The Fall 2022 edition of the Linneman Letter tackled Q3 2022 matters like rising interest rates (“things that are valuable—including money—should not be free because they will be overused”) and liquidity (the newsletter pointed out that businesses, households and governments remain “flush with cash”).

But what do current economic signals tell us? And how does this impact real estate investment?

Economist Peter Linneman and Willy Walker, Walker & Dunlop Chairman and CEO, talked through these and other issues during the Oct. 12, 2022 Walker Webcast. One point focused on reluctant liquidity. Specifically, the difficulty of obtaining debt.

Financial institutions, Linneman commented, have plenty of money these days. “They didn’t have much money in 2001, and they didn’t have any money in 2008,” he said. “Now they have their hands full of money.” But that money is barely moving into investments, partly because of fear. “When greed turns to fear,” he said, “money sits on the sidelines.”

And part of that far can be traced to the equities markets and their value declines. “Markets hate uncertainty, and there’s a lot of uncertainty out there,” Linneman noted. That fear, he added, is causing investment values to go down.

But that fear could also be misplaced. For one thing, while the GDP declined during the first two quarters of 2022, “in those two quarters, we added about 2.7 million jobs,” Linneman said. Furthermore, the industrial output and retail sales metrics also tend to bely a declining GDP, he added.

Moving onto real estate, Linneman remains bullish on most asset classes—even office. The one asset class he was not so optimistic about is senior housing. Part of the reason is that the real senior demand surge is still a few years off, even as headlines focus on aging baby boomers. But those boomers don’t necessarily require senior housing (with age-restricted multifamily the exception).

People tend to move into senior housing—independent and assisted living—at age 78, Linneman pointed out. “You go back 78 years ago and see how many people were born. It’s the end of World War II, and there weren’t a lot of births in 1944.” In fact it wasn’t until 1948 or so when births really started happening. “That’s why I’m not bullish (on senior housing) in the near term.,” he said. “I’m very bullish, but I think it’s a bit to early to get into it.”

Linneman said he does like multifamily and industrial as asset classes, though acknowledged that these two sectors have softened. He also believes “there will be an opportunity for people with dry powder to step into the market.” Not necessarily late this year or early next year but beginning in Q1 2024 and onward. “There will be opportunities, but they won’t be steals,” Linneman added.

On-demand replays of the Oct. 12, 2022 webcast are available by clicking here and through Walker & Dunlop’s Driven by Insight podcast series.