So Much For Predictions!
By David Larson
Today I talked with an appraiser friend of mine. His specialty is single family homes and he is very good at what he does, trained by his father. I respect his opinions. I have observed that the single-family home market is a leading indicator of what the multifamily market will do, leading by around 6 months. There were two key points that I took away from the conversation with my appraiser friend. The first one is the single-family home market is slowing down a little from a market-on-fire to a more normal good market. With appreciations in the 20% range last year this slowing down is desirable because those increases do not seem sustainable over time. An easing, rather than a crash, will be much better on our nerves. The other take away was that the majority of buyers had more down payment and the lenders were actually verifying incomes and job stability unlike the previous run up. This is also good news. If the market were to do a short correction, the owners will still have equity in their homes, and we would not see the flood of foreclosures we saw in 2008.
We are seeing some light at the end of the Covid tunnel and life is slowly returning to a slightly modified version of what is was 24 months ago. When Covid hit I made brave predictions of what the real estate market would do and where the opportunities would be. Boy, was I wrong! I predicted cash would be king because we would be seeing bargains in the market across the board and buying bargain property would be the game. WRONG! Single family home prices shot up after about a 6-week period of shock and kept rising. The multifamily market was soon to follow, with cash buyers from California to New York looking to purchase apartments. The industrial market must take a hit I thought, wrong again! The vacancy rate of existing industrial properties is currently at an all-time low of 1.8% currently. New companies are still wanting to move to Northern Nevada and there is practically no place to move those businesses. In addition, there is a lack of housing for their transferred workers.
A lot of us changed our work habits because of Covid. Myself, I go to the office less frequently as do many of my friends. Surely the office market will take a hit and maybe there will be an opportunity in converting office buildings into residences? While I specialize in multifamily properties I dabble in the other markets for friends and current clients. Right now, I am working with a friend who needs an office for his financial advisory business. The problem I am finding is there is an acute lack of inventory. Prices for an office building are rising like the multi-family market is. So, even office space hasn’t tanked!
My real estate predictions are starting to feel like weather forecasts… my previous predictions have been just as accurate as the weathercasters!