Years ago, I came up with the notion that when amateurs fail, it is because they miss the subtleties of the market. When the experts fail, it is because they miss the obvious. Back in 2005, it seemed obvious to me that financial speculation rather than demand from end-users was driving the housing boom. But too many economists, developers and builders kept going, acting as if the party would never end.  They kept trying to build a better mousetrap rather than counting the mice!

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Several years ago, a South Carolina homeowners’ association decided to make golf memberships mandatory in order to help maintain the high caliber of the community. After the housing market collapsed, though, a group of owners attempted to file a class-action lawsuit against the association, seeking damages for an alleged loss of value to their homes because of the golf membership requirement. It was a complex case that showed the value of an expert witness who understands real estate market conditions.

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Linking two popular concepts – “green” and “affordable” – will be one of the keys to success for builders and developers in the 2011 market. That’s because most residential buyers and multifamily renters do not yet understand how these frequently used marketing terms actually fit together. As a result, the first and foremost criteria for buyers continues to be price, rather than value.  Read the rest of this entry »

In 2011, the U.S. real estate market will be very punishing for those who don’t understand the fundamentals, and for the experienced players who miss the obvious. All too often, builders, developers and investors make decisions based on egonomics rather than economics.  So what do the market fundamentals tell us about the coming year? First of all, it will be much easier to identify the challenges, which are national in scope, than the opportunities, which depend on local markets. So, to succeed in 2011, you will have to look for the right niche, rather than try to apply a “one-size-fits-all” strategy.

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It doesn’t look like 2011 will be the year the U.S. foreclosure mess is finally cleaned up. That’s unfortunate, because the continuing high level of foreclosures pushes prices down and makes it more difficult for builders and developers to increase their production, even though the number of households continues to rise across the nation.

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Across the United States, market fundamentals are changing. From demographics, income and household composition to consumer psychology, the nation today is at a very different point than it was just a few years ago. In Florida, for instance, more seniors will be struggling with finances than in the past and affordability will be critical to market success. With only 20 percent of Baby Boomers in a healthy financial position, demand for country club and golf communities will remain relatively low for at least the next five years. And across the board, more Americans are looking to simplify their lives by choosing homes and condominiums they can afford for the long term.

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Back in 2004, our firm’s real estate market research studies pointed to a growing gap between the real end-user demand for U.S. housing and the excess supply of new homes being cranked out by local, regional and national builders. Armed with that data, I began warning about a housing bubble that would be dangerous to the financial community and particularly devastating to Florida, Arizona, Nevada, and other high-growth states.
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By Lewis M. Goodkin

In recent months, many real estate commentators have talked about the revival of Florida’s condominium market.  They point to the rising number of condo sales in overbuilt markets like Miami and Orlando as an indicator that multifamily housing is back in style. But it’s a big mistake to assume that rising condo sales means the market glut is over.

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By Lewis M. Goodkin

Builders and developers often get excited about new market opportunities, but fail to properly analyze their potential. That was the case with the golf bandwagon of the 1970s, when many developers forgot to segment the marketplace and ask questions like: How many golfers in that local area could afford high greens fees or an expensive annual membership?  The same thing happened with senior housing. Laventhol & Horwath (L&H) got the industry excited about its enormous potential, but most of the product built was simply not affordable for most seniors.  Now, with home building down severely, I fear the same thing will happen with rental housing.

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There are three critical issues connected to the oil spill that could seriously impact Florida real estate. The first is one of perception. Typically bad things are worsened by beliefs that things are worse than they actually are. It often translates into postponed decision making and or discounting that reflects consumer concerns. The second area is that things are really as bad as the news that is generated. Florida’s appeal has always been heavily focused on the appeal of its beaches and waterways. Vacationing in Florida has always been a generator of retirement, second home and investment demand for residential product in addition to the dollars that tourism generates for the Florida economy. We are already experiencing the pain of the housing bubble and a bad recession so things are quite fragile without another man made disaster. Some areas in Florida might benefit from another area’s problems but overall any area directly impacted by this oil spill could see recovery curtailed for several seasons or worse. The most critical thing will be to establish some realistic measurements as soon as possible. People deal better with things that they understand. It may be bad news but like the monsters that we conjured up in our minds when we were kids, they were often a lot scarier than the author or movie director gave us.