This particular blog is about the residential real estate market, but I'm borrowing the title from an article last Friday by Torto Wheaton Research regarding the commercial real estate market, in comparison to the "woes" of the residential real estate market.  The article noted that other than sharing the words "real estate", the two markets share little or nothing in common.  But it begs the question, is the residential market really woeful - is it really crashing or might it be smooth skating?

An interesting interview in this month's REALTOR magazine with Lawrence Yun, the NAR VP of research suggests quite a different perspective, and almost upbeat one (though the NAR is known for that).  While August foreclosure rates nationally were at their all-time high of one for every 510 households (that data is from a different magazine, the Illinois Association of REALTORS Magazine), Mr. Yun's presentation of the numbers is compelling.  Despite existing home sales down seven percent year over year, they are still on par with 2002, which was not a bad year by any measure. 

In fact, the NAR data shows that two-thirds of the markets they collected data in showed positive price growth in the third quarter, besting the second quarter's one in every two markets.  More importantly, in the markets with price declines, most were down only one or two percent, with only a few markets in the country seeing five percent or greater price declines.  It seems overall as though the corner has been turned.

The looming, in progress or perhaps already past disaster that the subprime lending market fallout is supposed to have created seems rather minimal by Mr. Yun's count.  Only nine percent of all borrowers fit into the subprime category and only a scant five percent of them are in trouble, so less than one percent of the market is really in a pinch (using the earlier statistic, one in 510 is only two tenths of one percent, hardly worth mentioning).  That, the NAR estimates, will result in about 200,000 homes nationally coming back to the market through foreclosure.  Given the four million homes on the market, the result is a net increase in supply of only five percent, not exactly cause for great alarm. 

What's more, he points out, is that there have been 4.3 million net new jobs created in the past two years and historically that should translate into demand for over two million home sales (roughly one for ever two net new jobs) and that has not shown itself, so whereas some pundits might say there is pent-up supply (would-be sellers that haven't put their homes on the market because it has been perceived as soft), the NAR actually projects there to be a lot of pent-up demand, rather encouraging.  The only problem is getting those people into the market and that, we understand from Mr. Yun, is not happening because of the general media-fueled perception that the market is in the tank.

But for that, nothing could be much better for a buyer: prices are moderate, especially given lowered seller expectations, and interest rates are near historic lows.  Apparently the old adage is right, though, perception is reality.  Given the general media bend towards sensationalism, one could hardly expect anything but tales of woe, which as things become more obviously positive, will surely overnight become stories of market bullishness and price spikes.  It's whiplash for the consumer (and that's Snidely Whiplash on the right).  The smart advice:  if it's time to sell, don't panic.  It might take a while, but the market is there.  We saw four of the highest priced residences in our building go under contract in a two week span in the last month.  If you're a buyer, I'd say get in while the getting in is good, at least as I see it in the downtown luxury Chicago residential real estate market, and by the numbers, that's not dissimilar to much of the rest of the country.