President’s Address to Congress Really Helps the Apartment Industry

The president presented his proposals to Congress last evening highlighting both the opportunity to make changes in job growth and the potential derision by the republicans. Despite a lot of wrangling over who is to blame or what sort of spending or stimulus would be effective, the president is offering a plan that is very similar to his previous shovel ready proposition, suggesting that the country can build its way out of this economic morass. The plan fundamentally offers support to manufacturing, construction and municipal spending, all areas important in the apartment industry. While it may be too early to know if this will in fact pass, the mood in the Congress, based on comments by House Speaker John Boehner (R-Ohio), seem to indicate a more congenial view that the president’s comments are worthy of consideration, a decidedly different perspective from before. It seems now that the Congress knows that the public is watching, anticipating more backlash if they don’t act.

The apartment industry will benefit from this interim step, especially in light of the absence of any game changing legislative proposals about homeownership. Given the fiscal sensitivity of extending the payroll tax holiday into 2012 and seeking $1.5 trillion in deficit reduction by year end, apartment owners can feel confident that renters will stay in properties longer, and some limited, but meaningful rent growth will still be evident through this year.

Economically we are still in a trough. I have been suggesting that we’re not heading into an additional recession, and I maintain that forecast. While a number of indicators are flat or trending wildly, we’re still a long way off from the economy getting much slower. In fact, from the perspective of apartment owners, the next phase of the pricing and revenue cycle looks very positive. Pricing power may be slower, but it’s still in the hands of owners.

Jack Kern is the Managing Director of Kern Investment Research, LLC, based in Germantown, Maryland. The firm has an enviable record in calling recessionary and recovery cycles. Just to be on the safe side, Jack has consulted a plastic surgeon about changing his appearance and installing a device to start his car remotely just in case he’s wrong on this one.