Doron F. Eghbali Real Estate Law Blog on Lawyers.com

Residential Real Estate May Still Have a Long Way to Recovery

Thursday, August 5, 2010 by Doron F. Eghbali

Optimistic about any imminent recovery in residential real estate market? Well, some figures might not prove us to be as optimistic. In fact, by looking at two numbers we might get a clearer picture of the status of real estate market: First, by looking at the number of unsold homes and then comparing such number to the number of homes that could be sold every year. In other words, with the glut of homes the question we have is: how many years does it take for the real estate market to at least return to a semblance of normalcy? The response is not very optimistic.

TOO MANY HOMES, NOT AS MANY BUYERS

Teunis Brosen, an economist with ING Bank in Amsterdam, reported in a conference call last week, as of the second quarter of 2010, there are about 2.5 million units of homes to be absorbed by the US real estate market for some kind of stabilization to materialize.

The way Mr. Brosen came up with this number is fascinating. Mr. Brosen looked into US Census Data for all the homes which are for sale, for rent, or not for sale but vacant for other reasons. This figure excluded seasonal vacancies.

Mr. Brosen determined there are 650,000 homes for sale, 900,000 homes for rent, and 950,000 homes being kept off the market.This excess supply included foreclosures not listed yet by banks for sale and other properties waiting for the market to appreciate.

In addition, ING research posits the average increase in US households is about 1.4 million per year. Concomitantly, the Commerce Department asserts the US economy can absorb about 549,000 homes per year. This means our excess supply (difference between 1.4 million - 549,000) is roughly about 900,000.

In other words, given the 2.5 million number of excess supply calculated by Mr. Brosen predicated on US Census Data, it could be at least more than two years for the housing market to stabilize. This recovery assumes no substantial home building to occur to skew such estimates.

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DORON EGHBALI is a Partner at the Beverly Hills Offices of Law Advocate Group, LLP. He Primarily Practices Business, Real Estate and Entertainment Law. Doron Can be Reached at: 310-651-3065. For More Information, Please, Visit: HERE.