One of the industry’s most important annual studies, the Emerging Trends in Real Estate, 2009 edition, was released this week.  It paints a bleak picture for the national market as a whole.  Reflecting a relatively broad consensus, the report predicts the US housing market will hit bottom in 2009 and then flounder throughout much of 2010.  A recovery is expected around the end of 2010.
Interestingly, though, commercial real estate-backed securities are expected to continue to exist, albeit in a more regulated fashion.  This is a bit counter-intuitive, considering how central they were to harming the global economy.
The report lists the five markets – commercial and residential combined – it expects to perform most strongly over the course of the next year.  In order, they are:

  1. Seattle – a strong  apartment market fueled by continued population growth makes Seattle the market to watch
  2. San Francisco – This market bubbled up first and crashed first, so it’s not surprising its recovery is leading the way
  3. Washington, D.C. – The strong residential rental market will keep this market above the national average.
  4. New York City – Coming in at number four, here is the summary of the city’s condition in the report’s own words, “New York takes a beating with the Wall Street “implosion” creating job losses and office vacancies. Hotels should continue to draw tourists with the weak dollar. Retail frenzy ends, but the wealthy keep Madison Avenue boutiques alive. With the condo/coop market at a “crest,” developers “should worry about flagging buyer demand.”
  5. Los Angeles – A number of new, innovative condo and apartment buildings in the downtown area are expected to keep this market alive.
  6. In terms of the residential national market, the report recommends that pressure on homes and other larger units will lend comparative strength to the apartment market, as many buyers settle for less than they would have just several years ago.

As the market begins to show signs of recovery, the report strongly recommends investments in publicly-held real-estate investment trusts (REITs), which the authors argue will be well out in front of the recovery; indeed, a rally in REITs is likely the first sign of a coming broader rally throughout the real estate market.
New York City is expected to be one of the first cities to relapse into a strong growth pattern.  The dollar’s recent rally is expected to last throughout a sizable portion of 2009, but as the global currency readjustment resumes course, and the euro gains steam towards the end of the year or in 2010, the NYC real estate market will likely regain an exceptionally strong source of stimulus.

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