It has been said that there are as many theories and opinions
about economics as there are economists who can talk.
Well, the same could probably be said about real estate.
Real estate organizations across the country are busy as we
speak, churning out their next newsletter or press release,
identifying trends and adding their opinions, analyses and advice to
the marketplace of ideas.
Most of them observe the nation in wide brush strokes, often
failing to recognize the peculiarities that exist in places like
But consider this, from a recent issue of "REAL Trends," a
Dallas-based real estate newsletter:
Michael Sumichrast, chief economist for the National Association
of Home Builders since the mid-1960s, says the housing market is
doomed. Jesse M. Abraham, an economist with the Federal Home Loan
Mortgage Corp., disagrees.
First, Sumichrast, as quoted in the Dallas Morning News:
"The whole country is going to where you were in Texas two or
three years ago. Housing is in simply terrible shape. I have never
seen anything like this, and I have been through seven recessions.
"What makes this period so dangerous is that the lifeblood of
housing - the credit to buy, develop and build - has been virtually
cut off. The people I talk to are devoid of reality. I am shocked
by their lack of understanding of the issues.
"Regulators have pushed real estate into a tailspin. Nobody can
foresee the ultimate impact. And nobody in Washington cares."
Now Abraham, as quoted in the Wall Street Journal:
"As with Chicken Little, the alarmist talk is overblown
generalization. In fact, we are seeing confirmation of a widely
observed but only reluctantly accepted fact - regional economies can
cycle out of sync with the nation.
"There will not be a nationwide collapse in home prices. Still,
price inflation is likely to slow. Someone will have to buy the
houses that trade-up buyers are selling, and the incomes of these
buyers - some of whom appear to be currently frozen out of the
market - will limit the sales prices of the boomers' outgrown homes
and hence their capital gains.
"Reduced demand will eventually mean lower total appreciation.
So the dynamics of demand and supply should work well and without
catastrophe over the next 10 years."
Who should we believe?
I'll side with the guy who says regional economies can cycle out
of sync with the nation. . .
- The newsletters produced more food for thought this week,
this time from the Schroder Real Estate Associates Advisory.
We'll leave out the national generalizations about commercial
real estate in the late 1980s, because Oklahoma was out of sync.
We'll also assume the baby-boom phenomenon is well understood, and
plunge right into the part that looks ahead:
"New space needs will be much lower in the '90s, so there will
be less new development and more focus on adapting and maintaining
existing properties to accommodate the demands of a mature, affluent
"Attractive opportunities are emerging for cash buyers because
so many property owners are overextended and are under pressure from
lenders. For investors that also have foresight the wherewithal to
manage quality properties with excess vacancy, the prospects over
the next two years are truly exciting. …