Many economists are predicting that the U.S. economy will start into the next expansion by the third quarter of 2002 at the latest, and that real gross domestic product will be growing smartly by the end of 2002. Even if these predictions come true, I do not believe commercial real estate will move out of the current OVERBUILT PHASE of its three-phase real estate cycle until past the end of 2002. I believe the real estate cycle ended its preceding DEVELOPMENT BOOM PHASE, which began in early 1997, in about mid-2000, when it then entered the current OVERBUILT PHASE. But the typical OVERBUILT PHASE lasts until well after the general economy has begun expanding upwards from the bottom of a recession. Though such a general expansion raises demands for space, at first there is enough available supply left over from the preceding DEVELOPMENT BOOM so that rents do not rise enough to justify new development. This is the third or GRADUAL ABSORPTION PHASE of the real estate cycle. During this phase, rents rise and vacancies decline as the general economy grows, but little new construction begins. Eventually, rents rise high enough, and vacancies fall low enough, so developers start building new projects again in the next DEVELOPMENT BOOM PHASE. Every developer could be in a good spot if gets payday loans online. But that will certainly not occur in 2002 and probably not in 2003 either. True, the current OVERBUILT PHASE will not be nearly as long or as difficult as the one from 1990 through 1993, because existing space surpluses are much smaller than those in the early 1990s. But 2002 is sure to be a year of coping with rising vacancies and downward pressure on rents and property prices, at least in most office, industrial, and retail markets.
“Smart Growth” is a code word for whatever the user of this term wants to achieve concerning metropolitan development Yet different users of the term have totally different goals, so “smart growth” can mean almost anything. In spite of its diverse and often conflicting meanings, all parties superficially endorse “smart growth” because it is clearly superior to the alternative: “dumb growth.”
Many people claim we are now in the “information age;” so old-fashioned activities like agriculture and manufacturing do not matter much anymore. Nonsense. The information age wouldn’t survive for a minute without an immense amount of manufactured equipment, and eating is still a nice idea. True, those sectors are not growing as rapidly as the information sector, but innovations in the older sectors still present great economic opportunities.
Stocks of Real Estate Investment Trusts did poorly when the high-tech sector was booming even though real estate markets themselves were strong. That happened because REIT stocks seemed to offer far lower potential returns than high-tech stocks. When stocks of much of the high-tech sector tanked at least temporarily, REIT shares did much better because real estate markets have remained strong. So REITs looked better relatively. That improved REIT performance will probably last as long as (1) real estate markets remain strong, which they will in 2001 though market prices and rents will soften somewhat, and (2) high-tech stocks do not stage another spectacular rally, which seems unlikely for at least a while.
Many suburbs use “fiscal zoning” to decide what types of housing they will allow within their boundaries. If a certain type of housing does not produce more in local taxes than it costs the city government in local spending – including schools – the community designs building codes and zoning rules that keep that type of housing out. Since low-cost housing and multi-family housing are such “fiscal losers,” this approach prohibits such units. But the affluent residents in that community need the workers who can only afford such housing to mow their lawns, run their cleaners and laundries, staff their hospitals, even run their police and fire departments and teach in their schools. Yet if every suburb adopts such “fiscal zoning,” there will be no place for those low-and-middle-wage workers to live – except doubled up in illegally overcrowded units. That is why every community should be legally required by its state legislature to permit a certain fraction of its housing to be low-cost and multi-family units. And every consultant who does a “fiscal impact” study of proposed new housing ought to point out to the city concerned that excluding all residential “fiscal losers” is an irresponsible and unfair policy.
Economists are notorious for thinking in depth about the macro-situation but not being very sympathetic to individual persons. This is illustrated by something that happened in Washington D.C. lately. A homeless man approached a minister. “I haven’t eaten in three days.” The minister said, “The Lord will provide,” and passed by without giving him any money. The homeless person then approached a politician and said, “I haven’t eaten in three days.” The politician said, “It will be better after the election,” and he passed by without giving him any money. The homeless person then approached an economist, in fact, it was Alan Greenspan, the Chairman of the Federal Reserve Bank. The homeless person said: “I haven’t eaten in three days.” Greenspan replied: “That’s very interesting. How does this compare with the same period last year?”
