Expert: Brian Bocchieri - 8/17/2007

Question
I have to write a essay on this topic, and I very confused, and I would like your help. I would like it if u can provide me with some information. thanks
With property foreclosures on the rise and home prices either declining or at a stand still in most areas, what are your thoughts on the Real Estate market over the next year?
If you can explain to me the real estate in commerical properties that would be GREAT.
thank u
bmhellojlkda@gmail.com

Answer
In my opinion Much of the " Real Estate bubble" trouble has come from the sub prime market,meaning buyers who were getting in over their heads.  Either they did not have sufficient down payments, income, or their debt ratios where out of line.  

What happen was banks/mortgage companies where looking for continued growth and began creating additional  programs for this sub prime market, such as interest only and other more aggressive programs many with adjustable rates.  This created a larger pool of people being able to afford homes.  Many of these buyers are on the marginal credit worthiness and have now begun to fall behind on mortgage payments, taxes, credit card payments ...   Which has now fueled the foreclosure crisis.

As anyone in the real estate business knows the market is cyclical as interest rates drop the housing market picks up, as interest rise the apartment rental market picks up.
As for the commercial market which includes apartment complexes should begin to see a decrease in vancancy and an increase in rental income in the apartment sector. Due to the fact that people need a place to live and most people facing foreclosure will need to rent housing.  Commercial space as a whole is still struggling in some areas.

The office space market has seen an increase in  absorbtion of space in most markets.  The  cap rate seem to be holding in the 7-9 % range.  

As you well know in the commercial market the players in the game are professional buyers/sellers and do not usually follow the same trends as the residential market. ( except developers of both residential and commercial projects)

As for the outlook for the next year.  In my opinion the meltdown is not as dire as the media report.  Housing prices will level off and drop in some of the overheated condo markets such as Florida, Arizonia, Vegas and parts of the Carlonias as for the rest of the country I foresee a cooling period with modest gains in value of over the next couple of years.  

I do hope this helps
Wishing you all the best

Brian Bocchieri