The following letter was received by the Editor of the Florida Association of Realtors
Back in July 2005 I was writing a weekly real estate column for the local newspaper. The column I wrote that particular week changed my life. In the column that day, I made a rather bold prediction about the real estate industry through the year 2011.
You have to remember in July 2005 real estate was flying high and everyone that read my column thought I was either insane or a total crack pot. I stated that I sensed a momentum change of epic proportions about to hit the real estate industry. I stated that we were about to go into a very deep down cycle that would last at least three years. At this point, it appears that I was right and it may even last a little longer, although personally I think we have reached the bottom.
At that time, I had a six-office franchise real estate operation with 200 Realtors. My business partner never read my columns until they appeared in the newspaper. The following Monday morning, after reading that column, he asked me to join him in his office. He only had one question – did I believe what I had written? When I answered yes, he said we needed to make a phone call to a large publicly traded real estate company that had made several overtures to us. We sold the company at the height of the market.
So, back to that fateful column. Not only did I predict that the real estate industry would be hit by the equivalent of a category 5 hurricane, but the down market would last at least three years, and new construction would become as dead as road kill.
Now here is the second part of that bold prediction I made in July of 2005, and I suspect almost everyone will again think that I’m either insane or a total crack pot: In 2011, the real estate industry will be flying high again. Here’s why: It all hinges on the fact that new construction is as dead as road kill. Since there is virtually no new construction coming out of the ground, the resale inventory is going to start to disappear. The construction industry will be hesitant to come out of the ground with any new product until the resale inventory is down to a 3- to 4-month inventory level. Even then, the new construction industry doesn’t appear overnight. They have to lay the infrastructure, get permits and then start construction.
It usually takes two years from the time the construction industry decides to get back in the business and a new product comes to market. In the meantime, the investors are appearing in many markets again, and as I’m writing this column they are gobbling up all the fire sales, thereby reducing inventory. We won’t even discuss that the country is predicted to grow by an additional 15 million people by 2011.
I’m sure not everyone sees this the way I see it, but if I’m right, the real estate industry will be flying high again in 2011. Don’t be surprised by the beginning of 2010 to see periodic articles in certain areas stating that prices are rising due to a shortage of inventory. By 2011, I believe we will be facing a severe inventory shortage in many communities in this country.
As I said in that fateful column in July of 2005, all of this is based on the premise that our country’s economy is in a normal cycle.
Letters to the Editor posted on floridarealtors.org are opinions expressed by the letter-writer in response to news articles and not necessarily those of the Florida Association of Realtors® or other local associations and boards.