What would be the most appropriate adjectives to use to describe 2016? Would they include words like incredible, unbelievable, unusual, tragic? Maybe some of those, but how about also including hopeful?
But more on that in a minute.
It’s a good time to take stock and look back. A lot has happened. In the midst of it all, what are the three most important lessons we have learned in the real estate market this year?
1. Certain neighborhoods, certain types of properties here have a tendency to overheat.
News stories have abounded of oversupply in the upper end condo market, particularly in Miami but also to a lesser degree here in Broward. Prices have been dropping, and some projects have been canceled. Looking at my recently released Real Estate Yearbook for 2016, there are neighborhoods that have declined in value in the last year, even in the face of a general increase in the overall market.
2. Eventually, you will reach a point where you can only sell a dollar for a dollar. You can’t sell it for $1.25. You can’t even sell it for $1.25 to someone from Russia, China, Brazil, DC or San Francisco.
You can look back 45 years in the Broward real estate market and see that the long-term rate of price appreciation here has been just slightly more than the rate of consumer price inflation. That makes real estate a good stable long-term investment. That also means the 1999-2006 experience was an aberration. It also means the 2011-2016 experience is something of an aberration.
No one has a crystal ball and the future may not necessarily be like the past. But double-digit annual returns are not likely in the next few years.
If we have a cooling in the global economy, particularly in any sort of trade war or “Buy American” movement, foreign capital movements that have supported South Florida real estate prices in recent years may lessen or even cease. And “Blue State” money may decide to be choosier politically, if not economically.
3. You don’t always get to call the game. Sometimes, someone else calls the game, and you have to adapt.
When I play bridge, I enjoy playing hands at “No Trump.” But I don’t always win the bidding so I don’t always get to make the decision. And so it goes in life. Most of the time we have to adapt ourselves to circumstances that are not to our choosing, even not to our liking.
And how do we do this? First, we take a deep breath and we make a clear-headed assessment of the situation in all its facets – strengths, weaknesses, opportunities, and threats. All four are always present, perhaps in different quantities and forms. But they are always here.
So I close with a word about hope, as I began. There is a lot of fear and uncertainty around. Maybe you feel it. Certainly you know people in the community who do, or among your friends and family. I see it and feel it every day in my real estate practice, and personally. I work and live right here, among the readership of this column.
But the way I look at it is, every day that begins, has a degree of promise. The odds may be long, but they are not impossible. If anything can happen, that includes the prospect of something good occurring.
Paying attention, being aware, speaking out, working together as a community, is more important than ever to building value here in South Florida – in real estate and in our daily lives.
James Oaksun, Broward's Real Estate Geek(SM), is Broker-Owner of New Realty Concepts in Oakland Park. In addition to having degrees from Dartmouth and Cornell, he is a Graduate of the Realtor Institute (GRI).