There are a number of events and conditions which impact real estate that are neither positive or negative at this moment -- but they are fluid and could change course.

• Local Factors. Real estate is an inherently localized commodity. What happens nationally may not -- for better or worse -- happen locally. A new road, the opening or closing of an industrial facility, a flood or hurricane, downsizing, and other nearby events can all impact local realty trends.

• Consumer Confidence. In addition to good economic times, there must be a willingness to spend -- a factor closely related to public economic perceptions. If most people think the economy is good, then to some degree it will be good merely because people are more willing to spend and invest.

• Year 2000. The Y2K problem will continue with us in the coming year -- and create thousands of programming jobs in the process. Once programmers fix the problem, look for increased employment in the legal industry as everyone is sued for everything.

• Global Warming. A little global warning, it turns out, makes growing seasons longer and cuts winter fuel bills, good news for food producers in northern climates, such as the U.S. Look for more global warming -- and debate about what it means.

• Commercial Real Estate. We usually think of "real estate" as where we live, but there is a huge commercial component within the industry. One question now emerging concerns the demand for retail space in an era with growing online sales. One firm, EggHead has moved from local stores to online sites, and if such a trend becomes widespread the implications for retail property will be significant.

  Then again, for years we have had both a huge and booming catalog industry and an expanding local retail base, so perhaps we will find that both expanding online sales and strong local store sales are possible. In any case, look for an expanding movement to tax online sales as local tax revenues are lost to online retailers.

• Tax Policies. Mortgage interest and local property taxes are deductible on federal tax returns. However, there is a perennial effort to end such deductions, the argument being that they are "costs" to the federal government. What is not said, of course, is that because the current system has been in place for decades, an end to mortgage and property tax deductions would result in fewer home sales; less construction; reduced consumer demand for big-ticket items such as appliances, furniture, carpets, and home improvements; increased unemployment, enlarged welfare costs (because jobs would be lost), and smaller tax revenues (because people without jobs do not pay taxes or buy much from others).

Possible Negatives

While the most basic indicators look good, there are some factors that could hurt realty interests.

• Asia. Troubled Asian economies are a two-fold problem. If they get worse, imports from the U.S. will decline (meaning fewer jobs here) and cheap goods will be exported here (because of over-production in Asia). If the economies get better, money will move East from the U.S. meaning that mortgage rates may stiffen.

• Oil. Falling oil prices have been a major benefit for the U.S. economy. Fewer dollars spent on imported oil means lower heating bills and more money to buy other things. But, instability in the Middle East or effective market management by OPEC could raise fuel costs and harm U.S. interests.

• Russia. The business community detests instability and few things are less stable than the Russian economy. A huge nation -- armed with massive numbers of underpaid soldiers, rotting atomic submarines and poorly-maintained nuclear missiles -- is now led by a constantly-sick president who governs a decrepit nation-state filled with millions of people who continue to idolize Lenin and Stalin rather than free markets and free thinking. There are no pain-free remedies available to kindle the Russian economy (there is little to "re-kindle") and not enough foreign aid to create a productive economic base. Continued instability in Russia makes lots of people nervous, not good news for stock markets or neighbors.

• Mexico. Political unrest, falling oil prices, and one-party political domination are an explosive combination now smoldering south of our border. Disputes concerning a more equitable distribution of national wealth and political power will inevitably happen. The only questions are when and at what cost.

• Stock Markets. Will the stock market continue to rise? No one knows, but the equity growth seen in the past eight years is unprecedented. A significant fall in the market would greatly impact national trends -- something that should worry folks when hedge funds falter and values are not rationally-related to income or profits. It's worth remembering that 20 years ago Mid-East oil states were seen as bastions of economic power and that 10 years ago the world marveled at Japan's stock market and realty values.

• Employment. While 1998 was a banner year for full employment, it's also true that there were a huge number of lay-offs, the oil industry was hurt by falling prices, and both the steel industry and farmers faced product gluts.

The U.S. has a huge internal market, a stable political system, and a history of enterprise which has served us well. Many of the questions and negatives mentioned above also existed in 1998 and yet the U.S. economy expanded. I see good results in early 1999 with real estate prices generally rising above the rate of inflation and unit sales at strong levels.

Question Of The Week

Q We are refinancing our home and the lender wants a new survey. Since the house hasn't moved, why bother?

A Assuming its not a mobile home or in an earthquake or flood zone, no -- the house probably hasn't moved. But has anyone erected a fence recently? Does the fence encroach on your property? Have you added a room or built a separate garage that crosses the line onto someone else's land?

It doesn't seem likely, but such things happen. And since the property is security for your new mortgage, the lender has a reasonable right to assure that such problems do not exist.

Weekly Resource

Just about everyone with an interest in real estate education belongs to REEA -- the Real Estate Educators Association. A national organization, REEA offers a wealth of information from a well-organized and coherently designed site.

Published: December 29, 1998

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Editor's Note: This article reflects the opinions of Peter Miller only and not necessarily the views of this or any other publication, organization or Website owner.