8-10 Years of Housing Market Strength, Blackstone Exec Forecasts
The housing market – and the resulting sales of home furnishings products – is about to enter at least eight to ten more years of strong growth, according to a chief investment strategist of Blackstone, the largest owner of commercial real estate globally.
At a special briefing for wholesale and retail executives attending the Las Vegas Market in January, Blackstone’s Joe Zidle forecast continued good times for the overall home sector. Zidle is senior managing director and chief investment strategist for the Private Wealth Solutions unit of Blackstone, the private equity firm that owns International Market Centers and its properties in Atlanta, High Point and Las Vegas.
“I’m very optimistic about the overall U.S. economy,” he told the room of senior management, “and I see the strength in housing continuing for the next eight to ten years.” He pointed to record consumer net worth, historically high savings rates and a continuing “bullish” stock market as factors that would drive this surge, all good news for the home furnishings industry.
But Zidle was clear that not all the news was good going forward. He said inflation was shaping up as the biggest red flag for the economy with wages and labor shortages as potential negatives. Ongoing supply chain issues, even as pandemic conditions lessen, will remain a factor limiting some growth opportunities in the consumer goods sector.
In his wide-ranging conversation with IMC CEO Bob Maricich, Zidle touched upon a number of aspects of the overall economy, all the while remaining decidedly positive on the outlook going forward:
• Residential & Commercial Real Estate: Noting that Blackstone owns a $448 billion real estate portfolio that includes multifamily and single-family rentals and logistics facilities, Zidle said residential, lodging and distribution centers would do well going forward, but that commercial office space may underperform.
• Inflation: He said the inflationary rate could climb 4.5% in 2022 and would continue to increase into 2023. “The Consumer Price Index in December of 2021 was the highest it’s been since 1981.” One-third of inflation is being caused by higher housing prices.
• Interest Rate Hikes: Zidle forecast that the Federal Reserve would raise rates four times this year, though he did not say how much that would amount to cumulatively.
• Stock Market: While saying he was “bullish” on the market, he said the recent volatility would keep up for the immediate future.
He said “speculative” companies, particularly in the tech sector, were the most vulnerable to higher interest rates and their stock prices could suffer. “Non-tech stocks will do better.”
• Wages & Labor: Zidle saw continued higher wages and job openings for the short-term. “The US economy set a record for the highest number of job openings in the history of the data.” An underlying factor in all of this is that 1.5 million baby boomer-age workers pulled their retirement forward, which accounts for one-third of the current labor shortage.
Supply Chain: The huge move by consumers to buy consumer products versus services flipped the spending ratio from 70% services/30% goods to almost the reverse and that has been the primary reason for the supply chain meltdown. “Things will get better as services rebound in the spring and summer.” He added that both near-shoring in countries like Mexico and even on-shoring of production back in the U.S. could benefit from the current conditions.
• Blockchain and Crypto: While being clear these are two different things, Zidle called blockchain “the most revolutionary thing in business’ right now and said he was enormously optimistic about it. Crypto currencies “could be the future but there are a lot of ways to lose money in crypto.”
That the home furnishings consumer product sector has done so well and is projected to continue to do so, Zidle said, is testament to its strength even as supply chain, pricing and merchandise shortages remain constants. While forecasting the future is a risky endeavor the positive outlook for the entire home business seems like a strong bet for the industry.
Stock up on home furnishings and décor at the next Atlanta Market.