A month ago MacRo asked you what your outlook was for the coming year. Will 2014 be “the year” or just another notch in the belt of a slow recovery for the real estate market?
Further, we took the same national questions to the International Builders Show in February to get a pulse on the outlook of the national market. We asked, you answered.
National Economic Outlook: Partly Sunny
When asked about national expectations for the economy a year from now 55% of our local market responded with a cautiously optimistic “moderately improved” with 50% of the national respondents at the International Builders Show (IBS) agreeing, but this is where the similarities end.
Real Estate Outlook: Blue Skies, Scattered Clouds
Overall the country appears to have put on a much rosier set of glasses than the Frederick County when it comes to the real estate market outlook. 25% of IBS participants anticipate a significantly better performance year in the real estate market and 66.7% feel that the market is significantly better in terms of real estate investment opportunity.
Locally, a different story emerges with 44 and 37 percent of respondents only expecting somewhat better or about the same performance in the real estate market. Locally the investment outlook is lukewarm as well with 42% of respondents expecting a somewhat better year in 2014 but 35% expect the same opportunity in the market for real estate investment.
So are Frederick County area businesses more cautiously optimistic, or are we being just a bunch of debbie downers?
Traditionally Frederick County and the surrounding commercial real estate areas have benefited from a “government bubble” – that is to say that our government influenced economy insulates us from extreme highs and lows in the market. Real and imagined government shutdowns and sequesters aside, the Washington DC market and surrounding suburbs have enjoyed over a decade of expanding federal largess. While Stephen Fuller, director of the Center for Regional Analysis at George Mason University believes government is our regions spending bubble, this distorted economy did not slam as hard during the Great Recession as real estate markets in the rest of the country did.
The Washington metro market simply doesn’t experience the peaks and valleys of the real estate roller coaster like the rest of the country. This could explain why our outlook is slightly cloudily with a chance growth. Our neighboring primary and secondary markets are more excited with their outlook. Phrases often heard on the IBS floor from representatives of Florida, Texas and Georgia real estate professionals would make us take pause…”I can’t keep up with demand”, “2013 was the best year I’ve had in a long time and this year is going to be even better”, “we expect to expand our services to keep up”. Is this the second coming?
Keeping in mind how depressed markets have been in Florida, Texas and Georgia in the heart of the downturn, it is worth nothing that on average these markets are still under performing. According to the Demand Institute, a nonprofit think tank operated by The Conference Board and Nielsen, the median price of single family homes will be close to the peak reach in 2006 by maybe…2018.
The Residential Market
To cover all bases the MacRo and IBS surveys included the residential housing market outlook as well. In any market on average the rule of thumb is that 14% are active. Locally, it looks like we may have a stronger interest in residential real estate with a total of 9% looking to purchase or sell a residence and 11% looking to invest.
In residential real estate secondary markets also have reason to celebrate. The Demand Institute study shows among the 50 largest metropolitan areas where housing prices are expected to appreciate between 2012 and 2018, the top five will see rises on average of 32 percent. The bottom five will only average gains of 11 percent. Hot markets include secondary market mainstays of Memphis, Tampa, Jacksonville, Milwaukee and St. Louis. Those with the lowest projected price appreciation are Washington DC, Oklahoma City, Denver, Minneapolis and Phoenix.
Take heart, there is a little hope. While sales overall have fallen in the local housing market, the Commerce Department reported yesterday that sales of new homes rebounded in January to the fastest rate in more than five years rising 9.6 percent to a seasonally adjusted annual rate of 468,000. The last time we saw this pace was in July of 2008.
In conclusion, our mirror seems to be mostly inline with current market performance. Only time will tell if we really saw ourselves or fell into the looking glass.
Interested in how the MacRo and IBS market survey trends affect the commercial real estate market in the Frederick, Maryland area? Contact our good friends at MacRo!
About the Author: Christina May, Real Estate Marketing Consultant and Managing Partner at Illumine8 Marketing and PR firm based in Frederick, Maryland. Recent GALA award winner for best Sales Center Design and Chair of the Brunswick Economic Development Commission.