Real Estate Outlook: Encouraging Signs

by Kenneth R. Harney

Could the tide be turning for real estate?

It's probably premature to make that call, but you can't ignore the encouraging signs -- especially when they come in multiples.

First we saw a surprising 6.5 percent jump in home sales for December. Now we've just gotten the latest Pending Home Sales Index, and it's up 6.3 percent, thanks to double digit gains of 13 percent in the Midwest and the South.

The index is based on signed contracts for home sales that haven't gone to closing, but that are scheduled to settle in the coming two or three months.

The National Association of Realtors collects the data from Multiple Listing Services around the country, and most economists accept the index as a reliable gauge of where we're headed in housing activity.

Dr. Lawrence Yun, chief economist for the National Association of Realtors, attributed the upward movement to "buyers responding to lower home prices and interest rates" that have improved the affordability equation to its most favorable level in 39 years.

Sales in the coming months might also be powered by something no index can measure: Congress is likely to improve last year's $7,500 home buyer tax credit by turning it into a nonrepayable incentive for new sales this year -- all as part of the stimulus package on Capitol Hill.

Though it's impossible to predict how many more home sales a true credit might stimulate -- one that doesn't have to be paid back to the government like the 2008 version -- industry estimates range anywhere from several hundred thousand upward, provided the expiration date runs through this coming December.

On other economic fronts last week, reports of tens of thousands of industry layoffs definitely won't help housing, but new numbers on inventories of unsold homes just might be a plus. Total homes for sale on the market nationwide dropped nearly 18 percent last month to the lowest level since May of 2007.

Mortgage rates inched up slightly last week, according to the Mortgage Bankers Association, with thirty year fixed rate loans averaging 5.3 percent compared to 5.2 percent the week before. That's up a notch, but it's still close to 40 year historic lows.

As we've said before on this program: Keep your eyes open for the little statistical improvements in the market that often get ignored by the media: Once they start mounting up, month after month, you'll know we're in turnaround mode.

We're not there yet, but we're headed in a promising direction in the real estate market.

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Emerging Real Estate and Development Trends

by Peter L. Mosca

Giffels-Webster Engineers (GWE), a civil engineering firm with a 50-year industry reputation for its vision for today’s market and beyond, revealed its annual list of Top Five Real Estate and Development Trends. According to GWE, the hottest market-growth areas are:

• Infrastructure Rehabilitation
• Energy Generation
• Urban Redevelopment
• Life Sciences
• Healthcare Expansion

Healthcare Expansion/Renovation
Intrinsic to each of the following trends is sustainable design and LEED-certified construction. Green elements will continue to be incorporated into projects as energy efficient, healthy spaces remain a top priority.

Infrastructure Rehabilitation

There has long been a need for public investment in the nation's aging infrastructure - roads, bridges and utilities. The new presidential administration has expressed a substantial commitment to this investment, which will generate significant work for public agencies, private design consultants and contractors.

Energy Generation

Government and private investment in energy generation, particularly of renewable sources, will provide opportunities for developers, construction managers and civil engineers as demand for clean energy grows. Many states, especially in the Midwest, are mandating that higher percentages of electricity come from renewable sources like wind energy, which will require site planning and manufacturing for thousands of new turbines.

Urban Redevelopment

Retail and residential re-development opportunities exist in urban areas, where the population and infrastructure foundation is already in place. This year, expect to see an increase in repurposing manufacturing plants and industrial buildings into new mixed-use developments. In addition, public investment to create connected, urban living spaces with walkable and bike-friendly communities are gaining popularity. Creating and improving light rail connections from cities to suburbs will also see investment.

Life Sciences

The life sciences industry is positioned for growth as a result of the aging baby-boomer population, increases in prescription drug spending and steady investment trends. Many companies are building or expanding research-and-development facilities, labs and office space for biotechnology, pharmaceuticals and diagnostics. It’s an opportunity to provide facilities that meet these companies’ needs now and can easily be scaled up for future expansion.

Healthcare Expansion/Renovation

Healthcare facilities must stay on top of technology developments and treatment needs to remain competitive; new advancements can quickly outdate existing facilities. An aging baby-boomer generation, coupled with a trend toward single-occupancy rooms, will drive many hospitals, nursing homes and hospice centers to undergo substantial renovations and expansions in 2009.

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