Despite Promising Signs, Many Wary that Recession's Knockout Punch Could Still Come
http://www.costar.com/News/Article.aspx?id=43C2565A98B9332301214A60E1C8E2E1">By Mark Heschmeyer, CoStar GroupThe End Is Near (for This Recession).
So read some of the economic placards that have been trotted out in policy statements these days with catchphrases such as 'Sustainable Recovery.' 'Recession Is Coming To An End.' 'Policy Actions Having an Effect.' 'Seeing Green Shoots of Growth.' and 'The Crisis Has Stabilized.' Many pointed to the more than 2,000-point climb in the Dow Industrial Average over the last three months as proof that federal stimulus measures appeared to be having an effect in rousing the slumping economy.
Just this week, chief economists from JPMorgan Chase & Co., Wells Fargo & Co., PNC Financial Services Group, Morgan Stanley and others said they expect the economy to "recover from its deep slump by late summer." The group that makes up the Economic Advisory Committee of the American Bankers said they expect the nation's gross domestic product (GDP) to increase 0.5% in the July-September quarter -- this after falling a projected 1.8% in the April-June period.
Such signs have raised hopes that the end of the recession may be in sight and that it is time to turn attention to making money again among real estate investors and service providers. We put those questions to CoStar Group customers and readers. Do they see the end in sight and what do they see the future holding for the commercial real estate industry? This article will address comments on the first question. Next week, we'll look at what the future holds.
So, is the end of the recession near? Not as far as commercial real estate is concerned, was the overwhelming answer we received.
"Since they repaired the Hubble Telescope last month, I suppose someone could argue the end of the downturn could be theoretically 'in sight.' Otherwise, the way we see it, not so much. The system is still too much of a cauldron of bad debt, soon-to-be bad debt, nonexistent credit availability and weak employment drivers," said Steven D. Sandler, CEO of Crosswind Capital LLC in Rye, NY.
If you compare the economy to a boxing match, the recession has probably delivered its worst blows. But according to comments made by CoStar Group readers, commercial real estate may still have more rounds left to fight and the recession may still have a knockout punch:
- Federal initiatives are prolonging the hurt by artificially propping up banks' troubled real estate assets.
- Maturing debt loads and rising loan defaults will continue to keep property values and deals down for a long time.
- Consumer spending is weak and continues to fall because of deteriorating net worth in home values and rising unemployment.
- All of which are continuing to hurt property fundamentals, and will likely continue to do so until real growth returns, which is not in sight.
The following are excerpts of comments and insights from wide sample of real estate executives across the country who say the industry is still in for a protracted fight. Next week, we'll take a look at what the industry can look for and what it will look like when recovery does begin.
http://www.costar.com/News/Article.aspx?id=43C2565A98B9332301214A60E1C8E2E1">Continued...