The US Economy and some potential bumps in the road ahead!Posted by Gary Ashton: RE/MAX on Monday, January 18th, 2010 at 4:40pm.
Here are some predictions regarding the US economy from the Chief Economist for the Real estate Center at Texas A&M University, Mark Dotzour, made recently.
One interesting observation is the trickle down effect on reduced home values across the nation as the knock on effect is the reduction in the property tax revenues.
There are 4 "land mines" for the US economy as Mark describes them. It really shows you how the housing market has such a huge inpact on the nations economy in so many ways. Not just directly in terms of either causing the foreclosure of homes or the ability to reduce or increase descretionary income at the home owner level but the impact is felt across the nation and impacts the world economy too.
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If the U.S. economy is like a vehicle driving a dirt road in Afghanistan, there are four known mines that must be negotiated, the Chief Economist for the Real Estate Center at Texas A&M University Mark Dotzour said yesterday.
Speaking to a group of the nation's largest real estate investors, Dotzour compared the economy to an armored vehicle, well made, equipped and manned by talented operators. But the drivers know there are four land mines ahead that are certain to explode.
"The question is how the vehicle will perform as each mine explodes," Dotzour told attendees at the 11th Annual Winter Forum on Real Estate Opportunity and Private Fund Investing. "Land mine number one is the budget crisis faced by states, cities and school districts, the result of falling tax revenues," he said. "The second land mine is the pervasive contraction of credit occurring in the United States as business loans, mortgage loans and consumer credit continue to fall. "Land mine number three is the question of what will happen to mortgage rates when the Federal Reserve stops buying all of the new U.S. mortgages at the end of March." Dotzour said the final land mine is Congress changing the rules for taxes, capital gains taxes, cap and trade, possible windfall profits taxes and new regulation of financial institutions. "These land mines have been identified by business owners and investors over many months," said Dotzour. "The dangers must be confronted before job growth resumes in a meaningful way."
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[Source: Real Estate Center, Texas A&M]
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