It is December once again, and that means it is time for the annual presentation to the Society of Commercial Realtors in Fort Worth; this year, Thriving in Wartime Conditions Dr. Mark Dotzour – Real Estate Economist. Always educational AND entertaining (a feat rarely accomplished by 99.95% of economists), today was no exception. Overall, I heard a positive outlook for those of us in the Great State of Texas! Read on for a summary of my notes from the presentation…
Job growth is not on the Washington agenda…..which is why we are only growing at 2-3% per year, rather than 5% per year.
Fed Reserve and SEC (the financial group, not the powerhouse football conference) have decided they want more homes BUILT in the US because of the massive economic boost that comes from homebuilding
Dotzour says that 95% LTV loans can be “normal” and healthy, so long as the borrowers have credit and jobs
The average Economic Expansion (after recession) lasts 58 months; we are now in Month 78 of this expansion cycle….though it doesn’t feel like it
–Dotzour feels like we are in the 7th or 8th Inning of the economic recovery (he thinks we have 2-3 years left…..IF we start building more houses)
INTEREST RATES – Dotzour thinks they will remain “Low”
Japan’s quantitative easing includes printing money and buying stocks……Nikkei is now at 20,700
Biggest threat to our competitive advantage in Texas is that we are not building enough houses……or apartments (really?); Why does he say this? Because rents are still going up over 5% per year.
Europe, Japan, and China are barely hanging on, even with massive printing of money!
Cap rates on CRE continue to compress because people have confidence in well-located RE with good tenants
The only rate the FED moves is the overnight rate…….the rate that one large bank loans money to another large bank for one day only
The Oil Market: Let’s Play Hardball
Automotive business is continuing to carry the economy today
Household net worth is at its highest peak ever
Corporate profits are flat, but there seems to be some pent up demand for hiring
The only thing you have to be careful of in a recession is having too much debt!
The lack of yield around the country is one thing that is causing a flight to US real estate; and TEXAS is always on the radar for US Real Estate
Will Cap rates rise as the 10-Year treasury rises? NO