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Real Estate Industry Heating Up

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Commentary by James Crumbaugh

RISMEDIA, April 14, 2009-My wife and I recently attended our once-a-month cruise club cocktail hour, in which we are two of the only working stiffs in the group, as most of the members are retired. Obviously whenever I show up because of my real estate history in this area of the state, the conversation always goes straight to: “What is happening in the real estate market?”

I found myself in a very upbeat, and excited mood and I was raving about the real estate market and what I see happening over the next few years. I was particularly excited, because for the very first time in my entire career, I signed 30 closings in one day the day before the cruise and had in fact signed almost 60 closings that week.

Our business in March was up 31% over February and by April 9th, we had already passed the halfway mark of what we did in March. The real estate industry is heating up and will only continue to heat up. Needless to say I ended up surrounded by several members dying to hear the good news.

What really got them worked up was when I made this comment: “If you think the last real estate boom and bust was bad, you ain’t seen nothin’ yet.”

Please let me take a moment to share with you want I mean by this statement.

Whether you voted for the current administration or not, it is having and will have a tremendous effect on the real estate industry in the years to come. All the money that has been thrown at the real estate industry to slow foreclosures and lower mortgage rates, plus the $8,000 tax credit for first-time buyers is what is heating up the industry.

Then you toss in the fact that there has been very little new construction over the past three years, that inventory is going down and pending sales are going up. You also have to calculate the physical obsolescence of so many properties disappearing every year to age, rezoning, and natural disasters, plus the fact that the United States continues to add 6 million new citizens every year, and we’re going to have a real estate shortage by the end of 2011.

But that is only the beginning of what the stimulus bill is going to do to real estate. I think every financial person in the country knows that we are going to be facing some extreme inflation due to the stimulus bill. You just can’t spend that much money and put that much money into the economy without causing severe inflationary pressure.

The resulting inflation that we will see starting in a couple of years is going to cause real estate values to rise by huge amounts over the next 5 to 7 years. Where I live and where all my cruise club members live is on the water in Southwest Florida. My comment to them was this: “We will see our property values double from the highest time of the market in 2006, due to the inflation within the next 5 years.”

What I’m saying is if your property was worth a $1million in 2006, it will be worth $2 million in 5 years because of inflation.

I just don’t see how it can’t happen. I just don’t believe we’ll escape the inflation that the stimulus package will bring to this nation. So while it may be bad for the country, it will be great for the real estate industry.

James A. Crumbaugh III is CEO of Allison James Estates & Homes.

For more information, email jcrumbaugh@AllisonJamesInc.com.

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