My prophecy for 2014 is short and sweet. "More Fed. impulse ahead causing mal-investment in localized asset bubbles". I'll say that again but in English this time: Folk do dumb things with easy cash and there's a lot of easy money bobbing around. Hence when you get some of this easy money don't be stupid with it!
The present level of wealth in the States is being fueled by the "wealth effect" which is fueled by huge govt stimulus supporting asset prices (often the stock market and to a much smaller degree the home market as well). The wealth feels real from the standpoint that people are spending money again. Nonetheless this is a game of musical chairs and you won't need to be the last one standing.
Economic stimulus through the printing press is like using a drug that causes you to feel great until the buzz wears off; then you have got an industrial hang-over worse than your original problem. I suspect we are at the end of the industrial hang-over made by the last bust and boom cycle and we are just ramping up the enraptured sense of the current QE (i.e. Money printing) infinity inflationary cycle.
These are my specific predictions about what is coming in 2014. Few folks are bold enough to make categorical predictions as the more categorical you're the simpler it is to be wrong (and most people hate being wrong). Take these forecasts with a hint of suspicion. Forward this to your chums and use it as a conversation starter. You can use the dialogue to make up your own forecasts for the year. I actually want to hear your feedback.
2014 Business Predictions for Property Investors
Real-estate leases, salary, food, rates and energy costs will rise moderately 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 % by July and hover in the low fives through the close of the year. Commercial loan rates will be lower than residential mortgage rates because commercial banks will remain flooded by money and have nobody to lend it to. Home IRs 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 acquired sizeable portfolios of repossessed homes will begin to liquidate their single family holdings because of increasing variable rate mortgages. (Many Wall Street investment funds purchased homes with short term variable rate loans and those loans are either coming due or are having a look at the probability of rising rates.) These Wall Street funds never intended to be permanent owners (and they aren't excellent at it). With home costs up this is a good time for these funds to start cleaning up their portfolios by liquidating their most worrying and most price inflated properties. The releasing 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 very wary about buying into 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.
I remain a massive fan of the Dallas-Fort Worth metro. I do have an individual bias for letting you know about that market as we are building and selling rental houses in Dallas and Fort Worth, but there are many other smart individuals that are awfully bullish on Texas. Visit our website for a great video by the North Texas Industrial Commission why the DFW economy is at the beginning of a long-term upwardly trending market.
Also I am drawn by Charlotte, Denver, Atlanta, Miami, Tampa, Washington DC metro, Portland, and Seattle but not quite so much as I like Texas. I foretell all the major towns and tiny oil cities in Texas will have 6-10% housing price and hire increases along with lower rates of vacancy (6.5% vacancy or less).
Bitcoin will get more media interest, but its pricing will become even more changeable such that only the black market economy will truly. Accept it for payment. Executives around the planet will find how to tax bitcoin.
Stock prices will become extremely unstable in 2014. Watch for heart wrenching price swings of 10-15% up and back down in a stated month. Investors will make record profits in 2014. Stock backers will end the year sideways or down.
The jobless rate is far worse than the published numbers because many individuals who've expired off 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 Fed pays for incapacity so money strapped states are moving folks off unemployment benefits and onto Fed. disability benefits as a way of balancing their budgets. Those on disability are not counted as under-employed.
Expect to see a jobless commercial recovery. The gap between the wealthy and the poor will expand because the affluent earn cash by owning assets which are rising in price while the poor earn cash selling their time but there will be fewer and less jobs for inexperienced workers because of increased environmental protection legislation and higher minimum wage laws. "The simplest way to help the poor is to not be one of them. " —Laing Hancock
2014 will be a prosperous year for most. Be careful not to sucked into hopeful 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 strongly recommend reading "The Clipper Ship Method" and "Whatever Occurred to Penny Candy" by Richard Maybury.
A trainer of mine once said, "There is not such a thing as a bad or good economy" You can only ever be talented or inexperienced in your interplay with the economy.
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Marco Santarelli is an investor, writer and creator of Norada Real Estate Investments — a national property investment firm providing turnkey investment property in expansion markets around the US. For more articles like 2014 Industrial Predictions For Real Estate Investors, feel free to visit our Real Estate Investing Blog where it was initially published.