There is increasing uneasiness in spending, despite the government’s attempt to jumpstart the economy with the so called ‘rebate checks’.
(Don’t get me started on what I really think about those ‘free’ checks and the fact that illegal immigrants are getting them, amongst a lot of other folks).
We’re watching this trend very closely because we believe it will be the single most important factor effecting real estate investing in 2008.
The government sees the need that people should go out and spend more. Apparently consumers need a little boast to go shopping.
But will more of these consumers buy houses?
We think not.
Our first fear as interest rates were recently lowered was that our tenants would go out and buy their first homes just as they did in 2004-2005. Those years were rough for buy-and hold real estate investors/landlords.
Now because of fear we don’t think that will happen. When people are not confident they don’t spend money. If they are not spending at Walmart they won’t be buying such a massive lifetime commitment like a house either.
So what exactly are retailers looking at?
Gift cards. They gage a lot by these little miracle money machines. This year they’re quite alarmed that people are holding onto the cards much longer and they are spending the cards on necessity items such as groceries. That means real cash is not so fluid.
Verify that with Chief Economist at International Council of Shopping Centers, Michael P. Niemira’s report that January, 2008 was the weakest January since 1970.
What’s my point?
This is another clear signal to go out and invest in real estate. Not only is real estate one of the best hedges against inflation, but there won’t be as much competition for the deals.