A close friend of ours is involved in commercial real estate, and they are very successful. I thought you might be interested to hear some of his comments about what he sees in the market, the U.S. economy, and the housing crisis.
First, let me say that he does think there will be a pullback in real estate in Canada. This does not mean a crash like the U.S. had in the housing markets. He has spend weeks travelling back and forth throughout areas of the U.S. looking for deals in the commercial real estate and he hasn't been able to find one. He said that the houses that are going for fire sale prices are quite a distance from any industry and are in areas that people don't want to live. These homes were slapped together, and sold to people who couldn't afford to even buy a home...I'm sure most of you are aware of the rest of the story and how it unfolded. His point is that commercial real estate is still going strong, and is healthier than we are led to believe.
He went on to say that Obama's spin to the media, was total hogwash about the U.S. government not being able to send out cheques if congress didn't raise the debt ceiling. This was priced into the market prior to any announcement by the government raising the debt limit. The last few days of selling may have been an over reaction, and was driven by fear, short selling and hedge funds needing to unwind positions that were heavily leveraged.
Bottom line is, commercial real estate is still going gangbusters in Canada and properties are holding their value in the U.S. The only trouble might be down the road. You see, much of this commercial property is being developed for companies like Walmart, Costco, and other superstores. This is big business, but what are they really selling us?? Cheaper and in many cases inferior products made in China, Japan or Taiwan. What will happen when the Chinese suddenly realize they can demand a pay increase? We will end up the losers, as we pay more for goods that could have been manufactured at home.
If we are to survive in this global economic environment, it's time to bring back manufacturing to Canada and the U.S. The unions need to realize that in order to compete, they must have common sense on what are reasonable pay rates, medical and other benefits. If we don't, China will be the next world power as we fall behind.
Canada cannot rely on natural resources, that are finite in nature and do not replenish. We must bring back manufacturing and actually "produce" something.
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