Perspective on Real Estate

September 25, 2002

October 2, 2002

October 9, 2002


Chaos seems to rule for now

So what's your take on the economy, on real estate, on San Diego? Funny I should ask because that's why you read this column -- but I do need a beginning.

Housing prices have kept climbing. Oh you knew that. Will they keep rising? Is God making more land? Will apartment prices keep rising? For a while, unfortunately, housing prices will rise, no matter what rents do. The demand is so deep and the stock and bond markets have become so undependable (volatile) that people are swarming into housing sectors, with financing readily available.

Nonresidential building, including hospitality and office, are in decline -- down by 17 percent as of August. Manufacturing will continue to be weak, which will impact on the overall economy as well as construction of new industrial, distribution and warehousing space; plus the lack, as well as cost, of terrorism insurance hurts those sectors badly.

California isn't the only state that is having financial problems, along with the national deficit. Things have changed. The drama is how much media attention is given to what stocks are doing rather than what the government is not doing. We have rank politically inspired amateurs running our economy and that is bad for the future. Corporations agree, for they are not making solid investments in new plant and equipment. Until they do, this recovery will look like the Padres -- the nonreligious ones.

The International Monetary Fund (IMF) revised its growth figures down including for the U.S.A., Europe and most primary economies. The dockworkers' work stoppage or lockout is doing a great deal of harm to the GDP. We'll see how long before George W puts up with this drain on the economy.

The predictions of the coming holiday season are not good either. We will continue with this very "soft recovery," this jobless climb out of worse-than-admitted recession. The truth is hard to come by, and the media adds to statistics distortions by printing them; far too many people still believe what is written or printed, even when the numbers are far from what is truly happening. This is particularly true during election campaigns, when so many millions pour into propaganda and attack ads that do not help the voters understand what is actually happening.

However, recent major stories have appeared with frightening implications: Business Week's "The breakdown in banking," which relates the conflicts of expansion which open up more wounds rather than closing inherent weakness because of dynamic expansion. There is a record $880 billion of corporate bonds and loans in distress or default as we begin to imitate the weaknesses of Japan's banking system: "Growing load of gloom weighs market down" -- which validates the loss of trust in stocks, bonds and psychology; "Index of leading indicators falls" -- which illustrates that while consumers keep spending because of sales, low interest rates and small mark-ups, they begin to show more concern about the future and war and such "mundane subjects."

When investors and consumers get bummed out, look out economy. So as some of us are more concerned with deflation (falling prices and falling profits) than inflation, the apologists tell us that we are not Japan, we are much more in touch than they, and we will begin to recover big time. I sense they are blowing into the wind of change and fate, and that each of you must become much more careful in selecting what you will invest in and what you are asked to pay. It's about time.

Goodkin is president of Ackman-Ziff-Goodkin, an international real estate adviser and strategist, and has been a housing analyst since 1956. He can be reached at sandy.goodkin@sddt.com.


September 25, 2002

October 2, 2002

October 9, 2002