After four and a half years of a stagnating market and falling prices due primarily to low demand, sellers are naturally frustrated with the lack of sales success. Realtors often bear the brunt of their frustration. This is unfortunate because a slow real estate market actually hurts those of us trying to make a living at it more than the people who employ us.
A good realtor is a big help to a customer, but he is not a magician. We are unable to make the market better than it is. Unfortunately: “It is what it is”. Everywhere I go I am asked about the state of our real estate market, so let me tell you how I currently see it.
First a quick look at our major feeder market: The US. Based on the first half of 2012 the projection by the National Association of Realtors for the US in 2012 is an increase of 9 per cent in sales volume and 1.2 per cent in prices. Also, according to NAR, in 2011 both closed deals and average prices were up about 7 per cent with rental rates rising 3-5 per cent making it now cheaper to buy than rent in the US. NAR is projecting as much as a 10 per cent rise in home prices next year unless too much new supply is built.
With regard to the local market, stayover tourism is up (7.2 per cent last year and 2.2 per cent this year), our population is growing, (55,517 in 2011) and our GDP is finally growing again (1.1 per cent) after three consecutive years of decline. In the real estate industry, price discounting has slowed considerably, and the pace of local property sales is on the increase although Dart’s appetite has added significantly to those totals. Our capital projects seem to be moving forward steadily – if not rapidly.
Combining the US and Cayman data it looks like the market may have bottomed. Historically, Cayman lags about six months behind the US and follows in its footsteps. While waiting for the US market to show continuing strength and for our local projects to come out of the ground, we will likely see a few more months of mediocre but slowly improving activity. Prices will begin to firm and supply which as been static over the past 12 months will begin to shrink. This would indicate that the period between now and years end may be the best possible time to buy and the last chance to get into the market before it begins to rise.
We see prices beginning to rise in conjunction with our upcoming Winter season although price increases and recovery will likely be “stair stepped” (ie value increases followed by plateaus and then repeating). If you have been considering a purchase, your leverage may soon be gone. It looks like it’s time to get serious about it.
The continuing vulnerability of the US dollar due to increasing US debt is worrisome, as is the European debt crisis; and so are the tensions in the Middle East & Iran. The US election in November will be a watershed – one way or the other – and many in the US are waiting to see that result before investing. Balancing that is the proliferation of pending capital projects in Cayman, which will have huge spin off ramifications if they continue to go forward. There are certainly serious issues in the mix, but we are starting to see light at the end of the tunnel.
As always our Mid Year Market Report comes out in July so I would recommend you either get on our mailing list or check our website (www.coldwellbankercayman.com) to see all the specific details about current market conditions.