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Navigating Economic Waves

In the years following the Great Recession, the economy has rebounded dramatically, resulting in a prosperous period for realtors. However, a startling, new trend has emerged. We have seen recent buyers in the Willamette Valley especially have become hesitant to pay sellers their asking prices when investing in real estate. This has caused many experts to wonder if we are nearing a peak in the current cycle of real estate values. In addition, when you juxtapose this recent uncertainty within the stock market with the financial pinch felt by companies and industries, it can lead to questions about where the economy is headed in the near future.

A classic indicator of economic issues is the recent upswing of activity in the debt restructure industry. Over the last few years, this line of work had fallen on lean times. This is because when the economy and businesses are doing well, there is less need for debt restructuring. However, recent economic issues have debt professionals gearing up to prepare for what they believe will be a new, incoming wave of demand for services.

In a recent article on the subject, Reuters reported that debt restructuring experts are preparing for what will be a strong wave of demand for their services over the next few years. In fact, one leading industry executive was even on-record saying their company is recruiting heavily in anticipation of this coming wave.

In addition to the overall uncertainty within the stock market, the anticipated rise in interest rates is expected to put even more strain on businesses, forcing more of them to restructure their debt. One industry executive said, “In the last five years, if companies had a credit issue, they solved the problem by issuing new debt. However, they won’t be able to do that anymore, and the outcomes will then be debt restructuring combined with the sale of distressed assets.”

In conclusion, it is common knowledge that both the economy and the real estate market have their own cycles and transition periods within these cycles. When buyers begin to cool down and pause before spending money, this is usually an indication that we are at or near the peak of the upswing in this cycle. However, often when an upswing is occurring, people begin believing that this particular upswing has no end in sight. Don’t fall for this naive way of thinking. Do your homework, look for any clouds on the horizon, and make the best, most well-informed decisions moving forward.

 

Alex Rhoten is the Principal Broker at Coldwell Banker Commercial Mountain West Real Estate at 503-587-4777 or cbcre.com.