- A bottom will be reached eventually in virtually all markets. Business will pick up gradually. Assuming that the global recovery truly gets underway, home sales may rebound reasonably well by 2011 or 2012. However, many owners of homes and commercial properties will remain in a difficult position as their properties have a current value of less than what the owners paid, and many mortgage debts are at higher levels than what the underlying properties are worth.
- Many major development projects are downsized, delayed or canceled.
- The commercial property investment sector remains slow. Vacancies remain high, particularly in retail shopping centers and many office markets.
- Commercial mortgage delinquencies and foreclosures will continue to be a big problem, and funding for speculative commercial projects remains extremely difficult to obtain. U.S. banks held $1.8 trillion in commercial property loans on their books as of early 2008, and write offs on those loans are projected to run as high as 12%, or more than $200 billion, by the end of 2010.
- On the corporate level, the trend will be towards consolidation of development and construction firms, particularly as stronger firms acquire weaker rivals. Cost control, debt reduction and risk management will be a core focus. Healthy development companies will acquire important tracts of land at bargain prices for future use. (In early 2009, Pulte agreed to acquire competitor Centex for $1.3 billion.)
- National government investments in transportation infrastructure such as highways, education facilities, government offices and health care facilities will offer opportunities to commercial construction firms. A large portion of national government “stimulus” construction spending will be funneled to state and local projects.
Source: Plunkett Research, Ltd.
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