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I had lunch with a contact today who is a very successful RE developer on West Coast and has developed billions of dollars of real estate. Thought my brief notes may be interesting to some:
Tom's thoughts on the economy
Recession really started in roughly 2001 – cheap, cheap debt and tax breaks after Bush and 9/11
Since then America has borrowed close to $4.7 Trillion against home equity alone – spend, spend, spend (it’s the American way as Bush declared)
Add other forms of consumer dept like credit cards
Subtract this from GDP figures and GDP growth has been basically flat, if not negative
Everyone (auto, retail, consumer) adjusted to this assuming the growth was all real and sustainable (of course a false assumption)
Hit the reset button – back to 1996
This recovery is going to be painful… it involves a reset of expectations and norms.
Things won’t return to where they were
He is clearing his housing inventory and basically planning to shutter the hatches for the next few years…
Bearish to say the least…
Tom's thoughts on the economy
Recession really started in roughly 2001 – cheap, cheap debt and tax breaks after Bush and 9/11
Since then America has borrowed close to $4.7 Trillion against home equity alone – spend, spend, spend (it’s the American way as Bush declared)
Add other forms of consumer dept like credit cards
Subtract this from GDP figures and GDP growth has been basically flat, if not negative
Everyone (auto, retail, consumer) adjusted to this assuming the growth was all real and sustainable (of course a false assumption)
Hit the reset button – back to 1996
This recovery is going to be painful… it involves a reset of expectations and norms.
Things won’t return to where they were
He is clearing his housing inventory and basically planning to shutter the hatches for the next few years…
Bearish to say the least…
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