who hosts the 'War Room' podcast, has publicly called for Musk, a South African native, to be deported and for the president to invoke the Defense Production Act to seize control of his SpaceX company in retaliation for his public broadsides against the president. Advertisement Musk has not publicly commented on the alleged altercation, nor has Bessent. There had been a prior report from the New York Times alleging that the two men got into a shouting match at the same April meeting. 3 Bessent reportedly scolded Musk for overstating the spending cuts he could find with DOGE. Getty Images During the meeting, both men had pitched different candidates to lead the Internal Revenue Service. The president ultimately backed Bessent's choice. Musk had previously publicly backed then-Cantor Fitzgerald CEO Howard Lutnick to helm the Treasury Department over Bessent. Trump ended up making Lutnick the secretary of the Department of Commerce. The day of the April meeting, Bessent also allegedly needled Musk for falling far short of his goal of cutting government spending by $1 trillion with the Department of Government Efficiency.
New York Post
14 hours ago
- New York Post
Musk's father says Elon made a mistake going nuclear on Trump, predicts prez ‘will prevail'
Tech mogul Elon Musk's father lamented his son's scorched-earth war of words with President Trump as a 'mistake' and warned that the US leader would ultimately prevail in the nasty spat. Errol Musk, who has had a strained relationship with his billionaire son, explained that Elon had been under tremendous stress and was optimistic the two personality giants could patch things up. 'They've been under a lot of stress for five months. And it gives them a break. You know, they've had to get rid of all the opposition, try and put the country back on track, and do normal things and so forth,' Errol told Russian media, per Izvestia. 'They're very tired and stressed. And so you can expect something like this. It's not unusual,' the elder Musk added. 'Trump will prevail. He's the president. He was elected as the president, so Elon made a mistake, I think. But he's tired. He's stressed.' Elon had slowly begun to split with Trump and Republicans publicly last month over the One Big Beautiful Bill Act due to his concerns about its impact on the deficit. 4 Errol Musk seemed optimistic that President Trump and Elon Musk could reconcile. 4 Elon Musk's time as a special government employee ended last month. AFP via Getty Images It started with some swipes during an interview on CBS's 'Sunday Morning Show.' Then, Musk ramped up his attacks on the marquee GOP megabill, ripping it as 'pork-filled' and a 'disgusting abomination.' Finally, last Thursday, Musk went nuclear on Trump. The world's richest man argued that without his help, 'Trump would have lost the election, Dems would control the House and the Republicans would be 51-49 in the Senate.' At one point, Musk appeared to back impeachment against Trump and then dropped a 'big bomb,' claiming that the president was in the Epstein files, in a since-deleted post. During the epic public feud, Trump threatened to sever lucrative federal contracts with Musk's companies and the tech baron suggested he'd decommission the Dragon spacecraft, the government's main method of getting into orbit, before reversing course. 4 Elon Musk and President Trump had forged a public alliance to trim government waste and bloat. AP Musk's time as a special government employee wrapped up late last month, and Trump gave him a chummy send-off in the Oval Office. Musk had seemingly also grown incensed after the president withdrew his nomination of Jared Isaacman to helm NASA. 'Elon wants to stick to the principles of not giving in to the Democrats [and] their stupid ideas,' Errol added. 'It's normal, it's just a small thing, [it] will be over tomorrow.' Errol was in Moscow to address the Future Forum 2050, an event to promote Russia's development championed by diehard nationalist Alexander Dugin, who is known as 'Vladimir Putin's philosopher.' Trump has publicly downplayed the breakup with Musk, but warned the billionaire that there will be 'consequences' if he starts dipping into his deep pockets to help Democrats in the 2026 midterm elections. Elon has expressed openness to working to patch things up with the president and Vice President JD Vance had been optimistic they could bring the tech baron back into the fold. 'No, I don't have any plans,' Trump replied when asked by reporters if he had plans to reconcile with Musk, adding that he's 'not really interested' in such efforts. 'I'm not thinking about Elon. You know, I just wish him well.' 4 Elon Musk went berserk on President Trump last week as tensions boiled over. The president suggested that Musk had 'lost his mind' and gone 'crazy.' Privately, Trump bashed Musk as a 'big-time drug addict,' according to the Washington Post. Musk denies being addicted to drugs. Errol, who has a frosty relationship with his son, has long been a backer of Trump. The South African engineer had briefly been a politician, serving on the Pretoria City Council as an Independent and then later a member of the Progressive Federal Party, which opposed apartheid.