A man sneaks into his bedroom at 7 am. carrying his shoes in one hand and moving softly, hoping his wife will not wake up. But she does, and she snarls: “Where have you been? — You’ve been out all night!” He says, “No, I haven’t been out all night. I came in last night about 10:00 and saw that you were already asleep, so I went out in the back yard and slept in the hammock so I wouldn’t disturb you.” She says, “Is that right?” He says, “Yes, that’s right.” She says, “It may interest you to know that last week, when I was cleaning up the back yard, I took down the hammock, put it in its box, locked the box in the basement closet, and put the key in my purse. What do you have to say to THAT?” [EMPHASIZE THE WORD THAT]. He looked her straight in the eye and said, “That’s my story, and I’m sticking with it.”
An old man visits his doctor for an annual check-up — a doctor whom he had not seen before. After the examination, the doctor says: “You’re in great shape for man of 65.” The old man says, “Who says I’m 65? I’m 80.” The doctor says, “That’s remarkable. How old was your father when he died?” The old man says, “Who says my father is dead? He’s still alive, and he’s 104 years old.” The doctor said: “That’s amazing. Does this longevity run in the family? How old was your grandfather when he died?” Old man: “Who says my grandfather has died? He’s still alive at 124. Not only that, he’s going to get married next week.” Doctor: “Why in the world would anyone want to get married at the age of 124?” Old man: “Who says he WANTS to get married?”
A farmer has two teenage sons who are starting to use a lot of profanity, so his wife wants them disciplined. The farmer says, “OK — tomorrow morning I’ll start disciplining them.” The next morning the farmer and his wife are sitting at the breakfast table when the two sons come in with a clatter. The oldest one says, “Where are the goddam cornflakes?” The farmer, who is a huge man, stands up, grabs his son by the throat, gives him a right cross [GESTURE WITH RIGHT CROSS], throws him up against the wall, and goes over and stomps on him. He picks him up, throws him back onto a chair, and then asks his other son: “Now what do you want?” The other son says, “I don’t know, but you can bet your ass it isn’t cornflakes.”
A new resident of Seattle arrives on a rainy day. She gets up the next morning and it is still raining. It continues to pour for the rest of the week. She leans out the window and sees a little boy playing on the porch below, so she asks: “Hey, kid, does it ever stop raining around here?” “How should I know? I’m only six years old.”
A third grade student is asked to name the ten commandments, when he got to number six, he said “Thou shalt not admit adultery.”
Traffic congestion can be confusing. Recently Irving Allen was driving along a crowded expressway when his car phone rang. He picked up and his wife said to him, “Irving, be careful! I just heard on the radio that some idiot is driving the wrong way on the same expressway you’re on.” “That’s right,” said Irving, “but it isn’t just one guy going the wrong way — they’re are hundreds of them!”
Four expectant fathers are pacing the floor in the waiting room of the Maternity Ward in a Minneapolis hospital. Then a nurse rushes in and says to the first man, “Congratulations, your wife just gave birth to twins!” He said, “What a coincidence — I play second base for the Minnesota Twins.” Suddenly another nurse rushes in an says to a second father, “Guess what — you are now the father of triplets!” “Amazing,” says the father, “I work for the 3M company.” A third nurse enters and says to the next man, “You have just become the proud papa of quadruplets!” “This is getting eerie,” he said, “I work for the Four Seasons Hotel.” Upon hearing that, the fourth father fainted dead away. When they revived him, he moaned, “I knew I shouldn’t have taken that job with Seven-Eleven!”
It takes time to amass capital, as my own experience shows. When I was just a kid, I used to play a popular game called “Spin the bottle.” Perhaps it was before your time, but in this game, a girl spins a coke bottle, and when it points at a boy who is playing, she has to either kiss him or pay him a nickle. I played this game a whole lot when I was young, with the unexpected result that, by the age of 14, I owned my own home.
A confirmed Catholic who had a reputation for fast living was on his death bed, so the local priest came to give him the last sacrament. As part of the ceremony, the priest said to the dying man, “Do you renounce Satan?” There was no answer. The priest said again, “Do you renounce Satan?” After a long pause, the dying man said, “Now wait a minute, Father — I’m not sure where I’m going, and this is no time to be making enemies!”
A rookie ballplayer is trying out in right field at a major league spring training camp. He misses the first three fly balls hit to him. The coach calls him over and says, “You’re terrible! You can’t catch anything!” The rookie says, “Oh yeah, well if you’re so good – let’s see you try a few balls.” He hands the coach his glove. The coach says, “Sure, I’ll show you.” But the coach also misses the first three balls hit to him. He comes back over to the rookie, throws his glove down on the ground, and shouts: “You’ve got right field so screwed up, nobody can play it!