Dr. Linneman discusses the overall economy and the state of the real estate industry with Trademark CEO, Terry Montesi. Linneman is principal of Linneman Associates, CEO and Founder of American Land Fund, and the chief economist of NAI Global. He was one of the “25 Most Influential People in Commercial Real Estate” by Realtor Magazine.
Montesi: Give us your current impression on the global and US economy, and those factors influencing real estate and the consumer.
Linneman: I think the real economy, that is, jobs and consumer behavior and things that real people do day-to-day, is almost unchanged from anything I would have said two months or three months ago, which is solid, moving forward. Obviously it’s been a lagging recovery, and still is. But it continues to recover. The numbers on jobs just came out and they were about 160,000. They’ll get revised upwards to closer to 190,000 is my guess, based on ADP, private job numbers. That’s too big a discrepancy, and also based on unemployment claims that are being filed, that’s too low. It just doesn’t pass the smell test. Where there is a huge difference, even from six weeks ago, is Wall Street. Wall Street is very spooked. And if you ask what Wall Street is spooked about, they’ll say China has slowed to 7% GDP growth. The dollar, on a trade-weighted basis, is up by about 20-25%. The Fed is raising rates, and oil prices have collapsed. Now let’s just pause before we go back to Main Street, and Wall Street is undoubtedly in a tizzy, there’s no doubt. Spreads have widened, they’re getting more difficult on loans, not just in real estate. Stock market’s down. Treasury’s yield dipped as if there was a flight of quality. It’s a little reversed, but there was a flight of quality again. So there is no doubt that they’re in a tizzy…