Most of us have experienced seeing real estate recessions and bounce backsâ€¦but, this one seems more serious, perplexing and sobering. We would like to think that the savvy pundits would be more evident in hoisting warning flags. It seems to say that we are ill served by the press which has so few trained to write with any meaningful experience with economics.
Globalizationâ€”we now learn that our economy is entwined with global influences. Global investors were attracted to our packages of high yield mortgages. Ratings of those packages overvalued their credit strength. Greed on Wall Street is difficult to regulate yet alone monitor.
Politics has not helped prudent real estate investors. Fannie Mae and Freddie Mac, encouraged by Congress became such an important player Congress could not let it falter. We need to understand that there is a price-penalty to pushing the purchase of houses with scant regard for adequate down-payment and verification of the borrower’s ability to pay.
For the older part of the population this is going to translate into much more conservative spending and investing habits. What does all this mean? Hang on, it certainly looks like 2009 is going to be a wild ride. However, for this Holiday try to forget the negatives as best you can and spend more time with your families. Love for each other should not be affected.
Steve Magenheimer’s— Holiday Thoughts
This holiday newsletter written a week or so before Christmas can be a reflection of the year past (2008) or it can be a projection of what we believe 2009 will bring.
In a year of credit crisis; the largest bank failure in US history (Washington Mutual) and the largest bankruptcy (Lehman Brothers) and a national election that elected the first African-American to become president of the US, it is difficult to predict that 2009 will be a peaceful year. In spite of the recent shoe throwing incident at President Bush, the war in Iraq is virtually over, and the US has a reliable (?) ally in the Middle East to help stabilize the region. Afghanistan will be a challenge for the new administration to say the least.
Most pundits say 2009 will see more of the same failures, foreclosures, bankruptcies, etc. As an individual commercial real estate broker, specializing in office leasing and investment sales, there is little I can do to effect change, beyond staying positive and making the right verbal confessions. But if I continue to do the same things as in the past, and they are no longer working, I am a fool.
So at TMC we look to the New Year with anticipation. Conditions may worsen before they improve; we are not at the bottom yet. It is not important to know when the bottom is reached and the upturn starts, let the experts do that. What is important is how you react to the process and what adaptations you employ to not only survive, but prosper.
God Bless All, Merry Christmas and a Happy New Year. And, when you give thanks this season, bless and ask the Lord to watch over our brave troops in Iraq and Afghanistan.
Tom Dixon’s —Holiday Thoughts
For the past several days Miami has been enjoying cool clear weather which is so different from the rainy, hot weather during the summer. And, just as it is pleasant now I can guarantee that in 6 months it will be summer time and the rain and heat will return. This cycle of weather is natural and we all accept this cycle of change.
Now that we are in the middle of very severe recession I think it is time to look forward and consider what I call the “Clock of Real Estate” but could just as easily be called the “Clock of the Economy.”
The clock starts at noon with an oversupply of real estate..
this leads to increasing vacancies which leads to â€¦.
declining prices which leads to declining constructionâ€¦
following this will be low vacancies followed byâ€¦.
increasing prices which encourages â€¦
finally we are back again with oversupplyâ€¦
and the cycle repeats itself.
Change the words from real estate to cars and you see the same pattern. What this tells us is that there is an economic cycle just like there is a cycle to the weather. As hard as it is to believe that it will be hot this summer I can guarantee that it will be hot this summer. By the same token I can assure you that we are going through an economic cycle and sometime in the future we will realize that the hands on the “Clock of the Economy” have moved and we have gone full cycle.
Andrew Dixon’s —Holiday Thoughts
What happened to 2008? It’s seems like just yesterday that people were sleeping on street corners in lines ready to drop down 20% on their third condo unit on South Beach, like they were buying tickets to the concert of the century. Today million dollar CEO’s are sleeping outside Congress waiting for their chance to beg for a loan. It’s been a pretty amazing year as we’ve slid from one end of the economy to the other. Or have we? In some respects I think the general populace is still living in denial of what is happening around us. Perhaps eventually we will accept that not everyone deserves a mortgage, or a new car every 2 years. When the make-believe money that created the credit-crisis gets taken away, which it must, the effects will be brutal, but until then I’m still getting credit card offers every day. The powers that be are seemingly willing to spend every dollar Congress is willing to give them out of your tax pocketbook in order to maintain real estate prices (not values) that were built on smoke and mirrors (fraud and un-sustainable lending practices.) And likely just when we feel the worst is over, and the storm has passed, we’ll all walk outside to realize it was just the eye of the hurricane. Luckily we Floridians are used to this concept. I apologize for the negativity, but I don’t believe the recovery will be nearly as fast as the fall.