2006 will be remembered like a splash of cold water waking us up from the dreamy frenzied market of 2003-2005. Residential sales slowed and in some instances prices dropped. The commercial market wakeup was gentler but still a wake up as buyers were alerted to slowing appreciation. 2006 offered brokers a respite from frenzied deal making to reflect on the 2003-2005 markets and suggested to others a different career. In retrospect; the fuel igniting the market blaze of 2003-2005 was low interest rates. People across the country leveraged the low interest rates to buy larger homes, new homes, cars and commercial property. Capitalization rates reached new lows and sale prices reached new highs.
Steady climbing interest rates in 2006 ushered in the slowing market. Fortunately, while increasing just 3-4 points, interest rates are still low and have not ramped up to the double digit levels that historically smother markets. Just the hype of the Baby Boomers beginning to retire with their own, as well as their parent’s, money was a force in the 2003-2005 market In reality, the Baby Boomer’s impact will be realized on a longer horizon juxtaposed to the immediate impact of precipitous interest rates.
The relative quiet of 2006 is a much needed time to weed out inexperienced developers and some ill conceived projects that never broke ground. Even in light of all the discussion of slowing markets and dropping of prices the market remains healthy. Vacancy rates across the board are at all time lows, rental rates, while increasing remain attractive and interest rates are low. 2007 looks to be a very steady year. A great deal of money is on the sideline waiting for residential market movement and many projects previously planned and permitted are poised to move forward as the market turns. The pressure for more office space is building. Residual from the frenzied days are some high priced properties remain on the market. Sellers are working with a different dynamic, a buyer’s market, which simply means look carefully at your pricing if you really do want to sell!