The Residential Real Estate / Commercial Real Estate See-Saw
According to a July 27, 2009 Economic Report posted on MarketWatch, June’s new home sales rose by a stronger than expected 11% to a seasonally adjusted annual rate of 384,000. This represented the largest amount since November 2008. Furthermore, inventories of unsold homes fell 4.1% in the month June. The adage that real estate is all about location, location, location seems to still be relevant during this particular housing market recovery period. For example, the report also showed that sales rose over 29% in the Northeast, increased over 43% in the Midwest and climbed over 22% in the West while falling over 5% in the South. The overall improvement in sales is an encouraging sign that the housing market may finally be stabilizing.
It seems to me that the residential real estate market may very well have bottomed on a national basis and yet remains a buyers’ market due to record low interest rates, continued foreclosure activity, buyer incentives and over-supply.
On the other hand, it also seems apparent to me that the commercial real estate market has now started to experience some of the difficulties that the residential real estate market has been dealing with for the past couple of years and the real pain for commercial real estate is likely on its way.
A continued downward trend for the commercial real estate market, which our Research Department at Hennion & Walsh views as likely, will deal another strong blow to financial institutions sitting behind the loans on many of the to-be affected commercial properties and, in turn, place further strains on already strained credit markets.