The real estate investment services firm Marcus and Millichap came out with an interesting statement last week.
The headline that their chief forecaster, Hessam Nadji, used was “Recovery Threatened, But This Is Not 2008”.
And he finished his overall summary by writing “The downgrade of the U.S. government’s credit rating by S&P has sent global stock markets into a frenzy, posing a threat to the already fragile U.S. economic recovery. However, there are stark differences between the current economic situation and the crisis in 2008. Amid renewed economic uncertainty, commercial real estate offers compelling investment opportunities.”
In the body of his piece he goes into detail and gives a litany of reasons why “this is not 2008”. And by that he means it’s not as bad as 2008 was. Surprisingly, he does identify the major issues impacting the economy right now, including
- Over-speculation that exacerbated the spike in commodity prices
- Super-charged liquidity spurred by Quantitative Easing 2 (QE2)
- The tactical Band-Aiding of sovereign debt issues in Europe
- Japan’s supply-chain disruption
- A double-dip in U.S. for-sale housing
But not surprisingly he categorizes the impact of these issues as nothing more than simply “paper cuts”.
Paper cuts? Seriously?
Of course, after brushing off that collection of 900-pound-gorilla issues, glossing over stagnant economic growth and abysmal employment numbers, he concludes that “Apartments, in a league of their own, should continue the march down the recovery path.”
But he couldn’t resist adding a monster caveat . . .
“Unless we enter a massively downward spiral that leads to fear-based, not fundamentals-based job cuts, property operations should remain relatively stable in most sectors.”
A massively downward spiral.
The kind that will be triggered, in my observation, if any of his “paper cut” issues goes really bad.
So I’m having a bit of trouble with his circular reasoning.
Listen, I’ve made it no secret that I think the economy in general and real estate specifically are going to get a whole lot worse before they get better. And I think the items he mentioned together will be the catalyst for the substantial downturn that we’re facing. The impact of these issues won’t be zero, and they’re most likely to be a mot more significant that a paper cut.
But that’s just me. What are you seeing?
You can read the full piece by Mr Nadji here: http://www.globest.com/blogs/streetsmart/-313014-1.html