Hank Fishkind was quoted in the Orlando Sentinel today saying that Orange County, FL is the strongest market in the state because of demand created from the robust growth and job creation in the tourism, health care, education, and defense manufacturing. He says that we have hit the bottom of the market and prices will not fall much further. He also says that we have years of excess inventory and flat prices ahead of us.
Sean Snaith, head of the University of Central Florida’s Institute for Economic Competitiveness, disagrees with Fishkind and predicts a 28% decline in prices for 2008.
Lawrence Yun, head economist for the National Association of Realtors, says that a recovery will occur in the second half of 2008. He cites that there is pent up demand from the 4 million jobs that were created the past 2 years and numerous buyers have been sitting on the sidelines trying to time the bottom of the market.
Robert Shiller, creator of the Case-Shiller Index, predicts as decline of 30% in 2008 due to an over supply of homes on the market from builders and resellers. The last time this happened was during the Great Depression and Central Florida is the second worst performing metro area in the index. Whoa!
Sure looks like we have some differing opinions for the real estate market in 2008. I hope that the economists predicting a recovery are correct but I am concerned with the excess inventory and the availability of loans to consumers. There’s no disputing that it’s much tougher to borrow money today than in the past. I also unfortunately disagree with Fishkind and Yun in that any study of historical demand for housing will show that the level of demand is a constant and demand levels do not vary a whole lot because most people only own one home. The only times demand increased significantly were in times of massive investor speculation as we witnessed in 2004 to 2005 and every other boom period.
We all need to keep in mind that real estate is very localized. The macro picture differs quite often from the micro picture. All economists and so called experts predicted a decline after Orlando experienced 3 hurricanes in 2004 but we ended up having the best market ever seen. It goes to show you that predicting the real estate market is a difficult task no matter how knowledgeable you are. Purchasing a home should be seen as a long term investment vehicle with a time horizon of 5 to 10 years.
The years of making quick profits in real estate are gone and anyone purchasing a home in the next few years need to plan on staying for five years or longer. There’s no doubt the market will be good again, the question is how long will it take. The times to get excited about buying real estate is when everyone else is not excited about it like right now. Some of the best deals can be had in this market as long you view the purchase as a long term investment.
download pdf: UCF’s FL Forecast in 2008