Posted on Wednesday, January 14, 2009
I just read a prediction today that the commercial real estate market will worsen over the next two plus years. That I can see since that market's been lagging a few years behing residentil all along. But also predicted was that residential real estate prices two years from now will be less than they are no. That maybe notM First of all each geographical market saw different price increases for different reasons. And each geographic market is decreasing at different rates. Some are being impacted by variables that are irrelevant to others. Whatsomore there are differences within geographic areas based on property type (ie condo verses single family verses townhouse) and by existing verses new construction and even by price rnage. So such a broad stroke prediction seems curious. On top of that is the fact that real estate prices related to local income, rental rates and traditional valuation methods seems logical. While prices may temporarily go below those values due to unemployment, lack of consumer conficnece and absoption hiccups caused by pent up supply in the form of rentals, foreclosures, etc, we also have to factor in pent up demand I people need a place to live and it almost always makes more sense to own than rent in the long run, plus americans love to own.
I suppose a lot of these variables will depend on what's done to prevent folks from walking away from properties their upside down in and how difficult it will be to get financing. But I see residential prices in some areas, for some property types and in someprice ranges stabilizing this year.