Back in the Fall, some market observers argued against the Fed lowering interest rates and bailing out the bad behavior of speculators and investors who overleveraged with cheap debt and bid up prices on various assets, including commercial real estate, to unsustainable levels. Well, it turned out bad behavior was so rampant and destructive spurred by licentious lending by the major financial institutions, the Fed couldn't help itself and has lowered rates beyond what might have been expected just a few months ago.
While lowering the Fed funds rate may buoy Wall Street in the short term and shore up battered banks, will it help average Joe on Main Street and end the dire consequences of the housing skid? And will Washington's $600 tax rebate keep consumers spending? A few hundred bucks doesn't take you very far these days especially when a lot of folks have mounting bills. That rebate won't suddenly improve most people's credit ratings or give them enough equity to start house hunting when banks will insist on more money down.
State and local governments, meanwhile, struggle with forecasts for lower tax receipts as property values drop and store sales turn sluggish. Anticipated government hiring freezes will shut down a major source of employment and reduced funding to myriad programs spells heaps of trouble for various contractors and other organizations supported by taxpayer largesse. Several not-for-profits, I work with, confront potential layoffs if various forms of state and city funding doesn't materialize in the next six months.
The stock market has taken a good beating. And stock pros say that stock prices actually stabilize or rise during most recessions. It's the impact on Main Street yet to fully play out that real estate investors need to fear. And while housing values have dropped, commercial real estate repricing still needs to run its course.
© Miller Ryan LLC 2008
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Jonathan D. Miller
A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.
