What made this particular convention the exception was a forum called "Economic Issues & Commercial Real Estate Business Trends" and its list of panelist; NAR Chief Economist, Lawrence Yun, and former NAR Chief Economist John Tuccillo. Also fellow Counselors of Real Estate-CRE, Stan Mullin of Newport Beach and Cynthia Shelton of Orlando, Florida.
The focus of course being the economic outlook for commercial real estate in 2008, where the opportunities may be and how to best prepare for what some view as a transitional year. I was most interested in hearing the views of the Chief Economist for the economy. But first an important disclaimer:
My views are the U.S. Economy has already entered a Recessionary Period that began most likely in the 4th quarter of 2007, or a Growth-Recession at the very least. Las Vegas' economy will follow the national trend in slowing economic output but to a lesser extent. Las Vegas will be one of the first metropolitan economies to exit this coming recession due to another building boom occurring on our Las Vegas STRIP...which creates enormous job growth.
Well, as you can imagine I was stunned to hear Lawrence Yun's forecast for the economy as not reaching a recession, GDP growth just below trend (that's 3 percent trendline growth!), and a bottoming of U.S. Housing in 2008. He also claimed corporate earnings will continue to grow and inflation as a non event. I just couldn't believe what I was hearing! Yun's forecast was probably the most rosey of the panel. Stan Mullin painted a more dire scenario quoting PIMCO's Bill Gross and the serious debt issues facing the global financial system. Cynthia Shelton gave her reasoning why commercial investment capitalization rates are sure to rise and why REITs buying interest may wane in 2008.
After these elaborate explanations, beautiful charts and enough credentials on the panel to give anyone academic-envy. It was time for the audience to ask the panelists questions. I ususally never participate in the question's portion of forum's but this time I just couldn't help myself. My opinions run strong and deep when discussing economics, particularly when I anticipate a turn in the real estate cycle. Finally, it was my turn at the mike...and after I addressed the panel with the following question I was known by the attendees in the forum as "The Guy with the Question"... Here goes;
"My name is Gary Banner, CCIM, CRE of Las Vegas, Nevada. And I'm not as optimistic about the U.S. Economy going forward in 2008. I see a secular bull-market in Oil...I see a secular bull-market in Gold. The U.S. Dollar continues to make multi-year lows and now it appears REITs are breaking into a new bear-market. Do you feel that we could be headed into an environment much like the 1970's with falling corporate profits and rising prices....Stagflation of some sorts?"
Yes, you guessed it...a stump-the-panel question to say the least. First, there was a puzzled look on the panelist faces. Then one after another they tackled the serious question I posed to them. I liked John Tuccillo's answer the best he said, "I can see an economy that is 6-and-6, meaning 6 percent unemployment and 6 percent U.S. Treasury yeilds, but nothing like the mid-70s or early 80s where these numbers where double digits."
Today, the stock market closed mixed at 13,056.72 up +12.76 as the price of Oil traded above $100 /bbl and Gold is well above $860 per oz. These are certainly inflationary signals. Plus, the 10-year treasury note which trades opposite its price, dipped to 3.89 percent from 3.91 percent yesterday. The notes are signaling a slowing economy. Look's like that '70s Show may return...Stagflation...or at least feel like it!
5 comments:
So.... Stagflation may be in the forcast? How long do you think this will last or better when do you predict the Las Vegas market will emerge back to a healthy balance?
Based upon today's stock market reaction to the Job Numbers one would think the economy may never recover. However, the consensus amoung my favorite economist is more to the tune of at least 4 quarters of a hard-landing recession. So, I'll go on a limb and predict no economic recovery until 1Q2009.
Gary, You seem to know how to compare and contrast the Stock Market with the Real Estate Market. How is it that you know so much about the Stock Market? I wonder about Stagflation.....HOW do you think the economy will recover in 1Q2009?
As Tracy_MBA above stated, how do you believe the economy will recover? What will trigger this recovery?
I think the trigger to a recovery will be a bottoming of the housing market. When I see Six Month supply of homes for sale on the MLS systems either locally or nationally. I think at that point we would be at or approaching a bottom. Not only in housing but the US economy as well.
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