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Saturday, April 10, 2021

2018 into 2019: Looking back, looking forward

What: Breakfast meeting of the Society of Commercial Realtors

Who: Dr. Mark G. Dotzour

When: Wednesday, Dec. 5

Where: Ridglea Country Club

He said a four-letter word.

He is Mark G. Dotzour is a real estate economist who served for 18 years as Chief Economist of the Real Estate Center at Texas A&M University in College Station.

“I’ve given over 1,600 of these presentations now, and I’ve never uttered a four-letter word,” he told the crowd at the Society of Commercial Realtors in Fort Worth on Dec. 4.

That is, until this past July.

“Then I said the same word three times in one speech and the word was boom. B-O-O-M. In all of my career I have never used that at all, I didn’t plan on it, I didn’t program it, I just looked at people and go, ‘Folks, I don’t care what you’re hearing on TV, you’re in an economic boom in this country.’ ”

The question is, Dotzour said, how long this can last? People are already talking about a recession, but for Dotzour the data doesn’t support the idea.

“The data supports a rocket, but the feelings of anxiety in this country are creating a problem for us,” he said. “People have asked me in the last couple of years. ‘When are we going to have recession?’ We can talk about the fact that data does not support a recession next year, but people act like it’s going to happen next year.”

The country is not going into a recession next year, Dotzour said.

“There’s a 50 percent chance that I have a clue what I’m talking about,” he said.

When we do have one, and we will, he said, it’s not that big of a deal. And, he doesn’t expect to see one as severe as the one that began in 2008.

“A recession is normal, we live in a capitalistic system and we do this we expand, we contract. Then we do it all over again. Is there anybody in this room that will stop turning clients if we’re in a recession? I haven’t met one person yet that said that,” he said.


Dotzour said that while a $200,000 house in Fort Worth would “sell like hotcakes in a minute,” an $800,000 home is just sitting there. He said he is seeing this all over the country. But that doesn’t mean the market is going down.

“It’s crazy, people want to buy a home, but the prices are too high,” he said. “People are getting sticker shock. The fact is the home market has appeared to hit its peak for this cycle, at least temporarily. The auto industry peaked a year ago and still at peak. What does peak mean? That means you’re really high and you’re still really high. It doesn’t mean you’re on the verge of laying off thousands of people.”

As for expected returns on real estate, over the next year, Dotzour says get used to lower yields on property.

Customers and investors won’t like it.

“The answer to that will be, ‘Of course you don’t, nobody likes lower yields on property, but the biggest pension funds … have told everybody this year to [expect lower earnings.]’ ”


The much-vaunted tax cuts passed earlier in 2018?

Dotzour said they have not resulted in many new jobs for Americans.

“President Trump comes out and says, ‘Let’s cut taxes for businesses and they can bring that money back to America and create jobs and build plants and stuff.’ It’s not happening. They’re bringing that money back and creating special dividends and buying back stock shares,” he said.

It was a shame, Dotzour said.

“Tax reform happens every 30 years or so. We just had one and we won’t have another one if all that we do is take all the tax benefits and give it back out in stock benefits, stock buybacks and dividends,” he said.

The tax reform will make business owners look like geniuses, Dotzour said.

Dotzour said that every business owner looks like a genius in 2018, because earnings are up compared to last year, primarily because tax rates are lower.

“Next year in 2019 when your shareholders have said, ‘How are you looking in 2019 compared to 2018?’ [A CEO will say] ‘I’m still a big genius, but the tax benefits we’re comparing in 2019 with the same tax benefit of 2018.’

“That’s what I think is happening to the stock market. I think they just woke up and realized that, OK, earnings are up 26 percent this year [because of the tax reform], maybe they’re only going to be up 9 percent next year because they got huge tax bump this year. They won’t get that tax bump next year.”

Defense spending may have peaked too, Dotzour said.

“Donald Trump is like, ‘I like spending money on Defense, let’s defense it up.’ We got a big budget that’s a problem, too. I mean, Republicans are really good running a huge budget deficits, that’s their specialty. We’re getting that again.”


With Treasury rates at about 3 percent right now, Dotzour sees this as a good indication that our economy is pretty strong.

“I remembered last year when you were asking me and other people were asking me, ‘Why is it the [Federal Reserve] is raising rates right now?,’ ” he said.

The Federal Reserve was going to say they were worried about inflation, but he said “nobody is worried about inflation and they’re not either.”

They are raising rates because the rates went down to zero and they want them up because if there is a recession they can “lower it back to zero and look like they’re doing something. That’s exactly what’s happening.”

Every time President Trump tweets “something about lower rates, it just guarantees the Fed will be even more reluctant than ever to lower interest rates.”

But it’s to be expected, Dotzour said, as presidents and the Federal Reserve have always been at odds.

President Johnson used to take the then-Federal Reserve head out to the ranch. “If you got a ride in a pickup truck on the ranch that meant you were about to get roasted big time,” said Dotzour.

Other presidents have raised a fuss too, but it didn’t matter, the Federal Reserve continues to be independent.

“The only people that worry about inflation are sensational people that want to get on CNBC and say something provocative and hope that they get lucky, and they’re right, and they’ll be famous for a year or two until they’re wrong and then you’ll never hear from them again,” he said.

The recent mid-term elections mean nothing much is going to get done for the next two years, Dotzour said.

“This is how it works. If you have a Republican president and the Democrats are in charge of Congress, they’re not going to do anything to let him look good,” he said. “That’s exactly what the Republicans did when Obama was running for re-election.”


Why are people moving to Texas?

“Do you think it’s because of our pristine trout streams, and mountain climbing, and cool breezes and all of that stuff? No,” he said.

People come here because of the economic future they might have in the Lone Star State, he said.

“Do you know what that’s called? It’s called fiscal policy. Donald Trump is an idiot in many ways, in many vectors, but the guy is a genius as for fiscal policy. Fiscal policy is simply a president and a Congress creating an environment that encourages men and women in business to hire people. We haven’t had fiscal policy for so long you wouldn’t even notice it’s gone. That’s exactly what we got going on,” he said.

For a video of FWBP Editor Robert Francis interviewing Mark Dotzour:


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Robert Francis
Robert is a Fort Worth native and longtime editor of the Fort Worth Business Press. He is a former president of the local Society of Professional Journalists and was a freelancer for a variety of newspapers, weeklies and magazines, including American Way, BrandWeek and InformatonWeek. A graduate of TCU, Robert has held a variety of writing and editing positions at publications such as the Grand Prairie Daily News and InfoWorld. He is also a musician and playwright.

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