Alabama Real Estate Confidence Index, (ARECI): Outlook For the 1st Quarter 0f 2010


Recently, I was humbled to be selected to participate on the inaugural  ACRE Leadership Council. The Council determined the need for a statewide industry confidence index and this was adopted as the Council’s first initiative. As a result of my professional background in real estate analysis, I was honored to be selected by the Council and Grayson Glaze, ACRE Executive Director, to spearhead and work with the Center to conduct and produce its Alabama Real Estate Confidence Index (ARECI). I am excited about the opportunity to work with the UA Real Estate Program and present the results of the first survey.

An excellent article appeared in The Birmingham Business Journal, by Lauren Cooper, referencing the study and material from the recent ACRE conference. If you have not signed up to participate, please do so now by filling out this registration. This is the initial report. We have posted a slide-show version with roughly the same content here (and at the end of this post):

Summary:

Over 637 Real Estate Professionals surveyed during the last quarter of 2009 about expectations for the first quarter of 2010 indicated an overall survey score of 49 indicating a slight negative bias for expectations. The expectations for the nation were 48, while expectations for Alabama were much more positive at 57. The scale ranges from 0-100 with 0 being much worse, 100 being much better, and 50 indicating no change expected.

The group was also positive 57 on the outlook for Real Estate Sales in the 1st quarter.

Inventory is expected to remain much the same at 49.

Pricing at 43 was generally expected to be weak due to the economy and the group expects the worsening of credit availability 40.

Respondents in the North Alabama were most optimistic with a score of 65 for an improved Alabama economy. On the low side the biggest divergence was the expectation for tough credit in the South 38 and pressured pricing in the commercial area at 36, which was the most negative sentiment expressed.

A summary of participants and responses:

Number Nat next Q Ala Next Q Next Q Sales Next Q inv Next Q Price Next Q Credit % of total
Residential 535 49.53 58.83 58.50 50.33 44.39 40.33 83.99%
Commercial 102 42.40 46.57 49.51 41.42 36.52 41.18 16.01%
North 116 51.94 65.52 60.78 54.96 49.78 43.75 18.21%
North_Central 224 46.21 53.13 54.35 46.99 40.63 39.40 35.16%
South_Central 117 47.22 56.20 58.33 49.15 42.09 42.31 18.37%
South 180 49.58 56.39 57.22 47.22 42.64 38.47 28.26%
Total 637 48.39 56.87 57.06 48.90 43.13 40.46


As we can see from the data table, at this time there is quite a bit of unanimity of outlook among different geographic regions, and even between the Commercial and Residential sectors. The Commercial sector has a  more negative outlook than the Residential all fronts, except somewhat surprisingly, for credit availability! While both groups were negative in their outlooks on credit availability the Commercial market participants were marginally less negative.

Since we don’t have history for The ARECI yet, a comparison with the business survey conducted of Alabama business leaders by the University Of Alabama School of Business, known as the Alabama Business Confidence Index, ABCI may be useful. It would be expected that the new Real Estate index would closely parallel the old since the initial values are so close.

The initial value for the ARECI index is 49.1.


Methodology:

Survey respondents answered 8 basic questions regarding their outlook for national and local real estate. The survey was open from 10/7/2009 through 1/12/2010. There were 637 Real Estate professionals who responded from all over the state which represents one of the widest surveys of Real Estate Professionals that we know of. The survey was modeled on the Alabama Business Confidence Index survey conducted Quarterly by the Culverhouse Business School at the University of Alabama and a similar monthly Real Estate survey the Federal Reserve conducts in the Southeast.

The questions:Your expectations for change from the current to the upcoming quarter:

General Real Estate Indicators:
  • Conditions in the Nation
  • Conditions in Alabama

Your expectations for change from the current to the upcoming quarter (as applies to your specific market):

  • Sales
  • Inventory (more=worse)
  • Pricing (lower=worse)
  • Credit Availability

All questions were scored  as:

  • Much worse = 0
  • Worse = 25
  • About the Same = 50
  • Better = 75
  • Much Better = 100

The participants were well dispersed throughout the state.
The regions are defined as (with the overall average for the region):

North: Huntsville-Decatur-Florence  (54.4)

North Central: Birmingham-Tuscaloosa-Anniston (46.7)

South Central: Montgomery-Auburn-Wiregrass-Dothan (49.2)

South: Mobile-Baldwin (48.6)

Residential Overall average : 50.3

Commercial Overall average: 42.9

Questions on method:

Several questioned some aspects of the survey methods, such as, no options for multiple association membership, or specific area as separate region (such as Cullman) or providing for a specific sub specialty (such as brokering rural land).

To administer a survey of this type, answers have to “fit”  into the most meaningful categories for overall analysis. Providing too many options for fairly small exceptions would if anything confuse both survey takers and subsequent analysis.

Multiple MLS members should choose the MLS they do the most with and that would most represent their answers, and similarly for others who asked about this category of question. The chosen methodology will yield valid and easily interpreted  answers. Given the fairly large number of respondents, there should be no distortions.

Other comments:

We received about 500 comments, which is outstanding for a survey of this type.

While it is difficult to fully summarize the comments there was a general feeling of unease and frustration expressed. Not surprisingly, this was directed at the government for unease as to both doing too much, and not enough, or not the right things.  There was a general feeling that many more problems remain to be worked through, specifically foreclosures, both residential and commercial. There was of course a general frustration with lack of credit availability, but a recognition that things cannot and should not return to the prior permissive policies that caused this problem.

Slide show:

ACRE, housed within the UA’s Culverhouse College of Commerce, collects, maintains and analyzes the state’s real estate statistics, and is a trusted resource for Alabama real estate research, forecasting, and professional development that includes hosting our annual Alabama Commercial Real Estate Conference & Expo (www.acreconference.ua.edu). The relationship between the Center and our industry stakeholders is one of the Center’s greatest strengths. Alabama companies and individuals, partner with the Center bringing a wealth of resources and experiences, becoming, in effect, extensions of the Center, a network through which our outreach to the Alabama real estate industry is enhanced and enriched. The Center, established in 1996, proudly acts as an industry liaison for the benefit of our business school students pursuing a career in real estate and is a catalyst for providing interaction with our 900+ real estate alumni. UA’s real estate program began “touching lives” over 75 years ago and has experienced explosive enrollment growth since 2000. To learn more, please visit www.acre.cba.ua.edu.

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