The Housing Boom has Peaked

This is the greatest real estate bubble in history, and it is not sustainable, particularly in the residential sectors. Housing prices are likely to flatten in most areas for the next several years then decline substantially after 2010 when our economy finally slows from the decline of the massive baby boom generation’s spending. The most overvalued areas, such as the Northeast, California and South Florida, are likely to decline substantially near-term, especially in the higher-end homes and condo/vacation markets.

Now real estate in nearly all sectors is the most overvalued in U.S. and Western history. Price to incomes and rents ratios are 35 overvalued on average for residential properties, and 60 percent to 80 percent in parts of California and South Florida. Likewise, prices on commercial properties have far outpaced rents, although not as much as in the residential markets - yet.

Will this extreme real estate bubble burst? Not yet. We have been predicting that prices would simply flatten, as has already begun to happen. But substantial declines in the most overvalued and higher-end areas in areas such as the Northeast, California and South Florida are likely ahead.

In severe economic downturn such as we predict for the 2010s, your business real estate assets will likely fall in value. If you are considering selling your business during that time, you may want to consider selling your business real estate now while signing a long-term lease with the new owner.

Harry Dent, Jr.
Smart Business Cleveland, 8/2006

The Go-Go Days for Condos are Over

Condominiums have enjoyed big price gains over the past few years. But the market froth is fizzling, so don’t expect prices to continue increasing by double digit percentages. In some overheated markets, prices could fall. Look for more give-and-take between buyers and sellers. If you’re selling a condo, be prepared to negotiate. If you’re buying, now is probably as good a time as any, although buyers in the riskiest markets, such as the Southwest and Florida, may be wise to wait up to a year to see how the market shakes out. In general, look for units that will hold their value over the long run. A great view plus easy access to parking, public transportation, necessities and amenities are desirable qualities. Drive a hard bargain, and protect yourself with appropriate contingencies.    

"Green" roofs are catching on with firms concerned about energy. EPA studies show that green roofs can be up to 90 degrees cooler than neighboring conventional rooftops. Installing a roof with grass and other vegetation growing on it can cost up to three times as much as a traditional roof, but it can also last four times as long.

Ohio's Population Migration 2000-2004

Ohio had a negative net migration flow from 2000-2004, minus 94,009. Most of the states in the Midwest are experiencing the same trend. Ohio’s border states have the same negative net migration except for Kentucky and West Virginia which were slightly positive.

Movers that crossed county lines were more evenly split on housing-related reasons, 33.5 percent; work-related reasons, 28.3 percent; and family-related reasons, 28.5 percent. As a general trend, the longer the distance the move entails, the more likely it was made for work-related reasons.

Young, college-educated Ohioans are leaving this state for job opportunities they are not finding here. According to the U.S. Census Bureau, young adults ages 20-29 years old are the most mobile and tend to move at a higher rate than the rest of the population.

In general people with more education, the unemployed, those who are not married, and those living below the poverty line were more likely to move than those people who have the opposite characteristics.

It is not surprising that the major urban areas including Franklin, Hamilton and Cuyahoga counties all had a negative net migration.

Besides job opportunities, research has shown that the amount of resources devoted to public and higher education is a factor in deciding where to move. Other important factors were the likelihood of getting a job, age, and home ownership in determining whether a person would move to another state. While some people leave the state purely for a warmer climate, it may be wise to ascertain what Ohio can do to better support higher education as well as improving the job opportunities for college graduates that will keep those highly mobile people in Ohio using their education in the state.

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