My prophecy for 2014 is fast. “More Federal stimulus ahead causing mal-investment in local asset bubbles”. I'll say that again but in English this time: People do foolish things with easy money and there's a lot of easy money wafting around. Hence when you get some of this easy cash don't be dumb with it!
The current level of prosperity in the USA is being powered by the “wealth effect” which is fueled by large government stimulus holding up asset costs (usually the stock market and to a much lesser degree the housing market as well). The wealth feels real from the viewpoint that people are spending money again. Nevertheless this is a game of musical chairs and you won’t need to be the last one standing.
Commercial stimulus through the printing press is like trying a drug that makes you feel great until the buzz wears off; then you have got an business hang-over worse than your original problem. I believe we are at the end of the industrial hang-over created by the last boom and bust cycle and we are just ramping up the euphoric sense of the existing QE (i.e. Cash printing) infinity inflationary cycle.
Here are my categorical predictions about what is coming in 2014. Very few people are bold enough to make categorical predictions because the more categorical you are the less complicated it is to be wrong (and most folks hate being wrong). Take these predictions with a hint of suspicion. Forward this to your mates and use it as a conversation starter. You need to use the dialogue to make up your own predictions for the year. I actually want to hear your feedback.
2014 Economic Forecasts for Investors In Property
Real-estate hires, wages, food, rates and energy costs will rise tolerably in 2014.
Gold will trade between $1150 – $1450 and silver will trade $18.50 – $23.00.
I predict 30-year owner occupied mortgage interest rates to go up to 5 p.c by July and hover in the low 5s through the year's end. Commercial mortgage rates will be lower than residential mortgage rates because commercial banks will remain deluged with money and have no one to loan it to. Residential rates will creep up as the government withdraws impulse from that part of the market in an attempt to moderate housing price growth.
Wall Street funds that purchased big portfolios of repossessed houses will begin to liquidate their single family holdings because of accelerating variable rate mortgages. (Many Wall Street investment funds acquired homes with short term adjustable rate loans and those loans are either coming due or are taking a look at the probability of rising IRs.) These The Street funds never planned to be permanent landlords (and they aren’t very good at it). With home prices up this is a great time for these funds to start cleaning up their portfolios by liquidating their most irksome and most price inflated properties. The release of this inventory will put a downward price pressure in those markets who had the highest rates of appreciation from the trough. I would be really wary about taking a position in Las Vegas, Phoenix, San Francisco Bay and Southern California and if I already had a large profit tied to a property in one of those markets I'd consider exchanging out of it.
Your ads will be inserted here by
Easy AdSense.
Please go to the plugin admin page to paste your ad code.
I remain mad about the Dallas-Fort Worth metro. I do have an individual bias for letting you know about that market because we are building and selling rental homes in Dallas and Fort Worth, but there are many other smart people who are really bullish on Texas. Visit our website for a great video by the North Texas Economic Commission why the DFW economy is at the very start of a long-term upwardly trending market.
I am also intrigued by Charlotte, Denver, Atlanta, Miami, Tampa, Washington DC metro, Portland, and Seattle but not nearly as much as I like Texas. I predict all the major cities and small oil cities in Texas will have 6-10% housing price and rent increases together with lower rates of vacancy (6.5% vacancy or less).
Bitcoin will get more media interest, but its pricing will become even more uncertain such that only the black market economy will really. Accept it for payment. Executives around the world will find a way to tax bitcoin.
Stock prices will become highly volatile in 2014. Watch for heart wrenching price swings of 10-15% up and down in a stated month. Investors will make record profits in 2014. Stock investors will end the year sideways or down.
The unemployment rate is much worse than the printed numbers because many individuals who have expired off of unemployment benefits and have stopped trying to find work, or they have moved onto the rolls of Federal incapacity. States pay for unemployment benefits but the Federal Agency pays for disability so cash strapped states are moving people off unemployment benefits and onto Federal disability benefits as a way of balancing their budgets. Those on disability are not counted as jobless.
Expect to see a jobless industrial recovery. The space between the affluent and the poor will broaden because the wealthy make money by owning assets which are inflating in price while the poor earn money selling their time but there will be less and fewer roles for amateur workers as a result of increased environmental protection legislation and higher minimum wage laws. “The best way to help the poor is to not be one of them. ” —Laing Hancock
2014 will be a prosperous year for many. Be careful not to sucked into speculative investments because fiat currency will be causing mal-investment everywhere. If you are looking for a fast read on how fiat currency manipulation leads to bad decision making I highly recommend reading “The Clipper Ship Method” and “Whatever Occurred to Penny Candy” by Richard Maybury.
A trainer of mine once related, “There is not such a thing as a bad economy” You can only really be skilled or inexperienced in your interplay with the economy.
[Editor's Note: Be sure to see our new Better Business Bureau Review].
Marco Santarelli is an investor, author and founding figure behind Norada Property Investments — a national property investment firm providing turnkey investment property in growth markets around the U.S.. For more articles like 2014 Economic Predictions For Investors In Property, feel free to visit our Real-estate Investing Blog where it was originally published.