Joel Ross, principal of Citadel Realty Advisors, the investment banking and real estate financing firm he launched in 1981, has put together the main points arising from a recent major real-estate Conference in terms of where the industry and economy are headed. The thoughts shared are sobering and suggest a long road back for the US economy.
1. No expert or economist who spoke was willing to make any prediction of where we will be in three years.
2. Development is dead for all real estate for at least three years.
3. Recovery will be slow. GDP in 3Q was over-inflated due to cash for clunkers and other stimulus. The first part of 2010 will be 1 percent to 2 percent GDP growth.
4. All real-estate values are down by at least 40 percent.
5. Nobody knows what debt structures will look like other than far more conservative underwriting, much simpler structures and a lot less debt availability. Debt likely will be long-term mortgages and fewer short-term floating rate loans.
6. The whole rating agency structure will change, but it is not yet clear what form it will take. The investment banks will no longer be paying the raters, so they will no longer able to pressure them to provide higher ratings.
Great point of view, thanks for putting this forum together.