We are at an interesting state of flux…. It appears as though we’ll finally see some leadership on issues that employers, business owners, and investors say are important during this time of uncertainty. Amazing what it takes for direction in taxation in America -our Administration appears to of waived the white flag with taxation -although who knows to what degree/level the negotiating and posturing will take.
How many months have the top business leaders and academics been saying “give direction”?
Sad isn’t it.
We will probably see most expiring tax credits extended for those with an AGI under $200k annually with an 80% chance of the extension for all. Staying out of the argument of which direction is better (all business people who really run a business know taxation is nothing but a drag)…, THANK GOODNESS -we are getting direction now. Both parties bare blame for not resolving at least six months ago. Our administration will look weak in reflection. Considering a tax-cut on employment taxes (your paycheck) both from an employer/employee standpoint would certainly stimulate jobs and consumerism.
2011 will be the year that we look for job growth. I am cautiously optimistic that we can at least create 100-200k/mo in new jobs; however, true healing would require at least 250k/mo. The prime has been pumped. Corporate incomes are growing at record levels, cash is high, and productivity has wrung out waste. Consumption is trending back up. It will be interesting to see how Holiday Retail Sales compares to last year. I would hope for at least 3% growth. This won’t be an overnight turnaround. Think jobs. Government will more than likely be a drag -so it’s important that our leaders really create incentives for the private market vs. smoke & mirrors.
I think our government is perplexed on how to handle real estate. It is a complex issue. Sadly -the truth is that if one has to sell they are in trouble. As I stated last year, (read this “You Can’t Handle the Truth”) sales volume is down a good 50% with true pricing down 10 to 50% depending on your home, the neighborhood, and region of the country. We will probably see at least another 10% drop (national average) before it is all over. Jobs will help tighten up supply (both with rentals and sales). As I have said before, we need an RTC type program that healed the S&L Crises (where some 733 S&L’s went under versus our 380+ banks that have failed to date). The compounding conundrum is that mortgage bond pools have been sliced and diced in so many directions that I’m not sure our government has figured out how to align all the parties. I would like to see forced pressure on the banks to turn impaired assets (delinquent mortgages) within 180 days. Flush the system. If government allows this flushing, look for short-sales to diminish and foreclosures/reo’s to pick up in full force; gone would be the days of 1-2 year stories of no payments -no foreclosure.
Yes -short term that will depress real estate prices; however, this will create productivity where there currently is none.
I would hope that our government makes 2011 the year to stimulate the real estate market. Sadly -I lay the odds at 50% due to politicians worrying more about their own re-election. And No -I’m not talking about ineffective programs to help those that cannot afford what they borrowed. I’m talking about stimulating the market by forcing capitalism with a flushing of the system and rewarding those that both can afford and are willing to take the risk with new purchases. Again, funding has to be available for professional investors.
The stock market appears perilous to me at the moment. I know that runs counter-intuitive to my prior hype on jobs and corporate earnings. I think the market is always priced looking out 6 months. I think the continued fear of JOBS, Real Estate, the U.S.A. deficit, the European Union, China, North Korea, Armageddon, etc., etc. will only continue to create fluctuation. I still stand by my thoughts that a 1000-1500 drop in the Dow has an 80% chance by March, 2011. Don’t pull out just based on my thoughts; however, have some capital available to add-in if a pullback occurs. Stand ready for more investments and focus on dividends.
Inflation? Maybe. I doubt we’ll see inflation in 2011 as it relates to interest rates throughout 2011. If we do, we’ll either see it in good news with better than expected job growth or bad news with a Stagflation with foreign investors demanding a higher interest rate to offset the risk of our governments deficits –that would certainly be bad news.
Again, stay the coarse. Now is the time to start new banking relationships. Lenders are starting to reopen there wallets. Keep looking for good investments (whether they be stocks, mutual funds, businesses, and of coarse -real estate). Focus on cash flow -even with stocks. Remember to get paid to wait -if that hasn’t sunk in yet! Opportunities are out there -you have to learn how to find them, identify them, and pull the trigger.
Again -Real Estate Investors read my article “You Can’t Handle the Truth” from a year ago (November, 2010) to reflect on this past year not to mention for insight as what will be a continuation for real estate in 2011. I will say if you’ve made it through this real estate bubble and financial crisis this far, odds are you’re a survivor, will adapt to change, and prosper as traction is gained.
The elevator doors have opened. Now we’ll have to see how many get on, how many get off, who presses up and who down. Hang on.
By: Tyler McCracken -a NC Real Estate Investor
12/1/2010
