Silver lining seen in the real estate cloud
By JAMES THORNER
Published May 6, 2006
Sluggish real estate appreciation getting you down? Don't think of the housing market as sick. Think of it as convalescent.
David Lereah, chief economist for the National Association of Realtors, regards 2006 as the year a fundamentally healthy real estate market purged itself of toxins.
In other words, in many markets, it's probably wise to wait until 2007 to reinvest in housing and land, Lereah (pronounced Le-RAY) said at a conference in Lakeland of more than 100 land owners, bankers, appraisers and developers from West and Central Florida.
"The market is being cleansed. It's getter healthier. We're getting rid of the germs, the speculators,'' Lereah said during a program titled "Florida Land: Is the Gold Rush Over?"
It was almost inevitable, during a five-year real estate boom, that speculators would infect the market with a stock-style fever, blurring rational decisionmaking. Now those short-term investors are leaving the market, pursuing other investments.
In Lereah's view, Miami's real estate appreciation, which averaged 45 percent over the past four years, is symptomatic. He compared such a market to the late 1990s hype for stocks like Lucent and Qualcom.
"We're not supposed to go crazy in the real estate world," Lereah said. "We're supposed to go crazy in the stock market."
There's good news for the Tampa Bay area in all of this. Lereah said Florida remains the market with the strongest "gravity": the favorite retirement destination of late career baby boomers. (Though hurricanes could encourage alternatives like Arizona and North Carolina.)
Tampa-St. Petersburg, Fort Myers and West Palm Beach avoided the rampant overconstruction and speculation afflicting Orlando, Miami and Naples, Lereah said.
"You're not going anywhere. You've got a good future," Lereah said, touting projections showing Florida, by 2030, absorbing new residents equal to the populations of Pennsylvania and Maryland.
That doesn't mean the short term will be pretty. Lereah predicts prices will slip in many parts of Florida as a buyers' market takes hold and sellers revise their expectations downward.
"Someone always takes the punch bowl out of the party." Lereah added.