My partners and I continue to field some form of the question “Do you see things picking up?” If only the answer were as simple as “yes” and “no”. Here’s some random observations of what we’re seeing and hearing:
Yes... there has been an uptick in activity and to some degree hiring. Is it an indicator that our industry is heading into recovery? Honestly, it is too soon to tell. Let’s face it: the market went into panic mode a little over a year ago. Since then, there has been little activity of any kind. Call it a market paralysis. Wait long enough and sooner or later someone will have a hiring need or want to invest in something. That is what I think we’re experiencing now... an uptick spurred by pent-up demand and special programs rather than signs of recovery, especially on the hiring side.
Meanwhile, banks are still sitting on real estate debt like chickens waiting for eggs to hatch, hoping something better looking will evolve. Add to that the commercial real estate loans that will soon need to be renegotiated amid an environment of stricter loan-to-values and declining appraisals. Can a recovery really get a fresh start with baggage like that? We’ll see.
On a more positive note, the builders and developers who have survived the write-downs and still have money (or lines to money) are on the hunt for land. In the past week we’ve heard reports of one builder staffing eight land acquisition positions and another looking to staff three or four in the coming months. Once again, we see this as the payoff for a few fiscally conservative players rather than an indicator of long term recovery.
At the market level, former Division Presidents are starting their own companies with subordinated lot deals through developers they know. The big question is whether the banks will play along when real debt is needed once again.
Yes... some positive things are happening. Let’s celebrate the small wins when and where they surface. However, I wouldn’t be too quick to order a cake.
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