Saturday, 24 January 2009

When does US Real Estate Hit the Bottom? - 2009 Real Estate Forecast

While I have been blogging about US real estate analysis in Japanese for 4 years, this is my first English blogging! Although it is already January 24th, it is one of my new year resolutions. So I promise I will be blogging about US real estate.

Also, please be mindful about my "lazy" English writing as my native language is Japanese.

Anyway, as you know, year 2008 turned out to be historically know year of economic turbulance. Initiated by subprimed mess, it has bursted excessive liquidity and asset bubble and it has caused global economic slow down.

It is challenging year in 2009 for US economy and employment in 2009. However, I believe there are tremendous opportunity to grab blue-chip real estate asset at the bottom price.

Today, I would like to introduce you about forecast regarding "when does US real estate hit the bottom by MSA (Metropolitan Statical Area)." This analysis was done by Moody's and and forecast is based on decline from Q2 2008. Since "all real estate are local", it is critical to understand real estate price decline forecast by MSA.

Rank Metro Area Decline from Q2 2008 Bottom Expected
1 Las Vegas, Nev. -42.6% end 2009
2 Miami, Fla. -42.5% Late 2010
3 Palm Bay, Fla. -41.4% end 2010
4 Fort Lauderdale, Fla. -36.6% mid-2010
5 Metro Area: Provo, Utah -33.9% mid 2011
6 Jacksonville, Fla. -33.6% end 2011
7 Bradenton, Fla -33.6% end 2009
8 Tucson, Ariz. -32.9% late 2009
9 Orlando, Fla. -32.3% mid-2010
10 Boise City, Idaho -32.2% early 2011
11 West Palm Beach, Fla. -31.8% end 2009
12 Phoenix, Ariz. -31.1% end 2009
13 Honolulu, Hawaii -30.9% early 2011
14 Tampa, Fla. -30.4% End 2009
15 Salt Lake City, Utah -29.3% early 2011
16 Santa Ana, Calif. -29.1% mid 2010
17 Metro Area: Deltona, Fla. -27.9% end 2009
18 Stockton, Calif. -27.7% end 2009
19 Los Angeles, Calif. -27.2% end 2009
20 Fresno, Calif. -26.7% end 2009
21 Edison, N.J. -26.5% end 2009
22 Riverside, Calif. -26.4% end 2009
23 Camden, N.J. -25.7% end 2009
24 Cape Coral, Fla. -25.6% end 2009
25 Greater Jersey City -25.6% end 2009

Here are key findings!

- The biggest drop is expected in Las Vegas with -42% decline by end 2009. Compared to peak of the property value, properties in Las Vegas has probably lost 50%+ in value. While I will write in separate blog, I think Las Vegas real estate will further decline by 20% or so, making median sales price of SFR from $200,000 to $150,000 range. At this point, you can generate $1200 a month in rental review, making investment cash flow neutral with 10% down. Or renters in Las Vegas find "ownership is cheaper than renting. Let's see if median sales price to goes down to $150,000 range.

- At bubble MSA in Florida such as Miami, Jacksonville and Orlando, these market will face approx. 30% decline in property value by Middle of 2010. Since lenders takes longer to foreclose properties in Florida (compared to Nevada/California), timing of decline has been delayed in Florida market. I think you will find more foreclosures (that will lead to distressed sales) in Florida market.

- Major MSA in California is also facing further decline around 25% by end of 2009. I personally think SFR price in Central Valley will decline to $150,000 range. Even in supply-limited Coastal Market, in the subpar neighborhood (such as Richmond in SF Bay Area), you begin to see properties valued below $100,000.

- While New York metro has resisted real estate melt down for a while, due to massive layoff in Wall Street, it begin show some cracks. In the least desirable suburb in NYC area such as Neward, Edison and Camden, property value is forecasted to decline by 25%

Above data are based on statistic. Therefore, when it "statistically" show the bottom of real estate price, you may have missed "real bottom". So I think it is important that, if you have eays for MSA for investment, you should actively making offers or neighborhood analysis 3-6 month below it hit the bottom! I will personally evaluating a few markets to start investing at the bottom.

Enjoy happy investing!!!!

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