Money guys..are we head for a steep decline soon ?

Drdogface · Drdogface's Garage

We've had a decent run up in the past few months but I keep hearing about the impending commercial real estate bubble burst. Lotta folks seem to predict that Q4 will be really tough on the market. I'm leaning toward going to cash soon...

Input from the pros will be very helpful to many of us...

Hetmann · 09-15-2009, 07:48 AM

I'm no pro, but it seems like a good time to take a little cash of the table and wait for a buying opportunity when things drop.

HardDrive · 09-15-2009, 07:56 AM

I bought some Ford Stock earlier this year, but we're staying cashed out otherwise.

Lots of positive talk, but I don't see a recovery. No jobs = less income = less spending = soft economy. Show me some job growth, then I'll jump back in.

Dunno, I might selectively bargain hunt, but I think the broad picture is still ugly.

nota · 09-15-2009, 08:35 AM

no that was last year

flatbutt · 09-15-2009, 08:46 AM

A friend of mine is a commercial agent. She says prices are dropping steadily but she hasn't many foreclosures/abandonments yet.

MikeSid · 09-15-2009, 09:45 AM

A portion of my practice is representation over 20 financial institutions in the puget sound area. When I see an uptick in consumer loan delinquencies with one or two, it's no big deal and could be due to a variety of internal factors. When I see an uptick across the board, evenly, you can be sure it is some form of leading economic indicator - albeit possibly geographically localized.

Between February and early June, consumer loan delinquencies and foreclosures were high across the board. From mid June to mid August things were back to normal -even appearing optomistic. Late August to present is showing a level that far surpasses what I saw in Spring...like triple...huge crushing losses....across the board.

Make of that what you will. 22 institutions is a relatively low sample, but given the consistency among them, it must mean something and it doesn't look good from where I sit.

flatbutt · 09-15-2009, 09:50 AM

Mike, I wonder how many those are opportunistic? People willing to take the credit hit in order to walk away from their debt?

MikeSid · 09-15-2009, 10:04 AM

Plenty are opportunistic, but in these parts they only "walk" from real estate debt. Any other debt requires bankruptcy to discharge and to qualify for that they have to make less than the median income or be unable to repay a certain portion of their debt within 5 years.

I also think the issue is twofold. Not only are people in a situation where "walking" either makes sense or is their only option, but the banks are suffering huge losses. Some of the smaller ones will fail or get absorbed - which may not be a bad thing for the herd, but sucks for the slaughtered.

tabs · 01:59 PM

Commercial RE and Credit Card Debt Bombs are still looming.

I am glad their are still so many naysayers on this Board. In any panic situation markets are going to over correct. The world stock markets pegged the pendulum and now the pendulum has swung back to a more normal market environment which occurred in June. What we can look forward to is the US Stock Market to return to its pre fall off the cliff levels. Which in real terms means about another 15% or so on the upside. From there it is a wait and see environment, a good bet is that the Stock Market buoyed but good corporate earnings from US exports will the game of choice in the coming years. Even though the US will suffer from an a relatively high unemployment rates and slow to no growth.

Since the economy also took a hit and over corrected now that the patient is in recovery room mode having coming back from the precipice. That means that we have suffered a short lived Depression and are in for a low and slow growth economy. Unemployment is going to remain high going forward, in the 7.5% to 9% range. US consumer spending habits are now changed forever, the era of conspicuous consumption is now over. Americans will return to the long term norm out of necessity. However all of this is not to say that Asia in particular will not be experiencing explosive growth from which a weaker dollar will benefit US exports.

What can derail this scenario to some extent are the legislative initiatives of the Obama administration of higher taxes, more government regulation of business and new government programs which require a large bureaucracy to run. Further the deficits and its attendant increase in national debt will be competitive for investment capital but also will put the USD in an increasingly precarious position with regards to its value. There are already serious movements in the world to replace the USD as the reserve currency for the purchase of oil. The alternative is that a basket of currencies or a global currency be made into the world reserve currency. Once that happens the world will experience a massive flood of USD into the market place and the value of the USD will plummet and interest rates in the US will spiral sky high. This is the next crisis that is looming on the horizon.

The lead up to this crisis will be an ever weakening USD, which will start US currency holders to slowly divest themselves of USD and US Treasuries. So it is likely that there will be a number of for shocks to the system before the final collapse. Which should be no surprise when it finally happens. The world will simply not follow the USA off the cliff.

GG Allin · GG Allin's Garage

Thought I'd share a little insight on a real world industrial real estate deal my company is involved. We are moving in to a new 200,000 sq ft facility near O'Hare. The building was built 3 years ago and we will be the first tenant. We won't pay any rent for the first 18 months. Our lease is for ten years. The landlord says the property will not see a profit until well in to the next lease, assuming we renew. The 100,000 sq ft building we are moving out of is owned by a individual and not a large corporation. I think he's screwed, there's a lot of empty space around here.

1967 R50/2 · 09-15-2009, 08:17 PM

Consider this:

If there is a currency crisis with high inflation, as has oft been predicted, are you any safer being cash out?

Your cash will automatically be worth less, but if you hold an exchangable asset traded internationally, (commodities or stock lets say), the values should adjust to the new level new depreciated dollar value, meaning their prices go up.

We saw this situation all last year when oil was hitting new highs as the dollar was hitting new lows. Most of that run-up was caused by the depreciating dollar making oil more valuable in real terms. On top of that there was speculation of course. Not denying that.

Will real estate appreciate in value such a situation (real asset) or plummet (already a big supply over hang and real estate is not easily traded internationally, infact international purchases in the US dropped off last month.)???

island911 · 09-15-2009, 08:30 PM

THe value of cash has a whole lot to do with how much is out there per person. As the housing bubble inflated all sorts of new cash was generated. When the banks put the brakes on new lending, the govt stepped up and put out some new cash. Bush sent out checks for immediate results; the new guy is hold back his stimulus dollars for programs. (slow).

As far as I can tell massive inflation isn't in the cards (as things are). But, who knows, massive programs can change.

...but I'm no Money guy.

tabs · 09-16-2009, 04:24 AM

RE will increase simply because the replacement value of the materials and labour will be higher.

In the short term inflation is not going to be a problem. Deflation was what they had to avert.

The oposite of Inflation could occur, as the US debt increases higher interest rates will be demanded for the investment. The economy will slow permanently and deflation will occur.

Agaisnst this scenario is incresing population and increased competition for resorces which will drive the prices higher

Also as the Fed buys Treasurys they are printing $$$ which will dillute the value of the $$$.

turbo6bar · 09-16-2009, 04:50 AM

Quote:

Originally Posted by tabs

RE will increase simply because the replacement value of the materials and labour will be higher.

Perhaps at the end of this decade you will be correct. The deflation in labor and materials is obscene. Take that back. The cost of good labor has not gone down much. Material prices have gone down in some segments and are flat in others. We need more time to kill off more contractors and builders. I believe real estate is fundamentally safe unless society's veneer dissolves through great trauma. The value of real estate is quite low when demand comes not by income-producing citizens. What is the value of a house which has no demand? That house is now a liability. Might as well tear it down. What is the value of a vacant lot? By that time, however, this nation is toast. It's every man for himself. En garde, spoonman.

I don't believe in trading USD for other currencies. The global economy implies you would be trading ***** for *****. I will invest in something I know well: real estate, a garden, a well-equipped shop that can fix and produce, a healthy mind and body.