Lusk Perspectives University of Southern California

How will the US economy perform in 2024?
Claudia Sahm (Founder, Sahm Consulting) joins Richard K. Green (Director, USC Lusk Center for Real Estate) to discuss the US economy’s recovery from COVID along with additional shocks and infer the implications of the Federal Reserve’s playbook for 2024.
Sahm’s key points:
- The US economy undeniably turned a corner in 2023
- The US recovery remains stronger than its peer countries
- The Federal Reserve will continue their conservative approach to rate cuts
- The greatest risk to the market in the near future is the Federal Reserve’s sluggish response
Sahm also fields questions on the risk that commercial real estate and regional bank distress poses to the economy, the Federal Reserve’s limits on impacting housing affordability, and more.
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Clayton Dube (Director, USC U.S.-China Institute) joins Richard K. Green (Director, USC Lusk Center for Real Estate) to discuss the condition of U.S.-China relations and the latest developments in China’s global influence on trade, supply chain issues, technology, and more. Dube highlights a challenge Chinese officials are watching closely in the coming years: stalling economic growth. To approach the “middle-income” problem, Dube notes the ways in which the government has both relaxed and tightened its grip on markets in an effort to continue the economy’s upward momentum.
 
Included in the discussion:
Security concerns between the U.S. and China
The important distinction between China’s total Gross Domestic Product (GDP) and GDP per capita
How China’s tech rivalry with the U.S. is evolving
Why Chinese firms have overpaid in key U.S. real estate transactions
 
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Joyce Chang (Managing Director & Chair of Global Research, JPMorgan Chase & Co.) delivers an overview of global economic trends to watch heading into 2023 and beyond.
In the near term, Chang sees a mild recession taking effect in late 2023, with a true “soft landing”, as identified by the Federal Reserve, being unlikely. She notes that overall cycles may be shorter, with a likelihood of 4-year recessions rather than the historic 8 or 10, and markets that rally faster to regain losses.
Included in the long-term outlook are remarks on China’s slowing growth, regions that could benefit from supply chain shifts away from China and nearshoring, and the political divides in the US around ESG (Environmental, Social, Governance) projects and investing.
Richard K. Green (Director, USC Lusk Center for Real Estate) also fields questions on the US housing crisis, how rapidly rising interest rates could affect regional banks and nontraditional finance, the implications of a global aging population, and more.
Timestamps:
00:00 Introduction
01:48 Presentation
41:08 Q+A
 
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Lusk Director Richard K. Green delivers highlights from the 2022 Casden Multifamily Forecast.
Before Green gives a breakdown of Southern California multifamily real estate markets, he pauses to discuss four uncertainties impacting the region. Inflation, interest rates, net migration, and the impending recession are all top-of-mind issues that could dilute the forecast’s potency should any of the factors take a dramatic rise or dip.
As for the forecast, Green reviews historical and forecasted data on each market, including overall economic resiliency, net migration since the pandemic began, construction activity, vacancy rates, rent growth, and more. Regions covered include Los Angeles, Orange County, San Diego, the Inland Empire, and Ventura.
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An industry panel discusses the changing dynamics of office work in real estate and beyond.
By now, it’s apparent that some version of remote work is here to stay for a dominant number of firms. Remote and hybrid work can solve serious employee issues like flexibility, commute times, and even productivity. However, the new work arrangements are not without drawbacks.
Moderator Mary Lynne Boorn (Associate Professor, USC Sol Price School of Public Policy) invites Allison Lynch (Compass Ventures), Amalia Paliobeis (Senior Director, Portfolio Management, AvantStay), and Brandi Popovich (Vice President, Talent Acquisition, SoLa Impact) to bring insights from their unique perspective on hiring and retention, adaptive management styles, office space, and to discuss lessons learned in distributed work environments.
Included in the discussion:
- The new costs of mandating an entirely in-person work week
- How remote environments impact mentorship
- Crucial in-person activities for employees and employers
- Strategies for preserving company culture
 
Links to mentioned resources:
The Work/Life Integration Project - http://worklife.wharton.upenn.edu/
 
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Racial bias in home appraisals and assessments is not just an anecdote. Norm Miller (Hahn Chair & Professor of Real Estate Finance, University of San Diego and Vice President, Homer Hoyt Institute), Ruchi Singh (Assistant Professor, University of Georgia), and Richard K. Green (Director, USC Lusk Center for Real Estate) discuss the statistically significant racial and ethnic biases in appraisals and tax assessments.
Miller details the benefits of automated valuation models, but he also cautions that using machine learning without human oversight of variables can result in a different set of biases.
Singh shows how assessments are regressive, often resulting in a mismatch of a lower property value with higher property taxes. She also points out contributing factors, including why excluding information like nearby schools or the condition of the home can set the assessments in opposition to appraisals.
 
More from the discussion:
How to make the assessment process fairer
The importance of loan-to-value ratios in underwriting
Pressure appraisers face in avoiding errors
Why short-term and long-term appraisal models will be required to avoid bias
 
Relevant links:
New York Times Story: Home Appraised With a Black Owner: $472,000. With a White Owner: $750,000.
https://www.nytimes.com/2022/08/18/realestate/housing-discrimination-maryland.html
 
Freddie Mac: Racial and Ethnic Valuation Gaps In Home Purchase Appraisals
https://www.freddiemac.com/research/insight/20210920-home-appraisals
 
William Sprigg’s Perspective:
https://lusk.usc.edu/events/racial-justice-and-economics-crucial-pairing
 
Freddie Mac’s Appraisal Institute Diversity Initiative:
https://www.appraisalinstitute.org/the-appraisal-profession/appraiser-diversity-initiative/
 
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