It is a bright, sunny spring-like day in New York City. The weather, itself, seems to contradict the gloomy mood that dominates the day to day thinking that has pervaded our psyche as both a city and a nation. It is on such a day that I challenge everyone to look on the bright side. In evaluating the local real estate market several things stand out as potential positives.
Uncertainty may have peaked. Yes, GM could file bankruptcy tomorrow, and a bank or two could be nationalized, but we have overcome some major hurdles. The real estate market has a tendency to slow before every presidential election, as people are reluctant to put their chips on the table not knowing which direction the country is moving. Given the financial upheaval, the election effect has been prolonged. Even though the presidential election was decided months ago, the uncertainty of how the new administration would handle the banks, the stimulus program, and a housing plan were great unknowns. Whether the stimulus package would even make it was a mystery a week ago. Now, whether you like the plans or not, the details are far more clear, lifting one major uncertainty from the market.
Sentiment is horrible. If the daily drumbeat of a negative media is not enough to get you depressed, the numbers- from unemployment, to housing starts, housing prices, housing permits, GDP, will probably do the trick. The S+P 500 is at an 11 year low. If history is any indicator, though, you would have made your best investment when everything looks horrible and your best divestment when everyone believes that prices cannot go down. Sure, it's the 'darkest before the dawn' theory, but nobody could argue that it sure looks plenty dark out there.
Rates are dirt cheap. While most down cycles in real estate are accompanied by higher rates, the opposite rings true today. There is some volatility in mortgage rates, but on a good day you can capture a rates that your grandparents would have been happy with.
Various other arguments can be made. We didn't see the exponential price growth that markets like Miami and Vegas saw, so there could be less downside volatility as well. While inventory has been rising, new construction is at a standstill, so future new construction supply coming on line will be limited. And, of course, the argument that this is New York, the greatest city in the world!
So yes, there are plenty of challenges ahead, but on a gorgeous morning with a hint of a season's turn, we should consider the positives and wonder when others will as well.