I spent several hours yesterday with some pastors who preach tolarge congregations in Middle America, primarily talking about adeal I am involved with them on. However, we had a long talk aboutthe attitude of everyday Americans, how they see things and thefuture. The comments hold a number of major lessons for real estateinvestors and developers. There seems to be a general loss of hopeor feel good across the country that results from the sense thatWashington is just a bunch of people who prefer to score points,but who do not do anything useful to solve the country’s problems.They hate the constant political bickering and showmanship, andcomplete lack of leadership. As opposed to 2006-2007, there is nofeeling of I can spend, I can have a bigger house, I can shop, theworld is great. And that is not going to change anytime soon.

We now have a reality check where there is serious unemploymentand under employment, and not a lot of hope this is getting muchbetter any time soon. House prices continue to decline in many midAmerica cities. The dangers of the world continue to pile up and itonly seems to get to be a more dangerous world. Middle class andworking class incomes are going nowhere, and gas and food costsrise making it harder for the average American family to do some ofthe things they had gotten used to in the mid decade.

What does all of this mean to real estate. There seems littlehope in the next couple of years that house prices or new homepurchases will increase materially. It will be a long slow slog.Likely good for multi family and not good for land and newsubdivisions. There will surely not be much, if any real pricingpower for new home construction in many areas of the country forseveral years until the demand starts to outstrip the supply of newand foreclosed homes. If you are buying land, make sure you knowthe demographics of the submarket and that you have a long termhorizon for exit. There may have been some good land priceincreases recently in some places, but generally it is going totake time.