Uncertainty, Globalization,Real Estate,

and a Little TrumpProfessor Christopher Palmer

Fisher Center for Real Estate and Urban EconomicsUniversity of California at Berkeley, Haas School of Business

Markets Hate Uncertainty• Political uncertainty, security uncertainty• Brexit, elections, regulation• Terrorist attacks, coup in Turkey

•Macroeconomic uncertainty• What will happen to interest rates?• What will happen with the debt ceiling?

• True for Wall St. traders and Fortune 500 businesses

Uncertainty and Real Estate• What’s so bad about uncertainty?• Induces commitment problems!• “Let’s wait and see how this shakes out…”

• True for residential real estate! Think through the psyche of a…• First-time homebuyer: buy vs. rent + household formation• Family trading up• Second-home buyer

• Add to it all the micro-economic uncertainty of a given family

What’s Facebook got to do with it?• Your perceptions of real estate’s riskiness is highly correlated with

who your friends are!• Extra source of uncertainty/volatility in personal perceptions• Describe this study from friends of mine with a map or graphic or two• (Covered by Inman here:

http://www.inman.com/2016/06/01/can-facebook-friends-nudge-you-into-homeownership/)

• Something to be aware of when talking with clients—opportunity to bring objective information when they are being heavily influenced by their far-flung network

Can Commitment Problems be Overcome?• 1-2 slides on First-time Homebuyer Tax Credit: pushed by a former-

Realtor® then-Senator Isaacson. Actually pretty successful. My research on its effectiveness along with recent Berger/Zwick evidence. Show graph of sales. Quick contrast with Cash-for-Clunkers.• Only $8,000. Why was it so effective? Most of us don’t get excited

about a 4% discount off jeans at the mall. Because it served as a coordination point between buyers and signals and a strong signal that the market was stabilizing and now is the time to be opportunistic again.

Winners and Losers from Globalization

The Geography of Globalization

Income Inequality and Globalization

The Silver Lining of Missing out on a Boom

Summing Up1. Uncertain times are incredible opportunities2. Your own situation biases you. Get objective 411!3. Little things can help overcome inertia4. There are silver linings to turmoil5. Stress test your own situation for reality check and

the confidence to be opportunistic in the face of uncertainty.