FIABCI-USA Day at the United Nations

[wpvideo 9GRsNgch]Last week, I attended the FIABCI-USA luncheon and presentation at the United Nations compound in Manhattan. After introductions by FIABCI-USA President, Judy Shenefield, Axumite Gebre-Egziabher, Director of UN-Habitat spoke and was then followed by Dr. Michael Buckely, the main speaker.

Wow, what a dynamic, informative program presented by Dr. Buckley, Director of the Center for High Density Development for the graduate real estate program at Columbia University. The title of Professor Buckley’s presentation was “Seven Transition Waves in the Midst of Crisis” which looked at the current economic situation and future trends – some good news and some situations that are shaping up to be a very negative drag on the economy down the road.

Professor Buckley discussed what got us into the current situation and in my video segment you will see him talking about the idea put forth by George Soros to plug a potentially catastrophic situation involving credit default swaps. According to Professor Buckley, Mr. Soros said the federal government should halt all credit default swaps and nullify all existing contracts due to the magnified effect of these instruments’ current outstanding obligations in the estimated amount of $60 – $90 trillion US dollars.  That is an action that only the federal government can make as Professor Buckley was discussing the realm of government in dealing with the unknown outcome of creative financing instruments that were put into place during the run-up.

Currently, the economy is in the midst of an unprecedented consolidation wave in pharmaceuticals, banking and high-tech companies according to Professor Buckley. He went on explain that these companies are much more sensitive to locating their headquarters in locations where they have access to top universities. And in deciding where to locate their headquarters, cost wasn’t even in the top ten categories of consideration for these companies according to a recent survey by his group.

The cities occupied by top universities and corporate headquarters constitute “growth clusters” as Professor Buckley called them. These are our present and future city states and their influence will continue to grow nationally as they set the pace for the rest of the country.

Demographically, he discussed the population growth here in the US where we will add approximately 60 million more people by 2050 and the largest segment of the population will be of latin heritage. He also discussed education and the lack of young people going into the sciences as well as a new wave of thinking about education. Rather than the old line schools (which will still be important), he talked about how the youngest generation is thinking. His son introduced him to Full Sail University in Florida – a university for gamers. And with a twinkle in his eye and a nod to the potential unknown, what great new technologies might come from that.

Lastly, he discussed the rapidly increasing bank failure rate in comparison to the 1930’s and gave his prediction on the current stock market run-up. He believes the stock market will fall by year’s end and if the bank failure rate continues its pace we really will be repeating the 1930’s.

Professor Buckley’s presentation was a highlight of my time in Manhattan. In addition to the presentation, however, I was also able to visit with other colleagues from around the country and around the world and get feedback from the trenches on other markets and how they’re comparing to ours here in San Francisco. It largely sounds the same at the moment, the lower end is strong due to government programs and the luxury real estate market for higher end homes is soft and is forecast to continue weakening. This does create opportunities as prices fall. A colleague I know from Miami was sharing with me about her international clients and the expectations and practice differences by country. She is originally from Brazil and works with a lot of South Americans coming to Miami. It is this opportunity to purchase in the US at bargain prices that is luring international investors to our most popular cities. This helps our local real estate markets as cash flows in and absorbs excess inventory thereby stabilizing the market. As the economy moves out of crisis, the US is becoming more of a global participant even on local levels and can no longer afford to just look within. The next buyer of your property may very well be from outside the country.

‘Til Next Time…All the Best, Lance