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10 Cities Primed for a Real Estate Recovery
Tweet Share on Facebook August 11, 2009 Comment (6)A stutter-step economic recovery seems to be underway, with signs that the housing bust and employment wipeout may finally be moderating. But economists still have a lot of major worries.
One of the biggest is an unfolding bust in commercial real estate that may mirror the housing meltdown. Earlier in this decade, when credit flowed easily and the economy was booming, commercial developers behaved much the same as overeager homeowners. Figuring business would keep growing and rents rising, they borrowed heavily to build office towers, hotel complexes, and retail projects. Banks obliged, funneling the cash. Now, with a surge in bankruptcies, cutbacks, and layoffs, office and retail vacancy rates are near record levels. Over the next three years, many cities will struggle with a new real estate bust as banks foreclose on commercial real estate loans and developers battle to stay in business.
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5 Downsides to 'Cash for Clunkers'
Tweet Share on Facebook August 6, 2009 Comment (132)Eureka! Stimulus works! The first $1 billion allocated to "cash for clunkers" rebates apparently helped boost car sales by more than 250,000 vehicles, bringing some much-needed cheer to depressed auto showrooms. So Congress added $2 billion to the program, which by extrapolation could increase sales by more than 750,000 units overall. Carmakers are gleeful. And the Obama administration finally has some concrete evidence that extravagant government spending occasionally moves the needle.
But the buying spree, fueled by government rebates of up to $4,500, may not be quite the economic boost it appears to be on the surface. And there will probably be some of those pesky unintended consequences. Here are a few reasons that cash for clunkers is likely to look a lot less successful when seen in the rearview mirror:
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Industries Hurt Most by Soaring Health Costs
Tweet Share on Facebook August 4, 2009 Comment (43)It started as a dull throb in the economy, with the pain growing sharper. Now there's finally a diagnosis: Runaway healthcare costs are directly harming businesses and their employees.
As just about everybody knows, the cost of healthcare is rising much faster than wages, profits, and most other things in the economy. Healthcare spending accounted for about 11 percent of GDP in 1987; today it's more than 16 percent, and by 2017 it's very likely to be almost 20 percent. We spend more than $2 trillion a year on healthcare—roughly the same amount we spend on housing—and the cost is rising about five times faster than wages or overall inflation. Exorbitant cost is the main reason 47 million Americans have no health insurance—and why President Obama's ambitious plan to expand coverage and overhaul the entire system is in jeopardy.
[Read about the trouble with healthcare reform, in numbers.]
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Why 'Cash for Clunkers' Will Keep on Rolling
Tweet Share on Facebook August 4, 2009 Comment (24)Heh heh heh. Those jokers in the Senate really have a sense of humor.
In case the savage recession has disarmed your funny bone, here's the joke: Congress has come up with $700 billion to rescue rich bankers on Wall Street and nearly $800 billion in dubious "stimulus" spending. Bailing out Chrysler and General Motors alone has cost $80 billion. Compared with all that, the "cash for clunkers" program is an afterthought, a tiny $1 billion program meant to goose car sales and get a few rattletraps off the road.
[See 9 firms that are least likely to pay back their bailout money.]
While we wait to see if the megabailouts work, however, cash for clunkers has turned out to be the first rescue program with demonstrable, real-time results. In less than a week after the program kicked off, C4C, as it's known, helped boost car sales by about 250,000, transforming July from another depressed month for the automakers into something to cheer about. Government giveaways don't represent a healthy economy, and some of those sales were to people who would have bought a car later this year anyway, without the rebate. But C4C has been so popular that buyers have already claimed $1 billion worth of rebates, exhausting funds that were supposed to last until November. The White House has now asked Congress for $2 billion more to continue the program.
Rick Newman
The global economy is mysterious, even scary. Chief Business Correspondent Rick Newman connects the dots. In addition to his writing for U.S. News, Rick is the co-author of two books: Firefight: Inside the Battle to Save the Pentagon on 9/11, and Bury Us Upside Down: The Misty Pilots and the Secret Battle for the Ho Chi Minh Trail.
Read Rick's latest blog entries here.
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