Real Estate Investment Outlook August 2020

It looks like the corona virus has spiked. When we will see a decline again depends on various factors:
 
SACRAMENTO, Calif. - Aug. 5, 2020 - PRLog -- 1) the effectiveness of the fiscal support measures  2) how fast jobs will return and short-working schemes  can be reverted to normal working time employment, 3) how fast supply chains can be fully repaired, 4) how resilient private consumption will be in the light of elevated unemployment and rising debt burdens, and 5) the impact of possible second waves.

According to its World Economic Outlook, the world economy, especially the advanced countries, is expected to contract in a coordinated fashion.  Most countries have embraced various support measures such as tax deferrals, loans, equity injections, and guarantees. These policies will only have an indirect impact on growth this year because they provide financing rather than directly increasing spending.

One argument in favor of a potential boost to inflation is the massive fiscal spending that is being used to fight the worst consequences of the current slump in economic activity. But arguing that fiscal stimulus is a game-changer is putting the cart before the horse. It is not the current stimulus that matters but whether huge deficits will continue long into the future. It must be noted first of all that a big amount of the fiscal measures announced are loan guarantees rather than fresh new money. There is nothing simulating about adding more debt to balance sheets. Even a direct form of stimulus is designed to be temporary and self-calibrating. The bulk of the fiscal stimulus is also temporary – households have received a one-off paycheck, more likely to be saved rather than spent, as happened in 2008. As things stand, the fiscal stance is set to be massively contractionary next year, not expansionary.

These policies will have a devastating effect on real estate values in the coming years. To keep on top of the real estate markets and avoid the rocky road ahead, we recommend using calstatecompanies "Market Cycle" which gives you a two-year head start on when to buy, sell or hold.

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