Happy New Year to all!

2008 promises to be the year of change. With 2006 and 2007 there was uncertainty in the investment markets because of the mortgage crisis that has hit America. The Fed is up against some very strong indications that the economy is not as strong as first thought. The Jobs report released for December showed a fraction of the jobs added as was initially anticipated. This along with slow home sales and the surging price of fuel will force the Fed to cut it's rate yet again. The change in stance from the Fed will lead to lower interest rates. It won't be long before we see the Fed reduce the over night lending rate to banks down below 4.00% (currently at 4.25%).

What does this mean to real estate investors? Buy, buy, buy. Of course fundamentals will still be key. However, the litmus test for most investments should be the 10 Year Treasury Bill. Basically, compare investments on a 10 year hold vs the 10 Year T-Bill. Considering that the 10 Year T-Bill recently closed at 3.84%, then investments with returns similar to this can only see upside in the next ten years.

Consider the recent sale of apartments that I closed in the
Hillcrest community of San Diego, CA. The six unit complex sold for all cash to an investor with a 4.64% return. That's 80 basis points above the 10 Year T-Bill AND there was still plenty of upside in rents for a substantial gain. It is clearly evident that his ten year holding strategy will gain him greater cash flow and appreciation than the 10 Year T-Bill (which will be greatly affected if the Fed moves to reduce its rate once again).

Of course, we all have our benchmarks for investments and this is just one example. As with all of my clients, I welcome each of you to call me for a full analysis of your Return on Equity. You may be surprised by the results.

You may contact me direct at 858-362-9374 or click on my "Contact" tab above and send me an email.