OUTLOOK FOR 2012-2014

The US Federal Government and the majority of its citizens are beginning to understand the depth of the economic crisis facing the United States and Europe. Due to the real estate meltdown, the frozen banking system, declining consumer confidence, and the growing Federal debt; we are facing a decade of readjustment. Here is how this adverse situation will play out in the next 3 to 5 years.

  • The Federal Reserve will continue to print money, and the dollar will decline further in value during 2012, but beginning in 2013 some fiscal responsibility will start emerging in Washington and several extremely tough years will follow with some serious cuts in the budget and maybe a complete over haul of the Federal Income Tax Code.
  • Credit will continue to be hard to get, and the banks will continue to struggle. With a worried consumer and confidence trending lower, demand for credit will be sluggish.
  • Hedge funds and private investors will continue to buy distressed debt and REO for another two years but at extremely low prices in a weakening stock market with limited new bench marks for assessing real estate value…what's it worth? How do you know when the best of the appraisers and consultants don't really know?
  • Buying a distressed deal at 25 to 35 cents on the dollar sounds good, but it's still a real 25 to35 cents and such a purchase requires a better exit strategy than: "We think the market is going to come back! This being said, we do not think we'll see the current purchases of real estate so far below replacement cost anytime in the next twenty five years.
  • After cutting corporate taxes; seriously trimming county, state, and our Federal budgets; and decreasing some of the regulation strangling business growth in 2013, we will start to see unemployment decline from the near 10% level and the US economy will gradually get back to productivity and new technology. Our real estate markets will then start to slowly improve but only after business and consumer confidence is restored and all the real estate excesses have worked themselves through our markets.

While we like to view things in a positive manor, the Federal Government simply cannot continue to spend a trillion dollars or more annually than it's taking in and expect everything to be OK! It is not OK, and things are going to change very soon!