Texas A&M Real Estate Conference: Market stabilization several years down the road

With the nationÂ’s real estate markets still volatile, it could be four more years until the industry begins to stabilize according to a recent presentation by Texas A&M Real Estate Center Chief Economist Dr. Mark Dotzour.

Dotzour, in addition to several real estate industry leaders, presented his findings at the 2009 Society of Texas A&M Real Estate ProfessionalsÂ’ Annual Conference held at the Fort Worth Omni Hotel July 30 to Aug. 1.

Contrary to earlier estimates that the nationÂ’s real estate market could begin to rebound next year, Dotzour said the industry should be prepared to weather the storm for a few years.

“Once we get price discovery for commercial real estate and the government backs out, prices will re-set,” Dotzour said. “And when they do, they will firm up and core buyers will be back in and we will snap off those prices.”

Dotzour estimated prices for commercial real estate would continue to fall in coming months as cap rates revert to 2002 levels, occupancy drops on high job loss numbers and rents fall as “owners covet tenants.”

Next year, Dotzour said the banking system will become even more of a focus as commercial real estate financing drives the industry. He expects foreclosures to increase in both residential and commercial properties and refinances will be recycled to be dealt with as the economy improves.

“Right now the buzz words in the banking system are ‘extend and pretend,’” he said.

Dotzour told Aggie real estate professionals to expect slow job growth to begin to be soaked up in 2011 with no new real estate supply and rents stable. In 2012, he estimated rapid job growth with some properties still succumbing to foreclosure as mortgages continue to reset. Though there probably wonÂ’t be any new supply for the year, property values should begin slow growth, he said.

And in 2013, Dotzour said he expects property values to go up and cap rates to fall.

“You’ll have those high net worth individuals who are the first buyers in. Those people are not your core buyer,” Dotzour said. “They will buy and sell and make 25 percent return on their investment. But once those first buyers have come and gone, here comes the endowments, the pension funds come in – and there’s your market.”

For a full report on the real estate conference, see the Aug. 10 edition of the Fort Worth Business Press.

ahowe@bizpress.net