on the road with Jim Willie... Boston real estate
the economy is slowing in the great city of Boston
on BackBay main streets like fashionable Newbury Street, landlords are struggling mightily
10-20% of storefronts are unoccupied and available for rent
commercial property and highend condo property are not selling
a backlog is out there
I went with a friend to see two properties
he is a guy who made his multi-$Ms and now wants to settle
we looked at a 10-unit brownstone walkup, five stories
it is for sale, asking a few $M, but not selling
it needs a lot of work, crumbling exterior, but nice penthouse
the owner is a character, a Lebanese guy in late 70's
he said to my friend...
"real estate stinks now, properties are not selling, they are just sitting, prices are coming down, units are empty for renting also, you dont want to buy now, wait a couple years"
imagine that, an onwer discouraging a buyer
but he did so because the guy knows my friend's father
then we checked a ground floor Commonwealth Avenue two-bedroom apartment for rent
something like 1000 sqft, maybe a little more
landlord put it up for rent in June, no takers
he wanted originally $7000 per month (seven thousand dollars per month)
now he got an offer in the low $4's
my friend is contemplating $4500 offer to submit
now that is an expensive social life
the economy is slowing
highend real estate is caving in slowly
I personally saw 20 for rent storefronts on Newbury, Clarendon, CommAve, and next to Boston Common park
two-bedroom condos overlooking BCommon sell for $4-5M
but the highend is softening FAST FAST FAST
first the highend, then the upper middle
out in the west suburbs, many many houses for sale
they range from $400k to $700k, some even more
in Harvard Mass some horsefarms are up for sale in the $2-3M range
I was told by my other friend in commercial real estate leasing sector that the market is in tough shape now
a great many properties are just empty on the commercial side
the commercial vacancy rate is the highest in 20 years
but on residential side, many buyers from the last two years are feeling great pain and load from the huge debt they are carrying
tough shit
the economy is slowing to be sure
almost every asset class on the planet except Treasurys and Real Estate are suffering badly
their turn is coming
as Puplava says, the RE sector will give off gas for five years
and the economy will flatten or decline as a result
so much personal spending is tied to rising RE values
all asset groups tied to paper will suffer
earlier this week in a daily market wrap he put it well
the entire US economy is a debt pyramid
There are already many on Wall Street calling for a 15-20% depreciation of the dollar. To think that the dollar can be depreciated without consequences is a dangerous thought to even contemplate. The last time this was tried was under the Paris Accord back in 1985. It ended up causing interest rates to rise to combat a falling dollar. The end result was that it led to the October stock market crash of 1987. This is something for policy experts to meditate on as they consider burning up the currency to rescue the economy.
.......
The sum of it all is that the US is borrowing between $450-500 billion annually to fund our trade and current account deficit, and another $400-450 billion to fund its budget deficits. With a possible war with Iraq on the horizon, that number could go even higher. In order to keep the economy moving it is now necessary for the US to borrow between $800-900 billion a year. That is big money by anyone’s standard. The question is where will this money come from? The exodus out of stocks has been instrumental in funding the government’s deficit. But how long will foreigners continue to fund our trade and current account deficits? With US foreign liabilities now running over $9 trillion, $4.3 trillion net, foreign appetite for US securities is waning. At some point in the near future they may simply say no.
.......
The US now finds itself in a precarious situation. It is dependent on the willingness of foreigners to finance its trade and current account deficits, and financial institutions to finance its budget deficits. The remainder of the economy is dependent on rising housing prices and lower interest rates to maintain consumer spending which is dependent lower interest rates. It hasn’t dawned on anyone yet that this is a prescription for disaster. In my 23 years in this business I have never seen such an absence of understanding of macroeconomics. We now have a recovery scenario that is based solely on a continuous pyramiding of debt. No one seems to contemplate what will happen when that debt spirals out of control.
excessive trust of the Federal Reserve will end up costing many people their life savings
they are no longer able to contain the damage that comes
I smell an Argentina Effect coming to our shores
not as devastating, but all things are relative
this is soon to turn badly, more badly than already
something ugly this way comes
/ jim |
