Texas Coast: Real Estate as an Inflation Hedge?

INFLATION: In the current state of the economy, inflation is becoming a growing problem and concern for many. While inflation is not a dilemma that can be completely avoided, there are actions that can hedge its negative effects. Purchasing the "right" real estate can be a key to successfully navigating through a period of inflation.

When inflation hits, everyone who is holding on to cash instead of investing in real property (like real estate) will watch their funds devalue. Sure, it’s not as obvious as watching your 401K statements plummet. The realization may hit only when they try to purchase something. On the other hand, people who have purchased the right real property (like real estate) will watch its value grow.

1. Lower prices and/or incentives can be negotiated
2. There are several prime opportunities and locations-with-in locations to choose from
3. Multiple options for Financing are available with good interest rates, including forms of owner-financing
4. The Texas Coast is uniquely positioned for future value and income producing properties

• Growing Demand - population is growing from USA retiree migration and Mexico immigration
• Limited Supply - most of our coast is already developed or reserved lands
• Steady Appreciation in Value - we did not experience the price bubbles and bursts like California and Florida
• Improving Areas and Home Products - radically new-look-modern-communities with storm-resistant energy-efficient designs are coming to our markets, supported by improving Government infrastructures and federal stimulus spending projects.
• More for your money - We have the most affordable warm climate coastal properties in the country
• Strong Market Fundamentals - Rental Income is comparable to ownership costs
• Texas - is an international powerhouse - Our state has one of the most diverse-competitive-best performing economies in the world

Take a look at our property investment calculator [available here]

• Location, Erosion, Insurance, Financial Backing, Health Care, Transportation, Aging-in-place, Energy-Efficiency, Maintenance Costs, HOA Concerns, Quality-Of-Life Factors, and more.

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For new home developments

A job-market surprise has reinforced the economic optimists and pushed long-term rates close to their highs of the year: with mortgages to 5.75 percent and the stock market is continuing its straight-line run to the highest level since early October 2008.

Payrolls lost a hundred thousand fewer than most forecasts and barely half of the June losses.

This employment report gets more attention than any because jobs drive consumption and tax revenue. If too cold they drive recession, if too hot: inflation.

There is nothing unusual about arguments between cyclical optimism and this-time-it's-different, every recession-end has one.

If you want to know where the future is headed, look where the people are going.

And if you want to know where the people are going, check with U-Haul.

Here's an interesting indicator, first noted by the legendary economist Arthur Laffer: Renting a 26-foot U-Haul truck to go from Austin to San Francisco this July would cost you about $900. Renting the same truck to go from San Francisco to Austin? About $3,000.

In the great balance of supply and demand, California has a large supply of people who are demanding to move to Texas.

There's a reason for this.

Texas without a doubt is the best state to do business. The numerous global companies that call Texas home greatly enrich its multi-faceted, wide open for business landscape.

Texas has one of the lowest tax burdens in the U.S., including no personal income tax. The state also has no state tax on property used for pollution control, no state tax on goods in transit and no state tax on machinery and equipment utilized in manufacturing.

After the government releases a lot of money into the economy, too many dollars begin chasing too few goods. That nasty economic situation is known as inflation.

To all you folks sitting on the fence, hanging on to your cash, waiting for real estate to hit bottom before you buy: prices are low, you have a plethora of opportunities from which to choose, and financing is available with good interest rates.

Beware of inflation

Economic Forecast: Slow Job Growth and Inflation

The economic cycle appears to have become longer and more difficult to manage. And the the news cycle has gotten shorter.

The economy has become slower to turn over the last two decades. The period from 2001 through 2003 was notable as a “jobless recovery,” in which businesses were slow to add workers, even though demand was picking up. That was in the context of a relatively shallow recession.

The current recession is much worse, and if there is a similar lag in boosting employment, we may not see the unemployment rate fall back below six percent for five years or more.

Why has the employment cycle become longer and more difficult to manage? I believe that an important factor is the change in the nature of the American work force, as documented in The Race Between Education and Technology by Claudia Goldin and Lawrence Katz. As recently as forty years ago, two-thirds of American workers had no more than a high school education. The most significant source of unemployment was temporary layoffs of low-skilled workers from manufacturing firms.

Today, over two-thirds of the labor force has at least some college education. Job losses tend to be permanent, not temporary, and matching workers to jobs is much harder given the diversity of skills. Workers need to find new firms, new industries, and sometimes new occupations. The government does not have any special insight about how to redeploy the work force. You cannot re-employ investment bankers as road builders.

