WHAT WILL THE SLUMP TEACH US?
Hopefully there is some knowledge to be gained by this economic slump. A hefty 76% of GlobeSt.com readers believe we'll learn that we're just in another cycle. Almost a quarter of you (23%) think it's too early to tell what will happen and only a miniscule 1% of you assume the industry will be invincible after this. Peter Hauspurg, chairman of Eastern Consolidated was nice enough to give us his opinion on this week's poll.
"The lessons from the slump will be forgotten as soon as the money comes back. It really is too early to tell. We're just getting into it. People want to know when we'll hit the bottom and I'm always asked, is that bottom here or not? I hope it ends tomorrow. It feels like the train wreck is just sort of starting. Once money is poured back into this industry, lenders will lend and builders will build. Now that we don't have anything to lend the developers are stopping.
"Real estate is sort of the tail that Wall Street wags. When those guys sneeze, we get the flu. That happened in 1987 and 2001 and it took us some time to pull out of that. The biggest lesson in this is probably to keep that Wall Street crowd from approaching leverage. That sucks the money out of the entire system and hurts the rest of us. Banks are not lending, the transactions aren't happening and the people who rely on transactions are sucking wind.
"New York is almost like it's in a bubble. We're sitting still doing condo deals and I don't have enough air rights to sell at the high line at more than $300 per sf. There have been retail deals executed last week north of $800 per sf on Madison Avenue. Most of the existing jobs in town are selling out just fine. You're reading the papers and thinking 'What's going on out there isn't happening over here, but it can't be far behind.' But before it hits here I think you're going to have to see retail sales slipping.
"The Wall Street guys got it out of hand. The real estate fundamentals were fine, but now the real estate business has no liquidity. You can't do a $100 million deal now.
"We're not adjusting to the slump, we're sort of just reacting to it.
"I think the Fed's doing what the Fed can do and making liquidity available so my guess is we want to stay on that track. I'd hate to see the government being the bailout of last resort, though."
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