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Posts Tagged ‘Consumer Spending’
I´m a curious person by nature and have always been fascinated by how public opinion changes with the times.
Investors and high flying property developers used to be respected and admired.
Getting a letter from the bank saying insufficient funds used to mean you´d no money left. Now it´s just as likely to mean they´ve no money left.
Politicians who you wouldn´t trust to run a bar in central Dublin suddenly lined up outside radio & tv studios to tell us about bondholder priorities, liquidity ratios and capital injections.
Like many of our readers, my attitudes to the people mentioned above have changed considerably over the past 3 years.
My attitude to property investment hasn´t really changed at all however, and while that might mean I´m in a minority, experience with clients and newsletter readers has convinced me that it is a sizable minority.
Before the recession, I didn´t like the idea of buying property when prices were rising at 20%+ per annum. I was never a fan of buying offplan because I always worried that they wouldn´t get built. I never flipped a property. Never agreed with 100% mortgages. As I don´t take holidays very often, the idea of buying a vacation home and renting it out when I wasn´t using it had little appeal.
During the recession, I thought buying property was a great idea and said so to anyone who would listen. Myself and my business partners identified a profitable market niche at a time when many agents and investors were running for the hills.
We´ve promoted a fairly wide variety of real estate deals in Florida over the past 3 years and I think it´s reasonably fair to say that we´re better than most at sniffing out a bargain. Siesta Lago is one example, Sabal Point is another. If you click on those links and complete the enquiry form, an information pack on each will be sent to you automatically within 10 minutes.
How has your attitude to investing changed over the past few years? I´d love to hear from you.
Regards
Colin
As Dusty Springfield famously sang, “the world goes round without even a sound, and it looks like summer is over”.
Dusty was spot on regarding the second part of that lyric but the property and financial worlds were making plenty of noise over the past few months.
Growing confidence in the markets
Stockmarkets have rebounded, as have equities and commodities. Investors have regained their appetites for debt and the interest rates at which banks lend to each other has fallen back to near pre-crisis levels. Ben Bernanke, the Fed Reserve chief, has announced that the worst recession since 1929 was “very likely over at this point“. The Sage of Omaha himself (aka Warren Buffett), told CNBC yesterday that “the US housing crisis was over“.
Confidence is also growing rapidly amongst large investors. I’m not just talking about hedge funds starting to actually buy shares again rather than short them, but also about pension funds and private equity groups buying huge amounts of distressed property in places like Florida.
Twice in the last 4 weeks I’ve seen developments with 100-300 units for sale taken off the market because single groups have purchased them outright, swiping the rug out from under the feet of those who were considering purchasing one or two units.
Kind Regards
Colin Murphy
Torcana.com
Many people (although hopefully not too many readers of these blog posts) can be forgiven for wishing journalists and commentators would simply shut up for a while about the trends in the housing and mortgage markets and concentrate on more important things like reducing unemployment and improving healthcare.
However, and whether we like it or not, the focus on the housing market needs to continue because it has direct links to many other industries and house prices directly affect consumer spending. Simply put, if people know that their house is increasing in value, they will tend to spend more money (and vice versa). In economic jargon, this is referred to as the Wealth Effect and it is very influential. The economic policy models of the Fed Reserve assume that a person whose house appreciates by $100,000 will increase his spending by the same proportion as a person who receives an extra $100,000 in stocks, shares and regular income.
Declining house prices also limit a banks willingness to lend money - not just for houses but also for cars, business start ups, holidays and general investment. Far too many people who should have known better lost sight of these forces.
Colin Murphy
Torcana.com
