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Fall 2010 Chairman's Report on Real Estate Market


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Fall 2010 Chairman's Report on Real Estate Market

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