Gordon Davis

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Some Reflections on International Markets

• Gordon Davis
• International Operations
• National Association of REALTORS

Chicago Association of Realtors International
Transaction Forum June 29, 2005
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(No Transcript)
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Ambiguities are Everywhere --- But So are Insights

• As an international real estate professional you
  must resolve the ambiguities
• You need to extract important information from
  the ambiguities
• Your international real estate practice will
  benefit

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The U.S. vs. The World Now
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The US vs. The World in 2050
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Representative News Stories

• Wall Street Journal Thursday, June 16, 2005
• Financial Times Wednesday, June 29, 2005
• New York Times Tuesday, June 28, 2005

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Some Sample Issues

• Currency Fluctuations
• Trade Deficits
• Budget Deficits
• Interest Rates
• Oil

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Currency Fluctuations

• A weak dollar makes U.S. real estate more
  attractive to foreigners
• A strong dollar makes foreign real estate more
  attractive to U.S. investors

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Trade Deficits

• A US trade deficit causes dollars to accumulate
  abroad
• Chinese businessmen, for example, are
  accumulating dollars
• Chinese businessmen are therefore potential US
  real estate investors

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Trade Deficits

• Trade imbalances usually cause adjustments in the
  value of currencies
• But not when one government pegs its currency
• With a pegged currency, distortions arise

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Budget Deficits and Interest Rates

• Budget deficits are usually inflationary
• Foreign demand for Treasury obligations has held
  Treasury interest rates low
• If foreign demand for Treasuries dries up then
  all US interest rates will rise
• Higher interest rates means inflation and high
  mortgage rates

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Interest Rates

• Foreigners hold 50.6 of US Treasury obligations
• Foreign support, like Chinas, for U.S. budget
  deficit could end over political differences
• South Korea may have quit buying dollar
  obligations already
• Trade and budget deficits render US interest
  rates vulnerable to actions of others

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Oil supply Worst Case Scenario

• If world oil supply shrinks by 10 million bpd
• Gasoline goes to 5 per gallon in the U.S.
• US GDP drops 5, we have steep and deep recession
• Saudi Arabia produces about 10 million bpd

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Oil supply Worst Case Scenario

• No idle oil production capacity and new capacity
  takes years to develop
• Military option problematical
• Real Estate consequences
• Mortgage market dries up
• Remote homes lose value
• Development plans on hold
• Markets in other countries follow suit

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Cmon, What about the Three News Stories?
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Action Steps

• Become a CIPS Designee
• Learn your local markets unique characteristics
• Develop relevant language proficiency
• Tap into local immigrant culture build a network
• Join (or organize) an international local council

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Action Steps

• Become an international trends junkie
• Re-learn international economics
• Read international newspapers
• Become a foreign policy expert
• Create a Designated Internationalist

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You can observe a lot by watching.
Yogi Berra