Real Insight. Real Estate.

Posts Tagged ‘Economy’

It’s time to wax philosophical about grandiose theories.  Don’t look at me, it’s just that time of year.

Between Dec 25 and Jan 1, business effectively shuts down in the Western world.  We always try to kid ourselves into thinking something will get accomplished.  Like the last two weeks of August, however, decision-makers head for fashionable “spots” leaving a skeleton crew to watch the shop.  i.e. nothing really gets done.

Needless to say, these annual slow-downs are not a coincidence.  They are a function of geographical, environmental and social phenomena, all of which conspire to yield a predictable outcome.  Whether it’s the shortest/coldest days or the hottest/humid days on the North Atlantic coast; or a long standing human fascination with the sun starting is journey toward longer days and the bloom of spring; the current state of affairs are almost always at least partially a function of underlying fundamentals.

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I’m pretty sure I’m just paraphrasing Ben Franklin with that one. Last week, an article on Time magazine’s website purported that the massive trade imbalance between China and the rest of the world (but specifically the United States) has caused the Chinese government to take certain measures uncharacteristic of its past in order to maintain its own balance between consumption and savings.  Up until recently, America’s savings rate was hovering around zero percent.  Since the credit crisis, we’ve closed our collective wallet, and seen our saving shoot to a whopping (by our own standards) 4.5% of GDP.  Conversely, China’s savings rate, who at the onset of the financial crisis was saving roughly 10% of GDP has fallen by a similar margin. With the RMB (Chinese currency) being undervalued between 15-25%, many global economists have wondered why China has decided not to let their currency’s value float.  Instead, they have done everything possible to keep its value as close to 7 to 1 to the dollar (where it has been historically) as they can. The most intriguing aspect of these measures is not why they are doing what they are doing, but rather what they are doing, and the greater impact that could have on their economy down the road. Read the rest of this entry »

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I’ve started to write these blog entries on Sunday night. The natural pause ahead of the new week and helps broaden my perspective.

It is in this mindset that headlines regarding South Korea strike me as relevant. It turns out, South Korea’s economy expanded in the third quarter at the fastest pace in 7 years. Notice, if you will, the contrast to this article from Feb 2nd when things weren’t looking so hot. A quick poke around the internet shows what South Korea exports: electronic products (semiconductors, cellular phones and equipment, computers), automobiles… Basically, the South Koreans make stuff we don’t and therefore have to import.

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In a piece originally titled “10 Bubbles in the Making,” Lawrence Delevingne, a writer for The Business Insider examines 10 current economic phenomena that he thinks are poised for fallout in coming years.  While there are probably other less obvious economic issues waiting to burst, Lawrence has done a good job of picking out some main-stream topics that have gotten a lot of press of late.  We thought we’d take a moment to offer our 2 cents in response to Lawrence’s ideas considering we have blogged on several of these topics in the last couple of months.

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You won’t find Miami, Phoenix, or any of the wounded Californian towns on this list of the most promising real estate markets for the upcoming year.  Money Magazine claims that despite a poor real estate market and the housing crisis certain markets are expected to show price gains in the following months and years.  These cities and towns have been virtually uninjured by the economy, seemingly immune to the foreclosures that have plagued the rest of the nation.

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10. Las Vegas

What happens in Vegas depends on the rest of the American economy, and until Americans start to travel (and gamble) again, nearly one-fifth of Sin City’s commercial space will stay vacant.

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10. Tulsa (projected vacancy rate in 2010: 19.2 percent, up 2.2 percentage points from 2008). The oil and gas sector was an albatross in the 1980s, when Tulsa suffered from a severe energy bust. But in recent years energy (along with healthcare, aerospace, and government) has helped sustain Tulsa’s economy. Employment and economic growth are much better than national averages, and unlike in other cities, most big construction projects have stayed on track. With new buildings coming online, the overall vacancy rate will stay high until the economy fully rebounds. But it will worsen only slightly in 2010 and probably start to improve by 2011.

9. Pittsburgh (17.3 percent, up 2.4 points). This once industrial city wriggled out of the Rust Belt years ago, and the economy now revolves around medicine, technology, and higher ed. At 7.7 percent, the unemployment rate is nearly 2 percentage points lower than the national average. Few people got rich in Pittsburgh during the real estate boom, which seemed to pass the city by. But the bust has spared Pittsburgh as well, with home prices remaining more stable than in most other markets. That leaves the Steel City primed for a recovery. Read the rest of this entry »

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Last week, the Wall Street Journal published an article citing a survey of 47 economists, the majority of whom said the recession is over and the economy had bottomed out. But the question remains: what does that mean?

Several key indicators must be examined in even considering whether or not a recession has ended. However, for the 247,000 additional people who lost their jobs in July, it seems more likely one could first find the bottom of a bottomless pit. This leads us to one indicator: unemployment. While the July unemployment rate dropped 10 basis points from 9.5% to 9.4%, this was due partially to a decrease in the labor force itself, as a greater number of workers have become so fed up with the job market they stopped looking for work entirely. Since then, the first two weeks of August have seen over one million Americans file for unemployment benefits. Read the rest of this entry »

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I am certain most of our readers are aware of the glut of commercial space that remains vacant in today’s wiltered economy.  We’ve even shown YouTube clips on this very site of people simply driving down the road, capturing storefront after storefront, strip center after strip center, vacant as a Ghost town right out of the Wild West. And as retailers continue their cutbacks, more and more cities are facing their big box stores becoming “Ghostboxes.” Read the rest of this entry »

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Everyone knows that there is a bid-ask gap between buyers and sellers. Everybody knows that financing is extremely difficult with the credit markets still in turmoil. Everyone seems to understand that commercial real estate sector lags behind the rest of the economy. Yet everyone seems to forget what will really help get CRE out of its rut…fundamentals.

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