Homeowners looking to sell their property and expecting to make a profit should plan to do so in 2016 warns leading real estate expert John Peterson.
The seasoned developer and chair of the Washington Real Estate Investors Association Network believes America is about enter a period of deflation – which, in turn, is set to see house prices “enter the desert” over the coming years.
“I have been investing in real estate in the Washington metropolitan area for the past 22 years and have experienced times of appreciation, times of contraction, and times of stagnant growth,” he said. “And over the past six months I’ve never seen such a rapid growth in real estate price reductions. They’re coming in thick and fast, prompting me to believe the economy of this country is falling increasingly towards deflation.”
“This means that anyone considering selling a piece of real estate for a profit should do so within the next few months. Even if we don’t quite go into deflation, prices will be stagnant in the coming years, at best.”
Peterson bases his economic predictions on falling commodity prices, plunging oil revenue within the last six months, and the contraction of China’s economy.
On the surface deflation appears to be advantageous since more people have money to spend. But Peterson argues that in reality the opposite occurs and the economy starts to shrink.
The businessman said he has been amazed at the sinking gas prices to less than $2.00 a gallon. And he warns this lowering of prices could “cascade into a downward spiral effect.” Although drivers currently have more money to spend on other products and services he insists this will be short-term.
“That’s because as deflation takes hold, unemployment rises, the availability of credit tightens and saving, rather than spending, become the de facto position for most Americans,” he added.
Optimists who argue that the dollar is rising in value and giving consumers more purchasing power are also wrong to feel-good about the future, Peterson insists. In pointing to the economy of Japan over the past two decades the businessman says that a higher rate dollar actually has encouraged consumers to save, resulting in lower business investment, faltering bank lending and the country’s shrinking economy
Peterson added: “In my own business, I have to be very careful in my investment decisions and I simply cannot purchase homes that need updating with outsized expectations of record selling prices. My analysis has to be precise and based on conservative estimates of value and future growth of the asset.
“I have learned not to put my head into the sand when evidence is all around to coming events. For that reason I have put measures in place to protect my business and assets when deflation rears its ugly head in the months and years ahead.”
More on the Washington Real Estate Investors Association can be found at www.washingtonreianetwork.com