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The Cal State Companies:  Center for Real Estate Studies ¨ Cal State Properties ¨ Cal State Investment LTD Partnership

¨ E-Mail CalStatecompanie@aol.com  ¨ Webpage http://www.calstatecompanies.com

 

 

 

WHEN WE COME BACK….

 

 

WHEN WE COME BACK….after this coronavirus commercial  break whoever is our new leader will have to manage the economy as it restarts in earnest in 2021.  Finances have been overextended by the massive fiscal packages approved so far, and hard choices will need to be made about whether to push ahead with further stimulus, or to try to constrict spending as the recovery gets underway. Therefore, we do not believe that tax policy will be at the top of the policy agenda for either of the presidential candidates after inauguration. We can imagine that taxes might be gradually used over time to strengthen fiscal ratios , where the Congressional Budget Office estimates that the debt-to-GDP ratio may reach 120% over the coming years. In addition, it is possible that tax incentives will be created to promote a more sustainable  consumer attitude toward scarce resources. Whether this may hurt earnings or would even support earnings will depend on the availability of technology to support the ability of consumers to adopt more sustainable behavior.

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Calstatecompanies  recommends a long-term investment approach, the temptation admittedly exists to position real estate investments to take advantage of, or hedge against, potential election outcomes. We caution investors against doing so at this time, but instead advise them to be ready to alter their investments as new information arises. One reason for this is that the election outcome is highly uncertain, and positioning  right now for a specific outcome leaves it vulnerable to the risk of a different outcome, with different real estate market consequences. Instead, we recommend tactically adjusting real estate investments to reflect the evolving outcome probabilities and the policies likely to be adopted in each case. The implied rationale for this approach is to maintain diversification so that a single outcome does not cause significant financial agony. In other words, we believe that the elections will have a more short-term impact on the real estate markets. Consumers adapt to changed policies over time and enhance their return continuously. Therefore, a diversifying your real estate investments based on the research reports issued by the calstatecompanies Market Cycles will give you the information you need to make sound investment decisions.  

 

 ABOUT THE AUTHOR: Eugene E. Vollucci, is considered to be one of the foremost authorities on real estate taxation and investing and has authored books in these fields published by John Wiley & Sons of New York. He is the Director of the Center for RE Studies, a real estate research organization. To learn more about the Center, please visit our web site at http://www.calstatecompanies.com

 

UTUBE: https://youtu.be/868wrjNPQFM

 

 

 

 

         News      

The Cal State Companies:  Center for Real Estate Studies ¨ Cal State Properties ¨ Cal State Investment LTD Partnership

¨ E-Mail CalStatecompanie@aol.com  ¨ Webpage http://www.calstatecompanies.com

 

 

 

Real Estate Investment Outlook August 2020

 

 

It looks like the corona virus has spiked. When we will see a decline again depends on various factors: 1) the effectiveness of the fiscal support measures  2) how fast jobs will return and short-working schemes  can be reverted to normal working time employment, 3) how fast supply chains can be fully repaired, 4) how resilient private consumption will be in the light of elevated unemployment and rising debt burdens, and 5) the impact of possible second waves.

 

According to its World Economic Outlook, the world economy, especially the advanced countries, is expected to contract in a coordinated fashion.  Most countries have embraced various support measures such as tax deferrals, loans, equity injections, and guarantees. These policies will only have an indirect impact on growth this year because they provide financing rather than directly increasing spending.

 

The Fed has already stretched its balance sheet at a frantic pace. Its total assets have grown from 4.2 trillion USD in December 2019 (representing about 19.2% of GDP) to 7.2 trillion USD by early June 2020 (±31.5% of GDP). Most of the expansion thus far can be explained by its “traditional” asset purchase program targeting Treasury and government sponsored enterprise (GSE) securities. The holdings of those increased from 3.7 trillion USD in December 2019 (17.2% of GDP) to 5.6 trillion USD by the end of May 2020 (25.8% of GDP), surpassing their previous record in both nominal terms and relative to GDP (over 24% of GDP in 2014). In addition to these programs, which are already reflected in the bank’s balance sheet and which as yet do not have an official upper limit, the Fed has pioneered new measures to provide up to 2.3 trillion USD in loans to support the economy, only a portion of which is currently disbursed. This latter figure includes up to 750 billion USD allocated to purchase corporate bonds from issuers which are either investment or noninvestment grade.

 

 

One argument in favor of a potential boost to inflation is the massive fiscal spending that is being used to fight the worst consequences of the current slump in economic activity. But arguing that fiscal stimulus is a game-changer is putting the cart before the horse. It is not the current stimulus that matters but whether huge deficits will continue long into the future. It must be noted first of all that a big amount of the fiscal measures announced are loan guarantees rather than fresh new money. There is nothing simulating about adding more debt to balance sheets. Even a direct form of stimulus is designed to be temporary and self-calibrating. The bulk of the fiscal stimulus is also temporary – households have received a one-off paycheck, more likely to be saved rather than spent, as happened in 2008. As things stand, the fiscal stance is set to be massively contractionary next year, not expansionary.

 

These policies will have a devastating effect on real estate values in the coming years. To keep on top of the real estate markets and avoid the rocky road ahead, we recommend using calstatecompanies “Market Cycle” which gives you a two-year head start on when to buy, sell or hold.

 

 

ABOUT THE AUTHOR: Eugene E. Vollucci, is considered to be one of the foremost authorities on real estate taxation and investing and has authored books in these fields published by John Wiley & Sons of New York. He is the Director of the Center for RE Studies, a real estate research organization. To learn more about the Center, please visit our web site at http://www.calstatecompanies.com

 

UTUBE: https://youtu.be/868wrjNPQFM

 

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