Nothing is more cyclical than real estate. Growing up in Florida in the 1960s, the history books told of nine boom bust cycles that had occurred in the state since 1890. Even so, you would have to be living deep in the Everglades to be unaware of the impact that the current downturn has had on the domestic economy.
So what can we expect this year? Pre-owned single family home sales are displaying a pulse. Interest rates remain low and sellers have run up the white flag, their expectations of value having finally surrendered to the dictates of the market. Pent up demand and attractive pricing are exerting a positive impact on the sector that should continue to build at a steady pace.
Multi-family residential units are the current stars of the real estate world. Prices are solid, financing is affordable and rent rates are up with more families having lost a home or postponed their ownership dreams as a result of the economic duress. This single out performing sector will continue to lead the way out of the darkness and into the light of the real estate recovery
Commercial properties appear to have bottomed out. Vacant square footage declined in 2011 and lease rates began to inch upward. The big challenge facing the commercial sector is the tide of notes issued in 2007 that will come due this year. Overall economic growth will factor into how well some of those mortgagers fare in meeting their obligations. Whatever level of growth is achieved, there will be a new wave of defaults. The only question is how bad it will be
Despite hopeful signs in the final months of 2011, new home construction will continue to lag behind the other sectors. Too much inventory, too many like new units and a reduced buying pool will all conspire to keep builders on the sidelines for another year. New homes will always be built. They are an enduring element of the American dream. Presently the hard sole of economic reality has its heel squarely on the neck of the developers and contractors. This too shall pass; but the shake out in that sector of the industry has been dramatic
Raw land remains challenging except in the agricultural heart of the nation where farm commodity prices have driven the cost per acre upward in certain areas. Eventually, well capitalized developers will begin quickening the pace of their purchases in preparation for the next housing boom. For now, those that have the vision and the resources will continue to drive a hard bargain and bank undeveloped tracts for a future date in time.
So there’s your overview. The market remains weak; but, like a fighter that survives a knockdown, it is slowly regaining a rhythm and pace that will propel us toward the inevitable revival. It won’t be quick and it hasn’t been easy. The cost in dollars and dreams has been steep. There is light at the end of the tunnel. It’s just been so long and it’s still seems so far away.