NAPLES, Fla. - Though the majority of CMBS players at the conference were bullish on real estate fundamentals for the coming year, the macroeconomic view - which many consider to be even more important - is a rather mixed bag of information.

In a combination of fairy tale references, Mitchell J. Held, managing director and economist at Salomon Smith Barney and Citibank, said, "We are not in a Goldilocks economy," and, "The bear is Alan Greenspan and he slays the wolf," which is presumably inflation. According to Held, the Fed may raise rates by as much as 50 basis points in February with more to come. Additionally, there will be more spending increases and tax cuts.

The very pro-Greenspan Held predicted that the fundamental backdrop for housing is weakening and "upside potential seems limited by the already-high level of activity." Moreover, some anecdotal evidence of a slowdown exists. In 1998, housing starts exceeded 1.6 million units for the first time since 1987. They topped 1.6 million units in 1999 and "should settle closer to 1.5 million units in 2000."

Additionally, Held mentioned that rising inflation fears are likely to prompt a modest further rise in long-term interest rates. A gradual rise modestly above 6.5% over the next six months is likely. Nevertheless, continued low inflation and the probable vulnerability of the equity market probably should preclude a further, substantial backup in long-term U.S. rates, Held said. "Rates should fall again later in 2000 or early in 2001," he added.

Scott Brown, chief economist at Raymond James & Associates, foresees that as interest rates head higher, there will be a strong demand for credit and lots of agency issuance. Additionally, there will be "less fear of inflation, but signs of imbalance in the economy."

"Barring a significant further increase in the pace of productivity growth, the U.S. economy will slow in 2000 - but the pace should still remain relatively strong," Brown said. "Federal Reserve policymakers face a tough situation. Despite economic growth, inflation has not been a problem. However, the economy appears to be on an unsustainable track and the Fed will likely raise rates until there are definitive signs that growth is slowing to a more sustainable pace."

Finally, Brown concluded that the complex interactions between interest rates, the stock market and the dollar makes economic prognostications for the first half of the year more difficult than usual.

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