Traditionally, fiscal stimulus would increase the demand for automobiles and for other consumer durable goods. Growth in these sectors would then spill over into the rest of the economy. Today, however, many of the automobiles, televisions, and other durable goods that Americans buy are manufactured abroad. Much of the low-skilled labor that meets American demand for these goods works overseas. Thus, the ability to increase employment in this country by stimulating demand for consumer durables is not what it used to be.

Another reason to expect employment gains to be sluggish is that most of the fiscal stimulus does not kick in for another year or more. In fact, if the economic recovery begins this year, we will have the irony of a recovery that largely precedes the stimulus, rather than the other way around.

Even though employment growth will be sluggish, we could see an upturn in inflation somewhat earlier than in past recoveries. There are several reasons for this.

First, the dollar is vulnerable to a decline. Foreign investors may be saturated with U.S. assets, and as they become less willing to absorb American securities our currency may decline. This would boost the prices of goods that come from overseas.

Second, the heavy reliance on government stimulus means less use of the natural forces of supply and demand to guide economic activity. Government might raise demand for workers where it already is strong (in health care, for example) rather than where it is weak. This could put upward pressure on wages and prices in high-demand sectors even though there is continued high unemployment in low-demand sectors.

Third, we will be in a situation in which the Federal Reserve faces considerable pressure to provide excessive monetary growth. In retrospect, the Fed policies from 2001-2003 are viewed by many economists as too expansionary, helping to ignite the housing bubble. However, at the time, a number of economists, citing the “jobless recovery,” argued that Fed policy was too tight . If we go into an election year with an unemployment rate of 7.5 percent or higher, it is safe to say that the politicians will not support any Fed tightening, even if inflation has begun heating up.

I expect that growth in real GDP will pick up strongly over the next year, as pent-up demand for new household formation and durable goods purchases produces a strong rebound. However, for reasons given above, employment growth will be sluggish while inflation pressures will slowly build.

Thus, the scenario might be as follows: In 2010, unemployment averages 8.25 to 8.75 percent, with inflation between 1.0 and 2.0 percent; in 2011, unemployment averages 7.5 to 8.0 percent, with inflation between 2.0 and 3.0 percent. In 2012, unemployment averages 6.5 to 7.5 percent, with inflation between 3.0 and 4.5 percent.

Those numbers will probably be good enough to enable President Obama to get re-elected, but his second term will be plagued by rising inflation, high interest rates, and unsustainable deficits, along with stubbornly high unemployment.

Washington view: Texas economy shining brightly despite recession

In Texas, business is booming. In 2008, 70 percent of all jobs created in the United States were created in Texas. That same year, Texas was named America's Top State for Business in CNBC's second annual study that scored states on 40 different competitiveness measures. Texas now surpasses New York as home to the most Fortune 500 companies, and Texas dominated Forbes' "Best Cities for Jobs in 2008" list with five cities in the top 20. While the nation's unemployment rate is 9.5 percent, the rate in Texas is 7.5 percent. And while our state faces a $9 billion deficit, Texas has a $9 billion surplus. Instead of raising taxes, Texas is cutting them. How did they do it? Gov. Rick Perry says holding the line on taxes, having a reasonable regulatory structure and offering economic development incentives such as the Texas Enterprise Fund and Texas Emerging Technology Fund have attracted hundreds of employers to Texas. He notes that 7,300 new jobs were created in Texas in November 2008 alone.

Economists Pronounce the Recession Over

The majority of economists surveyed by the Wall Street Journal say the recession is over and Federal Reserve Chair Ben Bernanke deserves another term.

Of the 47 economists the newspaper surveyed, 27 said the recession has ended and 11 predict another trough this month or next. The rest refused to commit. But they were nearly unanimous is saying that Bernanke should be rehired.

Gross domestic product is expected to grow 2.4 percent in the third quarter at a seasonally adjusted annual rate. Economists were also heartened by a better-than-expected jobless report in July.

When inflation strikes, consumers look to gold, real estate, foreign assets from countries with stable currencies, and inflation-protected U.S. Treasury bonds. But gold is always a high-risk investment.

The best bets from this list are quality real estate properties and Treasury Inflation-Protected Securities.

Influence can be defined as the power exerted over the minds and behavior of others. A power that can affect, persuade and cause changes to someone or something. In order to influence people, you first need to discover what is already influencing them. What makes them tick? What do they care about? We need some leverage to work with when we’re trying to change how people think and behave.

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