Oil might have bottomed with the reduction of rigs and the pull back from major new drilling projects. There is no way to know how high it will go back up, but maybe $60, maybe $70. The point is the little bonus consumers got for a few months was nice but not that material to any one household, and what did get realized is being used to reduce debt or saved. Restaurants have seen an uptick but not goods to any notable extent. I continue to believe that what the polls show is correct- the majority of people still do not believe that the economy is growing well, and many still think we are in a recession. That is because it is not showing up in their paychecks. Wages are barely rising for most people in the middle and below. There is still what I have theorized to be the economic shock effect of the crash. Tens of millions saw their net worth decline and that is because their house value still has not achieved 2007 levels and whatever 401K or stock portfolio is probably not material enough in size to matter even if they left it invested which many did not. Reality is for most there is no improvement in 6 years and their median family income adjusted for inflation declined materially. That is why we are not seeing any real improvement in retail sales. Add on the widespread feelings in polls of a lack of leadership from the White House and the majority correctly believing that Obama is not doing what needs to be done regarding terrorism and keeping us safe, and you have little that will incent consumers to spend. I do not believe this is going to get much better for much of this year.

So the implications are that retail will not be a place where substantial risk and investment seems justified. Condos and new homes are not going to be a place to make sizable investments. While the hotel sector continues to celebrate that things are wonderful again, reality is that on an inflation adjusted basis NOI is still below 2007. Costs are increasing and while revpar is increasing, it is not doing so for all segments.  Luxury is doing well as one would expect, but the average hotel and motel in most of the country is still behind in cash flow from the peak. Now there is new development and, just as has happened now in Manhattan, the extra rooms will be too many in a year or two in many markets and revpar increases will abate and NOI will either still not be back to 2007, or will be barely higher. Had you invested in the stock market in 2009, you would have made far more profit than investing in a hotel, especially if you used margin. As I have pointed out prior, the one area is multi and that remains, and will remain good. How much higher rents can be pushed is a real question since incomes are not rising to pay much more rent. Rent increases may slow materially over the next year as a lot more product comes on line and as incomes do not increase.

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