The new normal is starting to look like old normal of the period before everyone went frothy in 2004. Despite what we have just lived through there is seemingly truth to reversion to the mean as a long term truth. Stability has returned, and optimism is coming back. The real shift was the mid term election, getting rid of Nancy and Barney and Waxman, and seeing Obama shift somewhat to being accommodative on the tax bill. That was a huge turning point which will in later years be looked at as a historic moment when the far right and the far left were set aside and we had a reversion to the middle. While there will still be nasty fights with regulators in EPA, FCC and other agencies, and between the president and Republicans, the investing world saw the change and is jumping in. Office rents have begun to creep ahead, retail will likely be better after a good Christmas , and hotels are already showing better results than anyone expected. Lenders are now settling in to try to help the good owners and developers, and workouts are starting to become more rational and productive discussions based on several restructurings I am involved with as an advisor. Underwriting is still tough, as it needs to be, but at least there is capital to borrow if you have the metrics to survive the underwriting.

For all of you who think I have been tending to the negative, that was true until now. I think a major shift in psychology has occurred in the past few weeks once the tax bill got approved and Obama demonstrated he is willing to at least try to deal with the Republicans instead of staying hard left where he was. I now believe that 2011 has the possibility of having 3.5% GDP growth and a better retail showing than anyone thought possible 60 days ago.

For real estate this is all good news. As the year goes on, if my scenario is not interrupted by some major black swan event, then as optimism grows and as the numbers start to come through, investors will begin to look for a chance to get in, property prices will rise better than we hoped and lenders will be a little more accommodating. All of this could easily go the wrong way if there is a terror event, Iran or North Korea do something really stupid, or California and New York cannot get over their inability to function and do not start to deal with their deficits in a responsible way. Both new governors get it and have the ability to do the job if the legislatures and unions let them. Maybe Chris Christie will not be the only governor who is willing to do what needs to be done and to stare down the teachers and public employee unions.