The Real Deal on Real Estate in 2009: Part 1

When the media and public officials talk about "the housing crisis," they are talking not only about houses, but also about condominiums, apartments and offices—where property managers are working hard to cope with a crisis that penetrates to the very core of their business.

Because it hits so close to home, property managers who wish to survive the recession must arm themselves with knowledge—about housing as well as related sectors, including the condo, rental and commercial real estate markets.

In this first part of a two-part series on the state of the real estate market, experts offer their assessments of the condo market, as well as their forecasts for national and regional recovery—today, tomorrow and where you live.

Similarly, part two of "The Real Deal on Real Estate in 2009", coming next month, will explore the rental and commercial real estate markets.

THE CONDO MARKET

Today:

Like single-family homes, condominiums are in crisis, according to real estate expert Jim LeBaron, senior director of BBK, a Southfield, Mich.-based business advisory firm. “The condo market’s suffered tremendously,” he says, adding that the reason can be traced to extreme markets that experienced a condo craze in the years prior to the real estate downturn. “Because investors in those markets could buy a condo for $5,000 or $10,000 down, they’d end up buying five of them on the speculative approach that values were skyrocketing. When the sub-prime crisis hit, there were suddenly no buyers for those condos. So what you have in those markets is a glut of condos available, which is why you’ve seen such an enormous depression of condo values.”

Tomorrow:

LeBaron likens the real estate market to a patient who’s been taken to the emergency room. “You can’t get better until you’ve stabilized,” he says, adding that housing can be stabilized by one major factor—buyers—who he says will return to the condo market when banks start lending again, and when jobs and home values start rising instead of declining.

Where You Live:

While the condo market nationally is soft, some local markets are strong. According to the latest data from the National Association of REALTORS (NAR), condo values were strongest in the fourth quarter of 2008 in Albuquerque, N.M., where year-over-year values were up 8.6 percent; Bismarck, N.D., where values were up 8 percent; Dallas, where values were up 14.1 percent; Philadelphia, where values were up 10.2 percent; and Toledo, Ohio, where values were up 11.4 percent. Regionally, the Northeast and Midwest were strongest, with values that declined 6.3 percent and 10.1 percent, respectively.

“Overall, downtown markets should get better over time,” forecasts Dean Selvey, owner of The Condo Pros, a Scottsdale, Ariz.-based company that specializes in condo sales, marketing and consulting. “Suburban condo markets, however, probably still have some distance to go before we see recovery.”

According to NAR data, the worst condo markets—where recovery will likely take longest—are Las Vegas, NV, where year-over-year values were down 48.9 percent in the fourth quarter of 2008; San Francisco, Calif., where values were down 34.2 percent; Sacramento, Calif., where values were down 55.8 percent; and San Diego, Calif, where values were down 41.9 percent. Regionally, the South and West performed worst, with values declining 17 percent and 30.1 percent, respectively.

Editor’s Note: Check back next month for "The Real Deal on Real Estate in 2009: Part 2," when LowesForPros analyzes the economic outlook for the rental and commercial real estate markets.