2005: Industry Outlook

Despite so many dire predictions of housing bubbles, higher interest rates, falling stock prices and a sluggish economy, the real estate market is still sizzling. No matter where you look in the metropolitan area, prices keep on going up, bidding wars are still rampant, and the inventory remains at very low levels. Given these facts, anyone in real estate, even for a very short period of time, can easily predict where the market is heading - only up!

Headlines in all of the major national newspapers state, what to us in the real estate trenches, seems obvious. An article from the New York Times (January 15, 2005) entitled, “What Goes Up Keeps Rising” reported that real estate in New York City appreciated about 14% on average. It further stated that “These increases, even in the face of sluggish job growth on Wall Street and an overall economy that lags the nation's, indicate that "the rules of real estate have changed" as several factors have combined to keep pushing prices upward. Several years of historically low mortgage rates, coupled with the continued migration of new residents to the city, have kept demand high, and the market hot. “Other articles such as, “House Construction Reaches Highest Level since 1978 (The Washington Times, 1/20/05) report that 2004 was the “fourth year of an unprecedented housing boom that shows little sign of letting up” and that “the market should get a boost again this year from rising employment levels and incomes”.

We are witnessing a phenomenon that has never been seen in our lifetime - a housing market that just keeps on setting records year after year. Of course, low interest rates have been a catalyst for much of the record breaking sales. But interest rates are only the beginning of the story. Other equally important factors have contributed to the housing boom, and many of them have been predicted by demographers and sociologists in the recent past. Trends such as:

· “First generation children of immigrants now buying homes like never before
· Baby boomers buying not only second homes in New York City, but also in resort areas
· Retirees trading up and buying luxurious new homes in urban areas
· First time homebuyers are now starting to buy at ages 21 -25 instead of over 25.
· Middle age parents seeing that it is MUCH cheaper to buy an apartment for their college age
children (“kiddie-co-ops”) than to pay for university dorms
· Individuals, flush with cash, sensing that the only safe investment is real estate
· People of all ages, sensing that yields and returns from Wall Street stocks and investments,
are flocking like never before to buy homes to rent out.
· The pairing up of non-married individuals has created a buying boom that is completely un-
precedented in our country’s history.
· Foreigners, with the incredibly cheap dollar, are buying homes in this country in massive num-
bers, especially in New York, Florida, and California.

The list goes on and on. A minor rise in interest rates (as everyone is predicting) simply cannot and will not change these incredible social, demographic, and international trends.

Let’s all get ready for another incredible year in 2005!!!!!!