A Long Winter It’s Been
April 2003
I wrote an article last year covering many points, only some very few of which I could lay claim to any expertise. But I posed them more as questions.
I started by stating that these are harrowing times, and they still are. And they may get more harrowing. After all the startling events of the last eighteen months, we may have shifted in our complacency. And change is still the master principle of our lives and professions.
The World.
It hasn’t gotten much better, has it? Maybe all the things that we do or are being done to use will one day make it a better place. But it’s likely to get worse than better.
Stock Market. What really did happen in the 1990's and, more importantly, what can anyone do about it? (This was the same question asked before . . . )
Interest Rates. Still low. How much have low rates propped up the economy, and particularly the real estate economy? A lot, probably, more than we would like to think. If U.S. consumers stop spending and world demand is down, not a good prospect. Could be a lot like the 1970's which was not a good time for the nation.
Business Spending. The pundits point to all the positive indicators. Still. But it just looks like the wait may be a bit longer than originally believed. Job creation and space demand hinges on business spending. Get the corporations spending again and growth follows.
Office Markets. Last year, “directionless” was a good word for it. “Bottomless” may be a good word for it this year. Remain tuned in on this bellwether indicator.
R&D Markets. As Massachusetts reaps a bountiful harvest from high-technology, so does it suffer in lean years. These are lean years. All that shadow space has now taken on corporeal form and worse yet, it doesn’t seem to be quite over.
Warehouse/Distribution Markets. While the sector is quite as devastated as might be expected, it isn’t exactly robust either. This space sector follows along with business demand.
Development. There are hordes out there chasing multi-family projects, land leases, and triple net commercial deals. Are there chinks in these sub-markets? Where are there signs of weakness and oversupply? How much speculative activity is going out there right now funded by flush lenders that will cause some bumps down the road?
Multi-Family Housing. The pendulum has swung, and quickly. From landlord to tenant. Even in those traditionally tight downtown markets, everyone is predicting a slower season with rental rates down at most levels. What can we make of the condominium market? Is it a reverse leading indicator, like in the late 1980's?
Residential Single Family Markets. Surprisingly enough, last year these markets still had “legs,” mostly due to real buyer demand and low rates. Rates are still low, there are still buyers, but these buyers don’t appear to be quite as eager as they were a year ago. The upper end in many higher-price suburban markets has markedly slowed. Everybody still seems to be waiting for the proverbial shoe to drop. Keep watching listing times and inventories in the various sub markets.
Residential New Construction. The consumer seems to have an almost insatiable demand for new dwelling units. But for a tough permitting environment, and expensive, scarce land, this sector could be significantly oversupplied. Look for this sub market to take a hit if the economy doesn’t bounce back.
Residential Luxury Markets. Clearly, this market is far less certain than it was 2-3 years ago. One perceptive individual said in conversation that there are still a lot of trophy house hunting buyers with money burning a hole in their pocket and a fair number of insightful individual who are just waiting for that “one born every minute . . . ”
Lastly, matters close to (or that should be close to) appraisers’ (professional) hearts.
Appraisal Standards Board.
They continue to be busy. Some things on their minds include: ASB Concept Paper on a Comprehensive Review of STANDARDS 9 and 10 - Issued February 19, 2003; ASB Exposure Draft on proposed revisions to the 2003 Edition of The Uniform Standards of Professional Appraisal Practice (USPAP) - Issued February 19, 2003; ASB Concept Paper on The Role of Departure and Scope of Work (This issue is one that is truly fundamental to modern day appraising: it’s well worth reading and responding to on the Appraisal Foundation’s web site: www.appraisalfoundation.org.
Appraisal Qualifications Board. The work of this Board is often overshadowed by the doings of its flashier counterpart. However, this Board does important work regarding appraiser qualifications, including experience and education. The Board currently is addressing issues regarding revising the Real Property Appraiser Qualification Criteria, continuing education, and specific experience and education criteria for the various levels of licensure.
Should you wish to communicate with The Appraisal Foundation, their address is 1029 Vermont Avenue, NW, Suite 900, Washington, DC 20005-3517. Comments may also be submitted by facsimile to (202) 347-7727 or (202) 624-3053 or by e-mail to: comments@appraisalfoundation.org.
William J. Pastuszek, Jr. MAI, is principal of Shepherd Associates, a real estate consulting firm located in Newton, Massachusetts. The firm provides real world solutions to a wide variety of local, national, and international clients.
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