This week, Rusty Vanneman talks with Xavier Goss, Portfolio Manager, and Hannah Greene, Fixed Income Investment Analyst at Capital Group. They address concerns about commercial real estate, such as rising interest rates and falling property valuations, and highlight affordability and shortage of supply as key issues in residential real estate. Xavier and Hannah also discuss the potential risks and scenarios in commercial and residential real estate markets. They believe the housing boom isn't over, and the economy is poised for a soft landing rather than a recession. Learn more at orion.com.

SHOW NOTES

Key Takeaways

  • [02:59] - Hannah and Xavier's career backgrounds and how they got to Capital Group.
  • [04:14] - Xavier's definition of risk.
  • [06:56] - A broader macro outlook from Capital Group.
  • [12:22] - What commercial real estate is and its challenges today.
  • [18:50] - How commercial real estate problems affect the broader economy.
  • [21:00] - Potential opportunities and catalysts for unlocking value in commercial real estate.
  • [22:51] - What makes up the residential real estate landscape?
  • [23:45] - The challenges facing residential real estate today.
  • [26:13] - Xavier's outlook on residential real estate and its economic impact.
  • [29:31] - Base case scenario for mortgage rates, home prices, and commercial real estate.
  • [35:00] - Good case scenario for mortgage rates, home prices, and commercial real estate.
  • [37:59] - Bad case scenario for mortgage rates, home prices, and commercial real estate.
  • [44:14] - Other risks investors should be aware of.

Quotes

[09:27] - "If you can survive a run on the banks and banking crisis in March and come out the other side relatively unscathed, that's a good outcome." ~ Xavier Goss

[19:05] - "As long as the problems in real estate are concentrated mostly on office loans, there won't be a broad spillover into the economy." ~ Hannah Greene

[24:22] - "If you own a home with a 2% or even a 3% mortgage, it's hard to pull the trigger and sell it because you don't know what home you'll purchase because there isn't that much supply out there. And you can't replicate that mortgage rate, so your payments are up two to three times what you were paying before." ~ Xavier Goss

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Compliance Code: 2048-OAT-7/28/2023

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