There have been recent articles showing some stress in the banking industry. We’re already seeing these signs, such as bank closures and Wells Fargo's recent layoff announcements. It reminds us of the savings & loan crisis of the 1980s and 1990s, when nearly a third of the country's more than 3,000 savings and loan institutions failed. Rose & Associates was formed in the northeast in 1992 to assist lenders and developers to reposition struggling or failed projects, and we wonder if something similar may happen again.
Based on what we're hearing from clients, how and if money should be spent in light of the pandemic, the election and its resulting economic stress varies greatly depending on each perspective.
Our public sector clients (municipalities) are worrying about how property tax and sales tax collections will be hurt, especially from struggling property tax payers. Banks and financial institutions in the private sector do have money to lend, thanks to reserve requirements imposed during the last recession, but they are conservative and cautious with lending decisions. Private investors, equity and capital funds flush with cash are more actively looking for deals, but rising construction costs and pricing pressure are causing most to be carefully selective.
The election results will have an impact on people's attitudes toward the financial markets and future real estate investment. Time will tell what the impacts will be from COVID and how the divergent positions of the elected officials play out. In the meantime, the best strategy for moving forward is to remember that real estate success centers on the idea that all markets are local.
What does that mean for you? Take time to develop a deep understanding of your market. Go beyond simply pulling demographics or lease histories.
Thinking back to the Savings & Loan Crisis of the '80s reminds me of Clue, the murder mystery board game. Players had to determine who committed the murder, with what weapon, and in which room. Investors and stakeholders need to understand their own versions of who, what and where. For example, what assets are being managed and by whom? What's the property type or land use in question, and what's the quality of the location or market?
In a strong economy, everyone is an expert because the choices are easy and carry less risk. Now, we must do more research and pay close attention to the local details - socially, economically and politically.
Let us know how we can help with your investigation.