It looks as if there is no clear unanimous trend for a worldwide recovery in real estate prices or sales for 2010. But a glimmer of direction can be drawn from the focal point of recent troubles.
There was a time in the not too distant past that it seemed as if every country and location was experiencing a real estate boom.
Well, unless you’ve been in a cave for the past few years we all know that that fairy tail came to a screeching halt and the bottom dropped out of the market.
Worldwide real estate markets were shocked into submission by the collapse of the stock market and the mortgage crisis of 2008 in the USA. We all know the story. The worldwide banking system was on the verge of total shutdown and the focal point was New York.
It was something that we all read and heard about on the news, but it was much more than that. People in certain countries saw the value of their homes and real estate investments vanish in what seemed to be overnight.
The US real estate market suffered a total meltdown in some markets. Foreclosures became rampant and far too common. The collapse became so bad that it turned some subdivisions into virtual ghost towns. Some individuals even chronicled the foreclosed and abandoned California homes with YouTube videos.
The European market did not escape the mayhem. Spain became the poster child for the real estate market collapse in Europe and it looks as if a real estate recovery is not possible in 2010 because of structural problems with Spain’s economy.
In fact a story in the UK Financial Times on December 10, 2009 states:
Standard & Poor’s revised its outlook on Spain from “stable” to “negative,” sending another shockwave through Europe’s smaller markets and leaving most equity indices lower. S&P also affirmed Spain’s double A plus long-term and A-1 plus short-term sovereign credit ratings.”
The ratings agency said in its statement: “In our opinion, reducing Spain’s sizeable fiscal and economic imbalances requires strong policy actions, which have not yet materialized.”
Spain’s real estate market is in trouble and so is the UK’s and several other countries in Europe. Recovery will be intermittent for 2010. It will come to different countries in several forms. Some will see moderation; some will see things continue downward. A few parts of Europe will show signs of stability and possible growth in 2010, but as of now it is still too early to tell.
Real estate can be seen in many terms, but at its most basic it is a commodity. Yes the old adage, “location, location, location” comes into play. But, a more primitive law binds the fundamental value of real estate. You can put any value or set any price for a property but at its core it is “only worth what someone else is willing to pay for it.”
On September 15, 2008, the collapse of one of the largest investment banks in the world signaled the “realization” of a possible “Worldwide Depression” as Lehman Brothers Bank of New York was forced to declare bankruptcy. Creditors recently filled a staggering $824-billion in bankruptcy claims which some say will exceed $1-trillion in total.
Suddenly everything just stopped… Fear took over. No country or bank trusted anyone. Banks fell around the world and countries struggled to save their own “Financial Systems”.
The country of Iceland became an example of “the systems” failure when the entire country plunged into a debt crisis because 3 of their largest banks were overexposed and overleveraged on the worldwide stage. The result was unthinkable a few short years ago. A western country was on the verge of “Financial Collapse.” The IMF came to Iceland’s aid, but the repercussions will be felt for years to come.
So back to the title of our article, “New York Points the Way – 2010 Real Estate.” Well it is fairly obvious that New York pointed the way for the “2008 Financial Collapse,” which some people feared would lead to another “Great Depression.”
The city of New York with its “Wall Street,” dominated the world’s financial markets with such force that some of its bankers were coined as “Masters of the Universe.”
In late 2008, Wall Street, its banks and its employees suffered a downfall so huge that it precipitated the collapse of New York and entire United States real estate market, while dragging the whole world down with it.
Finally in December 2009 it appears that there are now signs that a bottom has come to the high end of New York City’s real estate market. The market “chatter” in New York has recently been trending to the positive side for the high end. Recent articles have alluded to a bottom in the high end of the New York market.
Real estate markets react to perceptions whether it is positive or negative. This perception creates market momentum, which creates market movements up or down. The market on both a macro and micro stage looks for a leading indicator.
In both the stock market and the real estate market, we look to trends to predict the direction of the market. But the word of certain individuals can move a market as well. A speech from Ben Bernanke of the US Federal Reserve can move the worldwide stock markets up or down.
This can also be said for someone that has a similar credibility in the real estate market.
Dolly Lenz, the number one realtor in the United States (sometimes know as Donald Trump’s realtor) with over $7-billion in sales has called the Manhattan high-end real estate market in New York as being “at or close to the bottom” according to an appearance on CNBC on December 10, 2009.
New York dragged the world’s real estate markets down and to the brink of the abyss and it looks like the world is looking to New York again to show a direction for 2010.
Some worldwide real estate markets will lead and some will follow in time, but the market signs appears to be trending up.
Hello – just a quick note to say thanks for this entry. Very helpful.