Thursday, July 7, 2011

Real Estate Trends & Issues -- The Finale

During this Real Estate Trends & Issues graduate course at UTA's downtown campus, we have looked at and discussed a variety of current real estate topics ranging from mezzanine financing to transportation oriented developments.  The course has been fun and interesting and has given me the opportunity to hear a multitude of perspectives.  The general consensus has been that the real estate industry is still facing several challenges and any real recovery will likely take time.  Although it is true that the real estate market has certainly had its share of trouble lately and will undoubtedly be in trouble again due to the cyclical nature of real estate, the worst part of the storm seems to have passed in my opinion.  My general sense is that real estate is poised for an upside driven by the convergence of demand from both the echo-boomers and their parents, the baby-boomers.  In addition, pent up demand for housing is growing, there is less inventory, and there are fewer developments in the pipeline which will likely prompt a steady transition from a buyer's market to a seller's market.  I also think that if we avoid the urge to over-regulate the financial and real estate industries as a reaction to what has occurred and remain true to capitalism here in the US, the recovery will be slow at first and then gradually gain momentum.  I fear there is a natural tendency for citizens in advanced civilisations to gravitate toward more dependence upon their own government which, in the end, discourages industriousness.  This has been modeled in many European countries that lean toward the socialist side of the spectrum.  If America is to remain true to its capitalistic roots, then it must move away from any policies that promote moral hazard and must support free-enterprise as well as a range of businesses - small, medium, and large.  Also, the 'too big to fail' doctrine which prompted the US government to bail out failing businesses must be avoided in the future.  We must find ways to prevent unbridled greed from jeopardizing the overall economy without imposing restrictions that discourage free-markets and the desire by honest and hard-working business men and women to make a profit.  Furthermore, the wealth effect resulting from the tech, stock, and real estate booms over the last decade has been a roller-coaster for many, a reminder that the bust is some times louder than the boom.  For many this decade has been a wash or worse, but if we can learn from our experience, rebuild trust in commerce, and be mindful that we can't, even through securitization, make real estate as liquid as stocks, we may be able to move forward into the the next decade which, I think, holds great promise for the US in spite of the many challenges we face.  At the end of class, I'm reminded of our grandparent's wisdom, "spend less than you make if you want to get ahead."  No matter how advanced we become, this advice will always reign supreme and ignoring it will always lead us down the wrong path.  This will be true for individuals and private and public institutions alike.  Many thanks to Dr. Peterson for navigating the lively discussions.