We continue to have the economic problems in Europe which may actually get worse depending on how Greece is handled. It is likely that some sort of face saving debt forgiveness will happen but it will look more like extended maturity lower interest, maybe even a payment holiday for a period, or some mix of things that let Germany say the debt remains and Greece to say they got concessions. The problem of course is that the new Greek government are avowed Marxists, and they have already undone many of the austerity steps, so they will head back to disaster in awhile. They have also not really dealt with the tax avoidance and corruption issues so Greece will remain a basket case. Once Greece does get some relief, Spain and Italy will be demanding similar things. There will not likely be dealing with the real issue which is the socialist labor laws and other structural issues which keep Europe from real recovery. The new ECB QE is not going to really make much difference and will only delay the day of reckoning. Some think there are signs of stabilization in Europe, but the reality is the underlying political issues remain, and the structural changes needed in Spain, Italy, Greece and other countries will not get fixed. All of that just means the Euro continues to sink toward par with the dollar, and deflation sets in and debt becomes more burdensome. A devalued Euro may help them with exports, but not enough to really make a difference to the longer term issues.

So Europe will stay a mess, China has a long way to go to clean up its mess, probably five years or more, and Japan also has a very long way to go to dig out of its debt and limping economy. As the currency wars ramp up, the devaluation of the yen is not going to prove to be the export help hoped for, given the depreciation in the Euro and the Chinese Yuan. All of this means US companies now have an inflated dollar leading to less exports and decreased earnings on currency translation. None of that is helpful to juice the US economy.

It is now highly likely the Fed will maintain existing rates through all of 2015, since if they raise rates the dollar will really go p, making the US even less competitive and costing more jobs. It also increases the federal deficit through higher interest payments.

With wages stagnant in the US, and little offshore demand, it is unlikely US companies will be expanding a lot, and with oil companies stopping drilling, there will be a decline in capital spending by any oil related industry. Result, less pressure to raise office rents, less demand for new housing, less demand for new factory space then we would have hoped at this stage of any recovery. Much of the hiring that has occurred has been part time, in hospitality which pays low wages and in retail which also pays low wages. While consumers may be more confident, they are unlikely to suddenly start spending like we all hoped would happen by now. Result, less pressure to raise retail rents.

It is not all bad. Things are getting better, but not at a good clip and not in a way that will keep driving up real estate values. Multi should continue to do well for many years, as the burden of no real wage increases, student debt, and a lack of equity for a down payment will continue to hamper housing. Also, the trauma of the massive declines in home values in 2009 will impact the desire to own a home, as we see from the latest stats which show near record low homeownership in 2014. It is a time to settle in for a slow grind up, and no big returns and no real deals like we saw over the past several years. Just be happy to make a nice levered return of 125-15% and consider that winning. I see the lenders reaching again and allowing weaker underwriting, over leverage and cash out loans. Don't be one of those reaching again. It will burn you eventually, just as it has always done.