T
he recent GDP growth rate of 2.8 percent might alleviate concerns that high interest rates have crippled the economy, but a closer examination reveals a more nuanced picture. Healthcare spending has been a significant contributor to growth, accounting for 17 percent of GDP, while defense spending reached its highest level in years.

    This is not a recipe for sustainable growth, as consumers struggle with medical bills and the Pentagon's increased spending on military equipment. A more accurate gauge of current growth comes from job data, which shows that employment has only increased by 1.2 percent over the past year. Manufacturing and business services, typically key drivers of economic expansion, have created zero new jobs in the last two years.

    Furthermore, many recent "new jobs" are simply rehires to fill pandemic-created vacancies at nursing homes and universities. This suggests a slow economy ahead, even as interest rates decline. The run-up in home prices has left them elevated, making lower interest rates less impactful. It will take years for incomes to catch up, allowing buyers to qualify for larger mortgages.

    In this uncertain environment, investors should focus on local markets with fundamental growth potential, driven by population increases and job creation outside of the healthcare and government sectors. Fifteen such markets have been identified, offering a more stable outlook for real estate investments.