Realtors Predict Slump Will Last 2 More Years

Although some agents are reporting increased interest in house hunting this year, more than two-thirds of the real estate executives surveyed in a new national poll believe that it will take at least two years before the nation’s slumping real estate market improves.

The 1,633 developers, lenders, brokers and other commercial and residential real estate professionals surveyed by the accounting firm Arthur Andersen & Co. expressed widespread pessimism about today’s market. More than half blamed financing constraints, low demand and excessive real estate inventory for the poor market conditions.

The 163 respondents from Southern California were more hopeful of a rapid market turnaround, however. Two-thirds predicted that the Southland’s real estate market will recover in less than two years, while 27% believed that it will take two years or longer.

What’s more, the survey turned up three bright investment spots on the national real estate horizon: multifamily housing, commercial warehouses and custom “build-to-suit” housing.

“There’s a lot of pragmatism out there,” said Andy Kane, a partner at Arthur Andersen who helped compile the survey results. “Last year was a very tough year in real estate, and that’s why most real estate professionals aren’t looking for a rosy 1991.”

The survey, conducted in November and December, when housing sales were slumping to their lowest levels since the 1982 recession, is Arthur Andersen’s first sampling of thinking among real estate professionals nationally. Survey respondents had an average of 20 years of experience in the real estate industry and primarily represented companies with assets valued at more than $1 million.

Although the survey, co-sponsored by the industry publication National Real Estate Investor, covered a wide variety of real estate topics, including financing trends and business operations, it focused most heavily on assessing the outlook for real estate development and investment.

During the next three years, survey participants said they felt most optimistic about real estate development prospects in the Pacific Northwest (38%), California (30%) and the Southeast (26%).

The survey also said Seattle (39%), Houston (38%) and Dallas (38%) had the most potential for real estate investment in the next three years. New York (48%) and Boston (46%) were the overwhelming choices for cities with the least potential. Opinion was divided over Los Angeles, with 24% of respondents ranking it among the cities with the most potential and 17% saying it had the least potential.

Robert Edelstein, co-chairman of the Center for Real Estate and Urban Development at UC Berkeley, agreed that the outlook in the Northeast is not favorable. Edelstein said he also agrees that multifamily housing, commercial warehouses and custom homes will be among the few bright spots in real estate over the next few years.

“The only (single-family housing) markets right now that are lukewarm to hot are parts of Texas, Denver and Phoenix,” Edelstein said. “Seattle is much cooler than it was six months ago, and the rest of the country is downright cold.

“But multifamily housing has been significantly under-built” and could be a big growth area during the next 20 years, Edelstein said, especially in states with populations that are expected to grow, such as California, Florida and Texas.

WHEN WILL REAL ESTATE IMPROVE?Realtors were asked: The general perception of the national real estate market is that it is in a downturn. How long will it be before it improves? How long for the region in which you are most active?

Southern California Nationally Less than one year 18% 2% One to two years 50% 25% Two to three years 21% 36% Three to five years 5% 28% Five years or longer 1% 8% Perceive market as healthy 3% 1%

Source: Arthur Andersen & Co.