I am constantly reading and researching for myself and the clients I serve, and I've come to some rather grim conclusions, sprinkled with some hopeful solutions. Currently we are witnessing the greatest financial meltdown in world history. It's not just a maybe anymore, it's a guaranteed certainy. Those whom have stood like a deer in the headlights need to start moving towards where the money is going to be.
First let's establish some salient facts before we all drive off the edge of the cliff.
- The US dollar is going to collapse in the near future. The Dollar has been severely overvalued, and the flight into US Bonds is soon to reverse. When China and the other large bond holders begin liquidating, this will cause a catastrophic loss in the US dollar. Which means food and energy costs are going to shoot through the roof. Therefore energy friendly communities, farming communities will be the new hot markets for jobs. With jobs come needs such as housing and financing. The big question is how solvent will US banks be in this crisis, and counting on wholesale banks is a thing of the past. We're either going to have to encourage private funds (like real estate opportunity funds) or we're going to have to rely on smaller regional banks. The big banks are dead or nearly dead, and if you want a government job, then perhaps CITI will be still hiring. But underwriting times will probably be outrageous, and smaller banking entities may turn out to be the real winners.
- Interest rates are about to explode. Will it be considered hyper-inflation, like a third world country. That depends on what the federal reserve does when the dollar begins its fall. If they react with higher rates, despite the fact that the economy is in decline, then we may avoid the excesses of hyper inflation. But if they leave the rates where they are, or they continue to use government to buy up mortgage back securities, and keep rates at 1.00% or lower, then watch out! What are we going to do if rates go up to 1981 levels, 18-21%? Your going to have to sell real estate in non-traditional ways. Private seller financing will not be the option of last resort, it's going to be the option of first resort. Thousands of home owners that have capitalized on lower rates stand to be in a good position when hyper inflation hits. It's going to be important to have extensive data bases of home owners with 4.5-5.5% rates. These home owners will still need to buy and sell homes, and cooperative enterprises that can transact exchanges will be the hot real estate networks of the next 10 years.
- Green Housing will now become economic housing. In other words, energy efficient housing will be more valuable then gold. Energy costs will skyrocket, forcing homeowners to shut off their power for long periods of time. Electrical and gas companies will continue to reward consumers for buying energy efficient products, and consumers will be looking as solar, wind and other ways to decrease consumption. Builders will be building small efficient homes, and luxury items will truly be just for those whom can afford them. No more jetted tubs, expensive tiles, wood floors, or other excesses you see in many American homes.
- Community Housing will also become more common. Generational housing will be the thing to do, where grandpa and grandma move in to help reduce costs for both families. Many immigrants already practice this to some degree. Now you will see the majority populations whom have been used to one family living now consider ways to decrease costs through community living.
Real Estate will evolve with the market and I imagine that will be a difficult adjustment. But in the end I still am optimistic that America will eventually pull itself from the ashes. The current form of consumerism has not worked. The idea that you can simply spend and spend and spend without consequence will soon shift to a more conservative public policy of savings and thrift. The key to survival in the real estate industry is creating the strategies that will take advantage of these ever changing economic conditions. Those who capitalize now will be the great successes of the future.