Editor's Statement

Article excerpt

One of the real joys of working in the real estate field is its complexity. There is always something new to discover, and everything seems linked to everything else. The "seven degrees of separation" game has nothing on our business. At times, it feels like the only way to get away from real estate is to take a cruise and to stay out of sight of land. When it appears that real estate is ubiquitous, it helps to remember that the planet is two-thirds covered with water.

But even water intrudes on the property industry, as James D. Timmons' insightful and timely essay on "The Growing Water Crisis: Public Policy Versus Private Property Rights" forcefully argues. Many may think of this as largely either an agricultural issue or one that impacts sparsely populated areas between the Rocky Mountains and the Sierra Nevada. But Timmons brings home the issue of water to questions of urban growth and the sustainability of economic expansion in such huge states as California and Texas. Couple his investigation with an awareness of aquifer depletion in Florida, and real estate professionals should immediately start thinking about the distribution of projected population and employment change in some of the nation's most dynamic markets. This is a timely and provocative piece.

For most of our professional lives, the leitmotif of economic discussion has been the impact of inflation. For a while, real estate was touted as a great inflation hedge for investors. No one has been arguing that recently. For one thing, inflation has been largely tamed since the Oil Shocks of the 1970s and the double-digit CPI increases of the early Eighties. For another, real estate has witnessed some rather sharp ups and downs in its pricing and it is clear that whatever its ability to hedge inflation over the long haul, values can clearly fall behind inflation and even drop substantially while the general level of prices is rising. The debate has shifted to the potential threat of deflation, and we are pleased to bring you a thoughtful analysis of asset deflation as it affects permanent loan and investment portfolios. Mortgage lenders have long known that they have to price the prospective change in the general prices into the interest rate. Now there is a further question of yield degradation and/or default risk due to systematic asset price deflation. If Alan Greenspan and his colleagues are talking up the Fed's preparedness for coping with deflation, it is clearly something for all of us to be thinking about.

Now that it has been two years since the watershed date of September 11, 2001, we have an opportunity to look somewhat more dispassionately at the ramifications of that date on our lives. …