1- Existing home sales fell by 8% in September more then expected to an annualized rate of 5.04 million units the lowest on record. More bad news is one of America’s leading financial institutions took a $7.9 Billion write down on sub prime mortgages. Also the housing bust has lead to job losses.
2- From January 2003 to March 2006 housing related businesses added 1.3 million jobs. Since then the housing sector has shed about 400,000 while the rest of the economy has added over 3 million. Economists say another one million housing related jobs could be lost.
3- Two years ago we predicted in SOLUTIONS the real estate and resort development market will certainly slow down.
4- Having lived, survived and prospered in slow markets all the signs were there two years ago. And soon as the ‘self proclaimed experts’ were saying it will never end - that’s when you can count on it being over.
5-Much of what sustained the market was unfounded optimism and hype – not facts or reality. And in many cases mortgages were issued to buyers that should not have been given a mortgage or were not well informed about the resetting of rates.
6- Now the experts are saying the market will get worse and the sub prime problem, real estate slow down, soft economy and rising energy prices may take us into a mild recession.
7-Smart developers are offering steep and real discounts and offering lower prices, free swimming pools, oversized kitchens, upgrades, flat screen TVs, patios, outdoor fireplaces - whatever works in that particular market. But while these programs do sometimes work confidence among US homebuilders has fallen to a record low.
8- Many banks have not yet come to grips with the coming onslaught of defaults and are not prepared to deal with short sales or creative dealings with mortgage holders or investors who want to purchase before foreclosure.
Just when most of the ‘experts’ are talking gloom and doom – perhaps its opportunity time. Especially for the wise and brave.
Some thoughts.
1- The dollar will fall a bit more and those dealing in Euros, Pds, Canadian dollars and other currencies will start to see the benefits of buying US and Caribbean property.
2- As developers stop building and inventories dry up prices will level and sales will perk up.
3- Those projects that were ill conceived, poorly built, badly financed, poorly marketed and created to fulfill a nonexistent market will continue to decline and be sold off at great discounts.
4- Well thought out projects that got caught up in the hype will start to turn … perhaps slowly, in 2008.
5- There are excellent property deals out there for those with a compelling concept to exploit.
6- Bright lights like the timeshare industry is doing well and will continue to do so since it provides consumer benefits, is cost effective – and that industry understands its expanding market. A side note is that we were among the founders of timeshare some 30 years ago as a solution to selling off unsold condos.
7- Real estate sold with a hotel and rental plan offering hospitality benefits including the right to exchange are selling.
8- Developers are bringing in hotel flags that know how to cater and pamper consumers, offer credibility and enhance the overall marketing by promoting to their client base. These units are being sold as condo hotels or condos with a ‘plan’.
9 - Smart developers are creating projects that people will love and have sustainability – including green development, offering special benefits and amenities, appealing to their markets hot buttons and not wasting one penny on ‘unnecessary trophy advertising’ - focusing on their niche market via ‘gorilla’ marketing – not buck shot or self serving launches.
What to do now.
1- If I were a buyer of a second home or residential property and I needed or wanted to buy I’d do research and make an offer.
2- If I were a developer I would bring in marketing experts with experience in challenging situations like Global Marketing Group and have them do an analysis on what will work and follow their recommendations.
3- If I were a financial institution I would bring in an experienced work out marketing team like GMG. Perhaps create investor packages to sell to domestic and international investors. I’d consider blow out auctions with GMG and their alliance auction partner JP King.
4- Most important at this time is to be honest to yourself, be open for thinking outside your box and wise enough to ask for outside help to get through this challenging period.
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