Berkeley Haas Professor Sees the End of the “Easy Money” Era in U.S.

Berkeley Easy Money

On the eve of the new House Tax Cuts and Jobs Act being passed by the U.S. Senate, Haas School of Business professor and Fisher Center for Real Estate & Urban Economics chairman Ken Rosen projected a slow end to the era of easy money, typified by “artificially” low interest rates and increased rates of home ownership, and a Bitcoin bubble, post-GOP tax plan. Don’t worry; you’ve still got time to get your ducks in a row.

Last month’s 40th Annual Real Estate & Economics Symposium was the site of Rosen’s annual economic forecast, titled “Peak Moment or Extra Innings?” While Rosen doesn’t foresee another recession on the horizon, he posited that the 9-year asset bubble that developed as a result of low interest rates “will come to an end when rates are normalized” in a couple more years.

When it comes to real estate, Rosen says industrial spaces are the hot ticket these days, due in no small part to the efforts of certain e-commerce titans—in fact, Amazon is credited with 60 percent of new warehouse construction. “Industrial is the new retail. There’s a big restructuring happening. Cannibalization is what we call it, and the cannibal lives in Seattle,” Rosen says.

Rosen says the new tax overhaul is expected to hit homeowners in California especially hard. “[The bill contains] a number of provisions that will hurt housing, including the property tax deduction limitation and limitations on mortgage interest deductions.”

The impacts of the bill extend to the larger California state economy, which is expected to take a “$38 billion bite from taxpayers if the state and local income tax deduction is eliminated.” Rosen explains that California will become “more tax disadvantaged relative to other states” as a result of the GOP plan and will accelerate “out-migration from California.”

 

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