Is a ‘buy low’ period on the horizon?

An economic correction may be around the longer-term corner


Published:

Nearly four weeks after Donald Trump's swearing-in as president of the United States and the world has not come to an end! Well, not yet. Perhaps we should keep in mind the disclaimer from stockbrokers – past performance is not a predictor of future results!

Personally, I am counting on the checks and balances built into the three branches of government to keep the president in check. So the plan is to survive the next four years, and shame on both the Democrats and the Republicans if they cannot tee up two viable candidates for 2020. Enough said.

Closer to home, Brian Gottlob of PolEcon Research in Dover has written a very informative piece on the aging of New Hampshire. While our median age is climbing, it is the mix that matters. Fortunately, our older citizens (yours truly included) tend to be healthier, better educated and financially better off than the national norm.

That is not to say we are not without challenges. Many of us need to work longer (full- or part-time), and as life expectancies grow, we feel we need to pinch pennies.

I did my own analysis. If I live to 95, it ain't pretty.

When I was younger, I would say I want to have “the big one” (aka heart attack) while I was shoveling snow off the roof when I was 75. I figured I would tumble off the roof and be found thawing in a snow bank in the spring.

Alas today, I figure I have more than nine years left! So at 66 I am preparing for the last quarter (or one-third) of my life.

Beyond financially, what am I going to do? How will I find the work-life-play balance? How much should I volunteer? The answer is when and where I can make a positive difference and not just to stay busy.

I am still working, albeit with a definitive plan to ease down one day per week per year, which would let me slide into Social Security at 70 without too much turmoil. Alas, there are undoubtedly outside factors that will influence my timeline.

Today, a client paid me to go out and walk a large tract of land – good work if you can get it. My task is to estimate how much acreage might be developable over the next 20 years. The calculation of which parts of the parcel are buildable (physically, legally per zoning and financially) is relatively easy. The next step, projecting how and when the site might be “absorbed,” is a much harder task.

It takes some of us “older citizens” who have lived through a number of booms and busts to bring perspective to this calculus. Ultimately, the projections of future development will lead to a calculation of what the property is worth today.

There are four tenets of commercial real estate success. If you do not believe me, ask the new president! So here they are: Buy low, sell high, collect early and pay late. It is that simple.

Let's start with buy low. Can you do that in 2017? Many would say no. Prices are too high. They are high relative to recent history. This is due to prolonged low interest rates, which have been artificially suppressed. Can the Fed truly manage a gradual rise in interest rates to reflate the economy? Maybe, but personally I think not. That does not mean we are headed to economic Armageddon, but a correction is certainly likely sometime in the next 12 to 36 months, or so say the pundits. It will not surprise me.

Over the past few months I have been advising clients to put cash aside so they will be prepared to implement buy low. Then they can hire me (and my co-workers) to advise them how to sell high.

Bill Norton, president of Norton Asset Management and principal of Harrington & Reeves, is a Counselor of Real Estate (CRE) and a Facilities Management Administrator (FMA). He can be reached at wbn@nortonnewengland.com.

Edit Module
Edit ModuleShow Tags
Edit ModuleShow Tags
Edit ModuleShow Tags Edit ModuleShow Tags