Against the Grain
I’m going to go out on a limb for a moment and make a prediction as to where I see the Real Estate market over the course of the next two years.
Of course all of this depends on our country avoiding slipping into that deep dark hole of a second recession.
I have been writing about a shortage of inventory and sharing my thoughts on this subject for years; and now we are starting to see the first signs of a severe shortage of resale inventory in this country. We have not seen any significant building of new housing units in almost four years.
As a result in most areas, except in some areas of the rust belt, we are seeing inventory levels of 8 months or less. Once we drop below 6 months of inventory it becomes a neutral market. Not a buyer’s market nor a seller’s market, but a neutral market.
Then once we drop down to a three month inventory, it becomes a seller’s market. Since I don’t see any significant building on the near horizon to help deal with this shortage of inventory, and the fact that once a builder decides to get back in the market and starts building again, you are faced with almost a two years lapse between deciding to build, and having a product to sell. Consequently, we are going to see a severe shortage of inventory before everything turns around.
I know that the Real Estate market has taken another hit just recently with the slowdown of sales, but I can’t imagine it lasting very long. I’m hearing from our Realtors across the country that sales are off again by 20%, but as soon as the consumer and small businessman has confidence in our country and economy again, I believe things will turn around fairly rapidly. The turnaround may start in November of this year or it may take till 2012, but it will happen.
I hate to get into politics, but my observation is that the country’s economic condition will not change for the better until everyone comes together, Republican, Independent, Democrat, Tea Party, etc. And makes getting the deficit under control the number one priority. The debt is killing this country just like debt kills a business. I know the next statement will probably be unpopular with 40% of the populace, but as a small businessman I can state that the tax burden that faces the small business man due to the unknown of the national debt and Health care scares us to death. That’s just a fact of life. As a result I believe that the country will remain in the doldrums till the beginning of 2011 or even until 2013. If by chance we slip back into a double dip recession, you can be sure that we will suffer for years to come.
However my glass is always ¾ full and I believe if we end up with the different branches of government being controlled by the different parties come November ( which I believe is always a good thing) then new spending bills will cease to exist. No matter what party you belong too this has to happen to get this country back on a financially solid footing. Then I believe confidence will start to build in our country again.
With all that said, once we finally get the inventory down to three months in this country, and with the lack of any new inventory, I believe we will see Real Estate prices escalate rapidly, once the American public has faith in our economic system again. I’m sure many will disagree with me, but my glass is always ¾ full.
I hope I’m right because our company is betting on my predictions. We’re expanding and looking for other Real Estate brokerages to acquire. So in a very short period of time we will learn if I’m a genius or an idiot.
James A. Crumbaugh III is CEO of Allison James Estates and Homes and may be reached at firstname.lastname@example.org
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