Earlier this month, I was willing to proclaim that we’d hit the bottom of the real estate market. Market reports from around the country are starting to catch up with me. This week several stated that they now believe the bottom is at hand.
However, a University of Florida survey says that the climb up from the bottom will be long and steep. For those who are shopping for homes for the first time, this is a good news. There is not likely to be a fast run-up in house prices. However, the report suggests that as the job market improves residential real estate prices will not only stabilize, they will rise.
According to Forbes, the latest Federal Reserve survey suggests the economy is becoming more stable, but is showing very limited forward motion. But residential real estate, which led us into recession has turned back the other way. Now residential real estate continues to show sales gains, along with inventory declines, all over the country.
The greatest sales, by far, are taking place in lower priced homes. This is not surprising, because most people can comfortably afford to pay between $10,00 and $300,000 for a home.
In Florida, we are watching a new trend develop: buyers who can afford higher priced homes are looking hard, and often paying cash, for lower priced homes. Their reasoning is simple: they’ve seen the effects of a recession. They’ve watched real estate values drop. They’ve been maimed financially by the stock market. So they no longer wish to pay for more house than they really need.
This upper middle income group competes for lower priced homes with the middle and lower middle income families. The result is the bidding wars we’ve seen for foreclosure and short sale homes in the $300,000 and under range. The effect of this new economic outlook is to reduce inventory among the lower cost houses, and leave large numbers of mid-priced and luxury homes begging for buyers.
Builders are also observing this new minimalist trend. They are putting up smaller homes that cost less to heat and air condition. This saves on construction costs, and helps move inventory faster. As profits rise from these smaller, lower priced units, and demand for them increases, additional jobs will return to this sector.
Meanwhile, The Federal Reserve indicated that manufacturing improved in most areas of the nation, while the broader economy remained relatively steady. Another positive sign of recovery, although slight, is an uptick in demand for temporary workers in many districts. Often, taking on part time workers indicates a return to hiring of new personnel in the not distant future.
These concurrent signs of recovery in the factory sector and in residential real estate bode well for the economy. The lingering dark spot on the horizon concerns commercial real estate, which is undergoing a meltdown of its own, from sea to shining sea. So, while housing and manufacturing keep chugging along, they’ll be dragging office buildings behind them, which will temporarily slow our rate of growth.
Written by Marc Jablon, Realty Associates
marcjablon@yahoo.com / 561 / 213 – 6139
www.marcjablonhomes.com/
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