Real Estate Happy Days are Here Again!

Real Estate Happy Days are Here Again!  
By John Occhi, Hemet CA REALTOR  
Real Estate, Hemet CA  

I recently received an email with an article that I found a fascinating read.  It turns out that the article only gave credit to the author - but not letting me know where it was originally published.  I did a quick Google Search and found the author - but not his article to link to

I felt that the article was so relevant and mirrored my feelings about the ‘bubble'.  Real Estate in Hemet CA has seen better days - this is true, however I strongly believe that the next big wave has already begun - after all isn't real estate in Hemet like anywhere else - driven by the principals of "supply & demand"?  Most people have thought I was crazy when I say we are out of the bad times and that the good times have already started.

Well, check out the predictions that Mr. Mantor has made as he explains about the global dynamics that are effecting our very livelihood today, and I guarantee you too will feel good about Real Estate and your future as an agent.

(I have taken the liberty to posting this article in its entirety.  Once I have a link, I will follow-up with an email to Mr. Mantor seeking his blessing as well as inviting him to our community - I believe this is a natural platform for him and his team of San Diego real estate professionals.  If he asks me to remove the article - I will.)

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Funding the Megapolitans
by George W. Mantor

While real estate economists like Dean Baker, co-director of the Center for Economic and Policy Research, and Robert Shiller, creator of a real estate hedge fund, are trying to figure out why real estate values haven't plummeted by half, the clear answer is right under their noses. Wake up and smell the chorizo! The next big boom is already underway. The only problem is paying for it.

We are a growing nation and we are a shifting nation. And like wandering nomads pursuing a herd, we are following the jobs and escaping the winter. A three hundred year westward migration has been accelerated by a shifting global economy and a massive influx of immigrants. The result is the formation of ten regional economic powerhouses that will, in the next 35 years, become home to 83 million more people.

We need more places to work, live and shop. Some of our previously developed real estate is either functionally obsolete or located in the wrong place.

Robert E. Lang, director of the Metropolitan Institute and associate professor of Urban Affairs and Planning at Virginia Tech, has named these growing regions "megapolitans." Lang, working with data from the Census Bureau, supported in part by the Brookings Institute, has identified what will be the most dramatic socio-economic shift in our nation's history.

In the last three centuries we have constructed more than 300 billion square feet of homes, offices, stores and factories. Lang notes that it will take just 25 years to build the next 200 billion square feet. Get ready for the mother of all booms.

According to the Lincoln Institute of Land Policy, "Megapolitan areas extend into 35 states, contain less than one-fifth of all land in the lower 48 states, but captured more than two-thirds of total U.S. population."

CNN Money calls it "the $25 trillion land grab ..." and "... a treasure map of opportunity." Strong words for a media outlet with little expressed affection toward real estate as an investment.

It will take $10 trillion to build the homes and another $23 trillion for non-residential construction. That is more than twice the size of the entire U.S. economy.

Where will the development money come from?

Certainly, much of it will come from abroad. But why let foreigners reap all of the profit from our expansion? Where should the money come from?

Why not you and me? By the time the construction is complete, social security will be bankrupt. Most Americans cannot earn enough to achieve significant savings, and programmed trading has rendered paper and promises an insiders' game. When one share of a stock costs several hundred dollars, most of us can't even get a foothold in the equities market. Besides, who wants to see their investment paying hundreds of millions in compensation to the executives? Real estate is real, tangible and a limited opportunity.

Congress should act now to stimulate the economy and make more funds available for real estate investors by increasing the Mortgage Interest Tax Deduction to $2 million on any real estate debt. Remember, things have changed since the $1.1 million ceiling was adopted. Values have skyrocketed and the limit is obsolete in many markets.

The same rationale applies to Section 121. In 1997, a five hundred thousand dollar exemption seemed like a lot. The limit should be increased to $1 million.

And while we are doing smart things, why not repeal the six month replacement deadline in Section 1031 and allow for the uncertainty of new construction. As it is, many would-be investors are avoiding new construction out of fear that delays could put them beyond the time limit and create a taxable event.

The recent report from the Goldwater Institute proved what many had long suspected, that there is a direct and incontrovertible connection between taxes and poverty. Lower taxes reduce poverty. Higher taxes increase poverty.

And in this case, what the federal government would lose in tax revenues on real estate, it would easily offset many times over by the growth it would spur.

We Americans have spent much of our prosperity funding global conflicts on behalf of our government. Now it's time for the government to allow Americans to regain some of that lost prosperity by making the proposed changes to the Internal Revenue Code and allowing average Americans to participate in the next real estate boom.

Published: February 13, 2007