Summer/Fall 2010 PFR Chairman's Report


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Short-term risk versus long-term reward - Greater Philadelphia Housing Market - Summer/Fall 2010 Chairman's Report

(c) Prudential Fox and Roach, REALTORS®

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Summer/Fall 2010 PFR Chairman's Report

  1. 1. Have you ever looked back on the opportunities you’ve had in your life and been satisfied that you made the most of some, yet wonder why you let others slip by? We all ask ourselves at some time if we’ve made the right decisions. Of these times, the ones I regret the most are when I chose not to do something, when I let caution keep me from taking full advantage of opportunities presented to me, when hesitation kept me from reaching out for my dreams. Have you ever felt this way? Right now, many people are faced with an unusually good opportunity to buy a new home. They are treading cautiously, carefully considering the balance between present risk and potential reward. I understand why — we are receiving mixed signals about the economy and real estate market. Technically, the recession is over, but it doesn’t quite feel like it. We knew the recovery would be long and choppy, but we’re impatient because it seems like the economy has hit an invisible wall. So what do we do? A Message from Lawrence F. Flick, IV, Chairman and Chief Executive Officer Prudential Fox & Roach, REALTORS® and The Trident Group 1 The Chairman’s Report SUMMER/FALL 2010 Risk versus Reward First, let’s look at the facts. Our economy is moving, albeit slowly, in the right direction: Employment growth Private sector employment growth Personal income Wages and salaries Local real estate sales Six out of last nine months Past seven consecutive months Nine consecutive months Seven of the last nine months Twelve months of improvement Source: Naroff Economic Advisors, August 2010 Many people are treading cautiously, carefully considering the balance between present risk and potential reward.
  2. 2. It’s been a year since real estate sales in our area hit bottom. In that time, sales grew each month until they spiked to April 2010’s peak. Activity then decreased in June and July because many buyers accelerated their plans to take advantage of the federal tax credit before its April 30, 2010 deadline. The chart below illustrates unit sales in Prudential Fox & Roach/Trident’s market area. Source: Trend MLS These are all positive signs in both the economy and real estate market, yet we seem to be fighting headwinds that keep us from feeling confident in the recovery. As consumers, we are saving more and spending less. Businesses are cautious resulting in slow job growth. Events in Greece and other parts of Europe have had the positive effect of bringing interest rates back down to historic lows, but have negatively affected our stock market. Economic signals are not as clear as we would like them to be, and as a result, we tend to hesitate when planning for the future. SShhoorrtt--tteerrmm rriisskk vveerrssuuss lloonngg--tteerrmm rreewwaarrdd Our current market presents a paradox. It’s a great time to buy a home, yet the fear of taking a risk can paralyze consumers. If you’ve been thinking about making a move, I urge you to consider that despite lack of confidence about the short-term economic recovery, the best time to buy a house is now. Here’s why: • Interest rates are at record lows • The selection of houses for sale is great • Prices in our area have stabilized These favorable conditions will not last. I believe our real estate market will bump along for another few months then grow stronger in 2011 and 2012. When the pace of the recovery accelerates, prices will begin to rise and interest rates will go up. And here is where the long-term reward comes in — our local real estate has proven to be an excellent investment. Over the past ten years average house values in our region have increased significantly: Source: Naroff Economic Advisors, August 2010 2 Atlantic City . . . . . . . . . . . . . . . . . . . . . . 71% Edison-New Brunswick . . . . . . . . . . . . . . 66% Ocean City, NJ . . . . . . . . . . . . . . . . . . . . 85% Philadelphia PSMA . . . . . . . . . . . . . . . . . 91% Trenton-Ewing. . . . . . . . . . . . . . . . . . . . . 61% Wilmington. . . . . . . . . . . . . . . . . . . . . . . 59% Average 10 Year Price Appreciation Prudential Fox & Roach Realtors® Marketplace Pending Units Rolling 12 Months The best investments are made before they become obvious to everyone but after the bottom begins to curve upward. That time is now.
