Try this on for the next decade in the credit markets

Implications: This material is an easy reading two pages that proposes government programs that will take at least ten years to effect.  We haven’t begun to set up a government program as proposed and won’t in this lame duck administration.  So by the time the next government in Washington gets out of first gear, 2010 will have rolled around.

Analysis: No doubt, though, that we will have to use the lender of last resort, the Federal government, to reestablish order. Asset classes in general and most categories of real estate in particular will retreat precipitously in pricing. Credit costs will rise enormously as capital will be in short supply. The consumer will suffer until debt ratios get back to those of say twenty years ago in order to be affordable. The retreat will affect housing prices, car prices and all manner of household purchases. We’ll have to get clever to deliver modern healthcare and educate our young. A revolution is coming in alternative energy which hopefully will reduce all forms of energy costs. I’m struck in the months since the turn of this year that there are still buys of office buildings in better areas, retail needing repositioning, big builder stocks and luxury/estate housing going down. I see big office building buys in downtown Phoenix and in Scottsdale that make no sense to me at premiums to recent record prices, older shopping center purchases that will be the new home of bargain basement retailers at low rents and require big time upgrades even to attract these tenants, recommendations of home builder buys anticipating a quick return to profitability when the operations of these companies are currently in deteriorating survival mode and the weekly closes of escrow for Scottsdale estates at ever increasing prices while surrounding communities are in a price retreat mode. I can only surmise there’s still offshore money in limited amounts thinking we’re at the bottom, some domestic opportunity capital available managed by optimists who again see the market at or close to the bottom, funds looking to time the home builders securities markets despite the credit market woes and athletes, entrepreneurs … still able to come up with a ticket or more to sustain the dreams of living in an estate property. I think that those who are buying now had better be sustained by emotional values because the prices they’re paying are considerably over any realizable near-term future exit. Emotional purchases can get old in a hurry when market prices fall and you’re stuck with an illiquid property for an extended period as the greater fool. I wish them good fortune but I don’t think any but the most meager investment dreams will be realized for these recent purchases.