US Real Estate Buzz
This brief overview of our current economic and real estate conditions is what I think, presented in a simplistic and broad narrative of the issues that get us to where we are today with some realistic long-term ideas for prosperity and strong economic recovery and growth. . .
History
First, we know that every industry is like the tide, each with its own ebbs and flows. Without a doubt, the real estate market is undergoing these changes, so in many ways this is very normal. The ebb and flow of real estate industries is generally 10-12 years. The last time we hit rock bottom was around 1995-1997. What is not normal is how dramatic this fact really is. The domino effect is clearly global, illustrating that this is not just a real estate problem, but a financial one as well. We had a disastrous housing market in the mid-to-late 1970s, which sounds a lot like what we’re going through today, but it was more of a national problem than a global one.
Current
The current state of our economy is the direct result of several factors that have been building for many years. The main contributing factor in my estimate, which is often the case, is government policies. What the government does or doesn’t do affects us all in profound ways, such as raising taxes, creating regulations and spending policies, to name a few, and of course politics; In short, this is social engineering. The courses of action our politicians take have a direct effect on how we live our lives, how we invest money, and what we invest in. Investors invest in assets that will earn them money or provide them with the means to do so.
Over the last 5-6 years, the real estate market has been flooded with new home buyers who were former renters, along with many “step up” home buyers. Funding was very easy to come by for most people, many of whom perhaps should never have had it so easy. With that, bad spending habits were produced throughout the general population, in other words, we were taking on large amounts of debt without the income to match. Many businesses, such as financial institutions, have also had their fair share of shady deals. Furthermore, governments at all levels were doing the same. They have never seen this kind of money come in at such a rapid rate and of course with policies put in place years before an economic condition is obtained, meaning government spending, regulations, taxes and fees that can no longer be absorbed by the government. the general population, corporations and financial institutions. A very serious unstable market had been created.
Finally, if all the previous spending wasn’t enough, the government did monumental overspending over the past 10 months, dragging the economy down even more. Now you may be wondering why is this so important? It’s because everything the government does, as I’ve said, has a profound effect on each and every one of us. Why? Investors and investments! It is no coincidence that we have the most dynamic and advanced economy in the world. America long ago embraced an open marketplace where investors, influencers, empire builders, and entrepreneurs are free to invest their money, products, and ideas in our system. Nowhere else in the world can you do this in the same way.
The problem is that for the past 20 years corporate regulation and tax burdens have been out of control, the influence on public employees to do favors has never been greater, and nearly 50% of the population pay no income tax. The country has been changing in ways, leading Movers & Shakers to rethink their investment strategies. Making money has somehow become bad politically. Be clear that making money is a good thing and should never be frowned upon. Subject to unethical and illegal activities.
Investor class people are very astute and can be sure that they are watching everything that is going on, and until they see clear skies, they will stay on the sidelines or invest elsewhere. Several short-term things need to happen before we can see clear skies.
Solutions
- Financial markets need to finish cleaning up their books with their bad debts, which will lead to improved lending.
- Taxes in all their forms, including “transfer taxes” such as the new Cap & Trade energy tax, cannot be increased or implemented as scheduled. Congress must prevent this from happening.
- Congress must repeal the planned stimulus spending bill, which will go into effect right after the 2010 election.
- Commercial real estate, across the country, is headed for major loan defaults, unless something allows homeowners a way to refinance without adding cash equity to the asset, we will see over $700 billion in default loans; this will be ugly.
- Interest rates must remain low and balanced with possible conditions of inflation and deflation.
Once the above happens or moves in that direction, companies can again start building their empire, which leads to growth, which will create employment, which will allow family investments to happen. Remember that 80% of jobs are from small businesses. The labor market must stabilize! Then, the residential housing market can enter a stage of full recovery that will promote a more stable economy. We believe residential real estate will pull commercial real estate out of this downturn. Additionally, Multifamily will lead the way in the commercial market.
In the long run, we need to worry about public policy and the spending that goes with it. It is my opinion; we must embrace and employ a new generation of entrepreneurship along with a core focus on research and development across all of our industries. This type of R&D spending will help ensure the future growth of our economy. In order to have a strong housing market, we need a strong economy. To have a strong economy we need good public representatives.
The people of this great country need to understand, we’d better plan ahead many, many years in advance if we plan to continue to lead the way for the rest. We have a great economic system and therefore the promotion of such a system should be sought.
Positive side
- Loan defaults will cause many purchases with new money.
- By 2010-11 we should be on the road to recovery and out of this mess by 2013, provided government policies improve.
- Interest rates should stay low for a while.
- Our country has always bounced back every time we have gone through periods of recession.