Bubil: How big a recovery do we really want?


The bank economist who predicted that the region's housing recovery was "years off" got me to thinking.

I know, a dangerous thing.

A week ago, Herald-Tribune reporter John Hielscher reported the comments of PNC Financial Group economist Mekael Teshome. "The area's housing market is starting its slow climb out of the deep hole," Teshome said, noting that home prices are down about 45 percent from their 2006 peak. "Fortunately, prices are stabilizing as steep price discounts and rock-bottom mortgage rates attract new buyers."

A year ago, people in the local real estate industry started telling me precisely that.

But the question I have for Mr. Teshome is, recovery to what? To the fantasy market that existed in 2005?

I contend that if we are going to recover to 2005-06 price levels, we had better hope it will be "years off," because it if happens right away, we will be in a world of hurt, once again.

As in "real estate boom." Which begins with "B" and that stands for "bubble."

So I called him, and he was very nice, especially after I congratulated him for having the courage to use the term "housing depression" in his report.

He clarified that what is needed is a return to a market where the construction of new homes is in line with demographics: the influx of new residents and the formation of new housholds in a region. Also, the ideal market is one in which home prices are in harmony with household incomes.

Both of those parameters were out of whack during the boom of a few years ago, he agreed.

What we want is the slowly appreciating prices that we have been seeing for the past few months. We want to get back to where we were on Sept. 10, 2001, before two things happened to set the market on its ear: the terrorist attacks of 9/11, which put in motion financial policies that led to excessive real estate speculation, and, locally, the opening of the Ritz-Carlton, Sarasota, which put the region on the radar screens of an increasingly wealthy buying public.

So pray that the market recovery is years off. Three to 5 percent appreciation in home values per year is plenty.

Teshome noted the importance of household formations in the housing market, and said those are increasing.

"Household formations ... are likely to have quickened in the past year as well," he said.

That bodes well for home builders, who been putting up single-family homes at a rate of just 492,000 units a year nationally from 2008 through 2011, compared to the 1.1 million that was the norm from 1978 to 2002.


Harold Bubil

Recipient of the 2015 Bob Graham Architectural Awareness Award from the American Institute of Architects/Florida-Caribbean, Harold Bubil is real estate editor of the Herald-Tribune Media Group. Born in Newport, R.I., his family moved to Sarasota in 1958. Harold graduated from Sarasota High School in 1970 and the University of Florida in 1974 with a degree in journalism. For the Herald-Tribune, he writes and edits stories about residential real estate, architecture, green building and local development history. He also is a photographer and public speaker. Contact him via email, or at (941) 361-4805.
Last modified: January 19, 2013
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