The weather in Steamboat has been amazing! Beautiful blue skies with the yellows of Aspens accenting the mountains! I know I live once, and I’m glad that living includes Autumn on an annual basis. The picture above is from a quick drive I did about a week ago.
I don’t know why I get so amazed by the questions I get on the real estate market and many other markets as well, including building and banking. To me, this being the fourth recession in my life, and probably the second major one, it’s just another trip around the sun in many ways.
This trip, though, works with more federal debt than we have experienced since the end of World War II. At that time, our country went into a huge growth phase and we were able to pay our debt back quickly. In this case, I’m betting that Peter is going to lend money to pay Paul.
Actually, this has been already happening. I guess the real question is if Mary will lend as well.
Overall, our country has to pay for the problems and wars of the past two decades or more.
What does that mean to my assets? Well, they are as protected as possible. There are always asset classes that make money at any time. I’m glad that I have managers that are internationally savvy and can make adjustments. For things locally, I have yet to see a large change in spending habits.
Things I’ve noticed are:
– there are not as many housing starts
– many closings are happening below the list price, sometimes with significant discounts
– consumers are using more credit to live every day
– restaurants think they are doing well
– beer is still necessary, though Steamboat Whiskey closed their storefront
– visitors to Steamboat this Summer were fewer than last year, but not by much
– stores are getting inventory steadily for the upcoming season
Really, changes in our habits and lifestyles will happen over the Winter when discretionary money is more limited. For an interest rate increase/decrease to be felt, it takes 6-12 months. With the increases that the Fed have made, most folks will be cautious now and even more so later.
For average people, buying power will be diminished more than it has in 15 years. An example is I have been shopping for a side-by-side for about 6 months now. This is an item I plan to buy with cash, with no financing. In Spring, it is a good probability that I will be able to get one at a good value because those who want to finance the off-road vehicle will be paying more than they would have 6 months ago. Payments are higher, thus making living more expensive and toys less of a priority.
Discretionary payments and expenses will stop first. Sellers, who want to relieve their debt burden and are paying a low-interest rate will be more motivated to discount to stop the cash bleeding. Using cash to make a purchase will be stronger for many to make a deal. (I know that this seems obvious, but when people want to sell, financing can be a hindrance and a greater expense overall.)
This, of course, is the same with any asset including real estate.