LA Loft Blog

Downtown L.A. Gets Ready for Tough Times  #recession #realestate

Because a very large number people in Downtown and the Greater Los Angeles Area are expecting and preparing themselves for the recession that will be under tremendous Fed influence, we will see two unexpected effects:

1. The recession will be big, but will be delayed.
2. The recession will be longer and more shallow.

The next recession (the first signs of which have already appeared) will be quite different from our 2008 recession. Because the U.S. federal government is mimicking the extreme central banking interference that has already been tested by Japan and Europe, our next recession is likely to be long and very slowly drawn out, something reminiscent of the “Lost Decade” (should be called Lost Decades) of Japan and the permanently pathetic slow growth of Europe.  Rather than one huge stock market crash, this recession is likely to go more sideways with more, smaller crashes punctuated by unexciting upticks.

The cooling that we’ve seen in the downtown and L.A. real estate markets are signs of the coming recession, and they are also steps that Angelinos are taking to reduce negative effects while preserving capital for hard times and for taking advantage of future low prices.  What LA residents and investors may not be ready for is the painfully slow duration of the next recession.  Because the Fed has made it abundantly clear that they will interfere to more extreme extents, including near zero interest rates (that will encourage eventual negative interest rates), markets will not be allowed to crash freely any time soon, and thus will not soon be allowed to shake free the extreme inefficiencies caused by the extreme Fed bubble that effects all real estate, including DTLA.

Forbes recently reported on ways that financial industry influencers suggest to prepare for the recession.  The articles points out the abundant talk in the U.S. about an inevitable recession. History shows that recurrent recessions are  indeed inevitable.  They vary and cannot be predicted.  We only know that they come about every 6 years, and it’s already been more than 10 years since the last.  A delayed recession creates pressure for a bigger, more serious financial crisis, or what the L.A. Loft Blog expects: a protracted economic funk. A global economic growth malaise has already been happening for several years.

Who’s Getting Ready for a Recession, and How

Buyers – While most considering buying a property have put plans on hold, a few are already taking advantage of the shifting market by placing several lowball offers to find that one desperate seller who will give the great deal.

Sellers – Home owners who do not have a large reserve of cash, and who don’t have much equity will consider selling early.

Flippers – Flip investors have begun to exit the Los Angeles market as their margins tighten. Flippers must make their purchases, renovations and sales faster, in days instead of months, in order to beat a sudden crash.

Real Estate Agents – With fewer buyers and sellers in the marketplace, there’s growing competition to acquire clients. Real estate agents will have to spend more marketing dollars to attract them.

Forbes says that the answer is to become a cash investor in order to take advantage of the growing number of motivated sellers, and to dominate the market for the best deals.  To build cash, consider selling some current assets, raise capital from investors and build more relationships with more lenders early.  Are you preparing for a recession?   |   COMMENT

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Copyright © This free information provided courtesy L.A. Loft Blog and LAcondoInfo.com with information provided by Corey Chambers, Realty Source Inc, BRE#01889449.  We are not associated with the homeowner’s association or developer. For more information, contact (213) 880-9910 or visit LAcondoInfo.com Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Properties subject to prior sale or rental. This is not a solicitation if buyer or seller is already under contract with another broker.   |   COMMENT