  3. 3. Those who bought at the top of the market in 2005 and 2006 may not yet see an increase in value, but over the long-term their investment will grow. Soon the market will return to a more normal rate of sales and appreciation. The best investments are made before they become obvious to everyone but after the bottom begins to curve upward. That time is now. There is a practical side to homeownership — building equity, taking advantage of income tax deductions, and benefiting from long-term appreciation. But there is an emotional side as well. We choose homeownership because we want to have control of our future. Each property is unique, and we are drawn to the one we feel we were meant to have. We are willing to take a calculated risk to attain long-term security, and we benefit from meeting our current needs, as well! WWhheenn yyoouu llooookk bbaacckk,, wwhhaatt wwiillll yyoouu ssaayy?? When thinking about your future, it’s important to carefully consider the balance between risk and reward. My favorite quote is by Mark Twain — “Twenty years from now you will be more disappointed by the things you didn’t do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.” Whether it is ten or twenty years from now, will you be disappointed in the things you didn’t do? Or will you catch the winds of opportunity and live your dreams? My wish for you is that it be the latter. 3 Lawrence F. Flick, IV Chairman and Chief Executive Officer Prudential Fox & Roach, Realtors® and The Trident Group Prudential Real Estate just compiled results of an online survey of homeowners and those who stated they intended to buy a home within two years. It found that consumers realize that the complexity of today’s market requires greater sophistication: • 69% agree that buying a home is a much bigger decision than it used to be • 76% agree that buying or selling a home is more complicated than in the past • 89% agree that previously “any home used to sell” but that marketing a home today must be much more sophisticated Based on these answers, it’s no surprise to see that: • 93% agree that finding an agent and real estate firm they can trust is more important than ever Relationships built on trust take time to develop. Many consumers strive to do their homework through online research, keeping up on the latest news. Unfortunately not all information we see online is reliable, which can adversely affect decision making of potential buyers and sellers. That’s why it is crucial to select a professional Realtor® with the knowledge, experience and creativity to guide you through the process. When buying, it’s important to tap current opportunity. When selling, it’s important to understand that we are in a value-driven market. From a strategic standpoint, sellers who ensure their house is in great condition, use accurate pricing, and employ staging techniques will experience success. Prudential Fox & Roach can assist you in all these vital areas. We are the market leader with a history of trust and integrity dating back to 1886. The expertise of our professionals is unmatched. And the consultants of The Trident Group will make the process easy and convenient while helping you settle on time, with great service and value. What do consumers want in a Realtor®?
  4. 4. An Independently Owned and Operated Member of the Prudential Real Estate Affiliates, Inc. AN INDEPENDENT VIEW 4 Joel L. Naroff, Ph.D. is the President and founder of Naroff Economic Advisors. He is a consultant to Prudential Fox & Roach, Realtors® and The Trident Group. A nationally recognized economic forecasting expert, Joel was awarded the Lawrence Klein Award for Blue Chip forecasting excellence and was the Bloomberg Business News top economic forecaster in 2008. In 2007, he received the National Association of Business Economists Outlook Award and was named the top economic forecaster by MSNBC in 2006. The economy has been growing for one year now and private sector employment gains have been posted every month during 2010. Yet households are concerned and consumer confidence is near recession levels. The reason for this disconnect is the pace of job increases, which has been less than stellar. That has left many feeling uncertain about their future, restrained spending and helped create the sluggish recovery. However, there is little reason to believe that we will fall back into a double-dip recession. The expansion may be less than hoped for, but it is likely to continue. There is a positive aspect to the softer growth: interest rates remain at historically low levels. Firms have little pricing power so inflation is modest. Also, the Federal Reserve has pledged to keep rates down to encourage growth. We have also seen that home prices have bottomed in most places and are beginning to rise again. The combination of low cost mortgages and a growing belief that you can buy a home without it losing value should lead to steady improvement in the housing market.