Real Estate Slump End in Sight?

It’s the 10 trillion dollar question and there are quite a few opinions:

Over this past weekend, former NAR Chief Economist John Tuccillo posted a weblog entry (“Is the End in Sight?”) with a good analysis of several factors in the current economy and housing market. He seems generally hopeful.

Here is one of his conclusions: “Your potential buyers need to know that their window is closing and that when sales begin clearly to rise, prices will soon follow. In 2005, sellers didn’t want to believe that and were left behind. Now, it’s buyers who are in danger of watching the train leave the station.”

Generally speaking, I semi agree with this statement as long as he is referring to residential real estate only and only in the top 25 growth markets. We all know that the commercial real estate market still has a long way to go just like the top 25 attrition markets like Detroit and Las Vegas.

But, I have to temper the above opinion with this: I think that the “other shoe” is about ready to drop in the mortgage and banking industry. A ton of option ARMs are within 18 months of adjusting as are several thousand of those super enticing entry balloon programs. Unless these property owners take advantage of refinance programs like the HASP program, I think that we might be ready to see the other half of this losing football game.

My prediction for the Nashville real estate market: We are near the bottom, very near in fact, but won’t reach the bottom until the end of this selling season. Builders, developers and individuals have for the most part stopped building spec homes and banks, lenders and hard money institutions are beginning to loosen their lending qualifications in this market due to our strengthening fundamentals. This simple supply, demand and buyer ability curve appears to finally be turning in our favor.

    Grant Hammond

    Grant Hammond is a Nashville real estate strategist with 25 years of experience advising buyers, sellers, and investors across Middle Tennessee. His analysis of housing trends, development activity, and macroeconomic dynamics has been cited by The Tennessean, Nashville Business Journal, Nashville Post, Los Angeles Times, and The Wall Street Journal. Readers seeking guidance on local housing trends or investment strategy can contact Grant.

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    7 Comments
    • Anonymous

      May 2, 2009, 1:18 pm

      Grant,

      I tend to agree with you that it appears that sales have bottomed and now prices should follow. Can you give me an idea of why you think Brentwood and Green Hills could see a spike in prices within the next 12-18 mths? Also, can you opine on the next five years of Nashville real estate? Still a good investment(not talking about condos, still overpriced)?

    • Anonymous

      May 2, 2009, 8:18 pm

      Grant,I tend to agree with you that it appears that sales have bottomed and now prices should follow. Can you give me an idea of why you think Brentwood and Green Hills could see a spike in prices within the next 12-18 mths? Also, can you opine on the next five years of Nashville real estate? Still a good investment(not talking about condos, still overpriced)?

    • Grant Hammond

      May 2, 2009, 5:13 pm

      I think that the numbers of sales will continue to increase throughout the year, but that prices will continue to fall until the very end of the years. Remember, banks still have a lot of REO on the books and they will dump those properties slowly over the next 12 months. This trickle supply should keep the sales coming, but the prices dropping. By this time next year, prices should be on the rebound and in 24 months we might see that artificial spike as demand overtakes supply.

    • Grant Hammond

      May 3, 2009, 12:13 am

      I think that the numbers of sales will continue to increase throughout the year, but that prices will continue to fall until the very end of the years. Remember, banks still have a lot of REO on the books and they will dump those properties slowly over the next 12 months. This trickle supply should keep the sales coming, but the prices dropping. By this time next year, prices should be on the rebound and in 24 months we might see that artificial spike as demand overtakes supply.

    • Grant Hammond

      May 3, 2009, 12:13 am

      I think that the numbers of sales will continue to increase throughout the year, but that prices will continue to fall until the very end of the years. Remember, banks still have a lot of REO on the books and they will dump those properties slowly over the next 12 months. This trickle supply should keep the sales coming, but the prices dropping. By this time next year, prices should be on the rebound and in 24 months we might see that artificial spike as demand overtakes supply.

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