To begin the round table Mr. Rowe gave a 30 minute PowerPoint presentation, discussing the current housing market and economy. Some interesting statistics:
- There is approximately $100 billion raised to purchase distressed assets. Obviously some people still have a lot of money and are ready to take advantage of opportunities when prices appear low enough.
- The Case-Shiller home price index is up 4.8% from it's bottom
- From the chart below you can see there is a big difference in the price drop for home prices in different areas. Areas such as Miami, Pheonix and Las Vegas show the greatest decline in values. This is primarily due to the extensive overbuilding and speculation.
- Denver home prices were only down 14% from peak to trough and currently is only down 1.8% from peak.
- New home sales have outpaced new construction for 8 consecutive quarters. If an oversupply of homes is part of the problem, this is a sign we are working through the inventory. Below is a chart of Existing home sales and Months of supply:
- Here in the Steamboat Springs local real estate market we too are seeing a significant change in monthly sales volume from the lows in January 2009:
The general message form the points above and the complete presentation was that things are getting better. Things are turning and we are seeing concrete signs that housing, along with the economy, is in the bottoming process. A good chart showing this is one of the us economic indicators:
As you can see from the above chart, the Leading Economic Index has made a significant positive turn, while the Coincident Economic Index has stabilized. The Leading Economic Index has actually improved for 7 consecutive months.
Continuing with the positive theme, the general opinion was that interest rates will remain very low at least through the next November election. A few comments regarding the future were that we will most likely see a spike in inflation and then a rise in interest rates. A potential opportunity is to purchase real estate with a fixed long term interest rate. If we assume that today represents a more true value in real estate and that from here the market will revert to a normal growth rate, the below chart represents how a homeowners equity may grow over time:
It was great to hear a positive opinion regarding the future of real estate values. In Steamboat, which entered the real estate down slide a year after the rest of the country, it may appear that all is lost. As we should have paid attention to when the rest of the country entered the down slide, we also should pay attention to when they exit. It may be that we have the luxury of watching the dog (US Economy) that wags the tail (Steamboat)as we make decisions.
A big thanks to Randy Rowe and his team at Ski Town Lifestyle Properties for putting on such a great event.
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