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Positive signs exist for buyers.

For those of us involved in the real estate industry, the 1990's are proving to be a difficult and distressing time. We watched the industry grow in the 1980's with newcomers entering the field as the demand for architects, planners, developers, managers, bankers and brokers grew. This growth was fueled by expectations that took different forms depending upon one's involvement in the industry. Commercial and retail users believed in an ever-upward sparaling revenue stream, there; by fueling the perceived need for growth and additional space. Residential users believed in an ever-growing personal income stream, establishing the concept that they could continually 'trade up.. The financial community expected the value of real estate constructed today to be greater tomorrow, pouring money into mortgages and mortgage-backed securities. securities. These expectations fueled the growth of the industry on the construction, banking, and brokerage sides.

Woe to those of us who never, ever anticipated a possible declining economic environment!

The end of the Reagan era brought declining income and an across-the-board lack of confidence. It is that confidence on which the entire real estate industry hinged. As it eroded, companies and consumers cut back and withdrew. For the first time since the early 1970's real estate professionals had to deal with a scenario in which reticent buyers did a slow dance with over-anxious sellers. This combination inevitably resulted in a sluggish market where the strike point between the seller's expectations of profit and the buyer's expectations of bargain values failed to intersect.

The change of administration may have a positive effect on the real estate industry to the extent that the perceived belief in positive change in economic forecasts and deficit reduction will once again mean that 'happy days are here again!. Certainly, a rationally devised cut in the deficit, with a corresponding reinvestment in the infrastructure, will restore confidence and convince the financial markets that investment in real estate, in the long run, will produce a reasonable profit.

Although the recession or depression depending upon how substantial the personal impact has been, has ;had the elect of downwardly modifying local median prices for sales of single-family homes, it has not so modified these prices to permit many first time home buyers to realize the American dream of home ownership. One of the ironies of the great recession of the late 1980's was that prosperity of the post war era was failed to be realized by the bay boomers reaching middle age.

If we are to reverse this downward trend, a partnership among government, banking, and private industry must be formed to devise a strategy of inclusion so that the supply of affordable single family home can meet the ever-present demand of middle class America. Once accomplished, the benefits are far reaching.

First, the construction industry will be revived since it will be needed to create housing stock. This huge industry provides jobs for thousands of families. Second, the banking industry will provide needed financing, both for construction and acquisition. Third, development of communities will provide revenue for public services and local industry. All of these will restore the confidence in an industry which has historically survived on the concept of greater expectations.

Ultimately, what the real estate; industry needs is a face-lift: A reversal of the public conception, created in part by overextended developers and foolhardy investments by thrifts, that real estate is a 'get-rich-quick" scheme with no socially redeeming value. We need to restore the public's confidence in one of the largest industries in this country in order to jump-start our sagging economy. There are glimmers of hope on the horizon, as seen by the recent statistics showing a' small, but significant increase in single-family home Sales in the, last quarter of 1992, inclusive of the holiday season, appear to have outstripped last' year's, numbers. These positive indicators may be enough to convince tentative buyers and worried lenders ;that the worst is behind us.
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Title Annotation:Review & Forecast, Section V; change of Presidential administration may have positive effect on real estate market
Author:Cohen, Robin J.
Publication:Real Estate Weekly
Date:Jan 27, 1993
Previous Article:Patience paves way to recovery.
Next Article:Property management to see modest expansion.

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