On June 25, 2018, the ULI Charlotte Capital Markets Council (CMC) participated in a joint meeting with the ULI Atlanta CMC in Atlanta, hosted by the Federal Reserve of Atlanta. During the meeting, the members had the opportunity to meet with Dr. Raphael Bostic, president and CEO of the Federal Reserve of Atlanta, in an open forum discussion. Dr. Bostic spoke about general Fed policies, unemployment rates, labor shortages, affordable housing, and skill advancement. Highlights include:
– Wage inflation is an early signal of broader inflation in the marketplace – wages eventually get passed down to the consumer.
– Are there federal policies that need to change to address affordable housing? LIHTC is one. Right now it’s capped at the number of credits available. This is equity money that is available to build affordable housing. Allocation is tied to the state and states are not allowed to trade credits. But the distribution of need is not the same across the states. If we could reallocate to places that have the deepest need, that would be better.
– What is your view on business vs. credit cycles? I look at the economy in a sequence of days – history is there but isn’t determinative. Cycles are a byproduct of decision making. What the Fed’s role is to mitigate the higher-risk behavior that has bad outcomes.
– Our days of easy policymaking are over (when you are at neutral, it’s harder to balance).
Next, the CMC heard from a panel of Atlanta and Charlotte market experts – The Good, the Bad and the Risky, a discussion on regional economic, CRE and finance dynamics. The panel included Greg Winchester, Summit Investors (ATL ULI), Jon Morris, Beacon Partners (CLT ULI), Lauren Foley, FRB Atlanta, Carl Hudson, FRB Atlanta, Richard Kaglic, FRB Richmond and Moderated by Brian Bailey, FRB Atlanta. This fast-paced panel shared insights:
– Describe current economic climate: scattered, thunderstorms forming; overdue, challenging, and unstable; land, leverage, and loss; and demand-rich, supply-constrained, and mildly to moderately overly risk tolerant.
– Themes: working well, forward-looking planning, both cities have positive demographics, educated workforce, infrastructure is coming back (light rail, airports, etc.) Facing a headwind from traffic; headwinds from job growth outside of urban centers
– Biggest risk is economy flying a little too high – we were at cruising altitude and now we need to add fiscal stimulus, which stepped on the gas (we are using more fuel than we have)
For more information about the ULI Charlotte Capital Markets Council, visit https://charlotte.uli.org/capital-markets-council/.