|
|
|
| |
|
|
| |
The recovery expected in late 2009 as prices completion correction, rents justify new investment, bailouts and pro-housing policy kicks in
|
|
| |
Download Market Update as PDF
Nationally, residential housing prices are dropping with a persistent downward trend. Various fundamentals indicate the fall will continue for at least a few quarters, and perhaps not until 4th quarter of next year even if all goes well.
First, the bad news:
- Market prices in all sectors (investment grade, median, and luxury) are still trending down.
- No particular region or sector appears to be protected from the steady decline in pricing.
- Falling prices are spreading to more cities, after a slight rally earlier in the year
- Bankers report tightening credit across all types of property, lenders, and loan types, despite the recent Congressional effort(TARP) designed, in part, to help home-owners and buyers
- We estimate prices could fall by as much as another 8% before the market bottoms out.
- Ambiguity in tax policy under the new administration, the role of various bailout programs aimed at financial institutions and at borrowers, and the extent of a global recession will slow down investment until at least after inauguration
- Resort-based metropolitan areas (coastal, mountain, and other leisure destinations) have suffered significantly worse than more diversified markets.
- Key regional markets (much of Florida and California) are still dismal investment opportunities
The good news:
- Inventories appear to be settling out. This means existing inventory is not being absorbed. But it also means no new inventory is flooding the markets.
- Net rental income matches or exceeds the costs of property ownership in 88% of US markets, making markets increasingly affordable for investors in terms of return on investment.
- There’s light at the end of the tunnel: we expect prices to hit bottom by middle or end of next year, by which time the incentives for investors to acquire properties should be very attractive
- If you owned real estate for the last 18 months, or even the last 10 years, you may have been better off than having invested in the stock market.
- Some of the best places to invest are a handful of major metropolitan areas, or a number of fairly small metropolitan areas.
- There are investment markets that appear to support continued demand for housing, with good rent-to-value, price trends, and inventory.
- The price free-fall is slowing down among median and especially luxury-priced segments of housing. Luxury properties have held their value better than lower-end properties.
- TARP and a change of administration in Washington may improve the psychology of both consumers and institutions. Government intervention may also provide direct support to housing markets and credit. We expect either case, hopefully both, to help housing markets in 2009.
- President Obama’s focus on Midwest labor markets, especially Detroit, should energize housing markets in those regions.
|
|
|
| |
|
|
| |
| Back to home page. |
|
|
|
|
