"Sales of newly constructed single-family homes spiked 11% in June to an annualized rate of 384,000 homes. The gain over May was much greater than expected. A consensus of housing industry analysts had forecast seasonally adjusted sales of 352,000. However, sales are still 21% below the levels of a year ago (488,000). Four years ago, during the height of the housing boom, the sales rate for June was 1,374,000, nearly three-and-a-half times higher than last month." Wire service reports 7/27/2008

Housing led us into the economic pit beginning its slump three years ago. Now it appears housing is bottoming out ... finally. It´s good news if for no other reason that every day brings us closer to recovery. Hitting bottom usually delivers mixed messages and this time is no different. Homebuyers, who can afford to buy, signal that the time looks right to them. So, (a few) more people start to close on deals. Government mortgage incentives help and homebuilders continue to lower prices (down 3% from May´s median) albeit at a slowing rate, to entice more activity and move inventory. At the same time, foreclosures on existing homes continue to increase. That means more fire sales and auctions, which could lower prices further before we see a true firm up. It´s still not a time for homeowners to sell unless they have no other choice.

At least, we start to see the first signs of increased sales activity and some small attempt to clear the market at rather dismal pricing-40%, 50%, even 60% below peaks in some locations. At these levels, buyer equity can go a longer way and that´s necessary since lenders have turned understandably more parsimonious.

In the commercial market, we may be a year or more away from seeing any measure of transaction pick up. Equity sits on the sidelines, but as we have said before it´s not in the interest of owners, borrowers or lenders to recognize the depth of value declines. If they did, many borrowers would be wiped out and banks would have to face up to massive write downs on their balance sheets. So they dance around the realities.

Unfortunately for the dance partners, buyers know that time is on their side. The likelihood of a swift economic rebound to buttress property cash flows from higher occupancies and rents looks extremely doubtful over the next couple of years. At some point government programs like TALF and bailout funds will have added enough to bank loss reserves to let them dispose of their toxic loans. When that happens we´ll approach the stage that the housing markets seem to be reaching today.
Delaying the inevitable isn´t much to look forward to.

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Jonathan D. Miller

A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.