I am not real big on predictions. I leave that to professors and marketers, Mostly. I’ve been around long enough to not get too excited about talk. However, we all know that the best collection of data around on real estate is the Texas A&M Research Center. Jim Gaines is there now, with a lifetime experience in being a real estate professor and consultant. So, he is probably the best predictor.
The Houston Chronicle got him to make predictions about real estate going forward in the state of Texas, and Houston in particular. He had lots of interesting answers. See article ” Where Texas !&M Economist, Jim Gaines, Sees RE Ups and Downs in the Year Ahead
He started out by saying that no economist can predict what will happen in this environment, because no one has ever seen a situation like the one we are coming out of. Economists are talking about job growth between 5 and 7% — an unusually large range. In short, we will probably get back to pre-covid levels. Maybe we will do a little better than that.
He predicts that the market desire for single family houses,stoked by the shut down, will persist all year. Construction might be catching up then, and the eviction moratoria may be ending about the same time. The number of foreclosures will probably not be overwhelming. The market might smooth out.
Gaines thinks it might be too early to tell what will happene with commercial real estate, like office, retail, and hospitality. There will be some return to “normalcy” but likely there will be significantly more remote work and virtual shopping. Still, Gaines opines that humans are congregate animals. We will continue to want to get together and try on shoes.
In big picture perspective, institutions probably won’t be able to swoop in on distressed properties like they did in the 1980s. or 2009. The Fed will be very very hard pressed to raise interest rates. As this will cause compression of cap rates, buyers will demand lower prices.
Fewer office buildings will be built in the near term. At the moment, there is an excess of spec space in Houston, so there will be some time until the market evens out. Vacancy rates for CRE will be a short-term problems.
When pressed for a comparison of the near-term future and 2019, Gaines gives the fairly safe prediction: Texas will continue to be a growth state. That looks like a fairly safe bet to me, too.
Previous article on skyrocketing of population and valuations click here
More recent article on same topic. click here.