Now both the Fed and Bank of America are reversing their forecast for a new recession. What does it mean for real estate investors? What if they are wrong?

Which Way Is The Economy Headed?

In spite of projecting a $50B loss just a few weeks ago, Bank of America has now joined the Federal Reserve’s messaging that we no longer need to worry about a looming recession.

Recent GDP data suggests that the economy is growing well again. Though other data compilers suggest business tenants are falling delinquent at high rates, and foreclosures are rising again.

Some may say that this disparity is due to misleading averages. With a small percentage of people and companies making outsized profits, and the majority seeing their finances contract.

Of course, while fundamentals are the reality we have to build with, as we’ve experienced in the past, sentiment alone can drive or crash economies and individual market sectors.

What New Optimism Means For The Real Estate Market

New optimism in the economy, especially driven by the Fed and major banks is likely to lead to more interest rate hikes, as well as an easing of lending. With more private capital flowing as well.

In the current environment, this would also mean fueling inflation. As well as the potential for more hiring and salvaging jobs that may have been in question a few weeks ago.

This would support more confidence in buying and leasing both residential and commercial real estate. In turn, driving up prices even further.

What Happens If The Experts Are Wrong?

Of course, those top headline news stories are not always something you can rely on. No one gets it right 100% of the time. Especially when it comes to pinpointing turns in economic and market cycles.

If this rebound does not appear, then we could see even more layoffs, loan defaults, and bankruptcies.

Perhaps what is most important as an investor is to remember that every segment of the market, and every location is on its own timing in the cycle. It’s about finding the gaps, and bringing together the distressed opportunities and motivated sellers, with motivated buyers who see the value in paying more. Focus on this, and the fluctuating forecasts don’t have to impact you and your income or wealth. Decide to control your own destiny.

Distressed properties and discounts finally seem to be appearing for investors who have been waiting for better value opportunities.

Investors are still hungry for deals. In fact, the volatility in the stock market will probably bring a lot more capital in search of real estate for safety and income soon.

While not every seller is motivated or in enough of a crunch yet, many are willing to sell at discounts for cash. Real estate wholesalers who get out ahead of the pack will begin to find more deals to fill their pipelines with.

Bill Gates Takes A Loss In NYC

Bill Gates recently listed his daughter’s Fifth Ave. condo in NYC at a quarter of a million dollars less than he paid for it. With many properties now selling for under list price he might take an even deeper loss than that.

If titans like these are that motivated to sell, there are going to be many others too.

Twitter Defaults On HQ Rent

$40B tech company Twitter is being sued for failing to make its rent on its headquarters in San Francisco. That’s after shutting down offices in Seattle.

Amazon has also had to lay off 18,000 workers already this year, and try to sublease warehouse space it recently built after a lack of demand.

Not only will this yield more commercial real estate deals, but plenty of residential properties as tens of thousands of tech workers face unemployment and need to structure their housing expenses.

IRA Balances Nose Dive

According to Fidelity, IRA balances dropped by 25% year over year to November. Similar losses were seen in 401ks. Given the bearish outlook on the economy, expect those losses to compound and snowball in the first half of 2023.

Many individuals may cash out these accounts to put their money somewhere safer like real estate.

Make Offers: There Are Discounts To Be Had

This is a great time to be out there making offers on residential and commercial real estate. Even if owners are not motivated enough to give you the discounts you want now, keep the lines of communication open for later, when they absolutely must sell. You will build up a big pipeline for the rest of the year.

Price Your Deals Right

On the flip side, make sure you are pricing your resales with room on the table for buyers. Everyone wants a deal right now.

A new last minute deal to avoid diving over the fiscal cliff seems to have been struck, but what does it mean for real estate investing in 2013?

Will you seize on the new opportunities arising this year or take a hit?

With over $600 billion in tax hikes and few spending cuts some won’t feel there is much difference for them than if we did go over the fiscal cliff. However, there are at least several specifics of the new ‘fiscal crisis bill’ which will directly impact real estate investors.

With those earning over $450,000 a year taking the brunt of the hit this will certainly be a busy year for tax accountants. Continued spending is planned to be offset by new revenues levied on those converting retirement savings to Roth IRAs. While on the upside tax breaks for accelerated depreciation of acquiring new property for businesses and research and development have been extended for another year.

However, with many of the extensions and band aids in the new bill only being temporary more standoffs, media hype and political wrangling should be expected in the coming months.

Still the U.S. is expected to stay the top global real estate investment destination of 2013.

Even at the top the new 39% tax bracket is certainly far better than the 75% tax being proposed in France and the new taxes on foreign real estate buyers in Hong Kong, London and similar measures coming in Canada.

So expect increased foreign investment over the next year, high income earners in the U.S. restructuring, a turnaround in commercial real estate and lower income earners more confident and interested in buying homes.

However, you choose to capitalize on this as a real estate investor perhaps the most important thing you can probably do is to get with a tax accountant now and make a plan to lower your own liability for taxes on your income this year.