The attached story (link found below) includes comments by the CEO of Honeywell which I found very relevant. He makes the point that if we don't have the resolve to address our budget deficit problems, the bond markets will react by pushing up interest rates dramatically. It seems to me a fair assumption is that we will not solve all of our deficit problems quickly. Over time the Chinese and other buyers of US debt will demand higher returns given the increasing risk of lending to the U.S. As a real estate investor, if interest rates move up, real estate values will move down, all other things being equal. Therefore there is downside risk in today's real estate values. Acquisitions need to be scrutinized with this in mind. At Arixa Capital, we generally prefer to be the lender rather than the buyer of real estate in the current market, because this insulates us from being hurt by possible downward pressure on real estate values.
In the link below, you can access the transcript for this discussion. If you prefer to listen, the CEO of Honeywell, David Cote's comments are found at minute 3:05.