Michael Timmerman wasn't a popular guy in 2005.
In May of that year, he forecasted that home prices could fall 15% to 20%. It was the equivalent of taking the punch bowl out of a really great party.
Timmerman isn't some ivory tower economic forecaster without skin in the game. He put his money where his mouth was when in March 2005 he sold his successful market-analysis firm, Feasinomics, to Hanley Wood Market Intelligence.
Now a senior associate in the Naples office of Fishkind & Associates, Timmerman is a sought-after consultant to developers and builders who need insights into the real estate market in Charlotte, Lee and Collier counties.
So what worries Timmerman the most today? The BP oil spill in the Gulf.
While the leak has been capped, Timmerman is worried that the spill's impact could be felt long after the cleanup is over. “People may choose not to move to Florida,” he recently told a gathering of the Urban Land Institute in Bonita Springs.
Despite the fact that there's a low probability of oil washing up on the shores of Sanibel, Naples or Marco Island (less than 1% chance, according to government scientists), there's a widespread perception outside Florida that all areas of the Gulf have suffered.
On the flip side, Timmerman says Southwest Florida may benefit if people see the region as having escaped the environmental catastrophe and choose to vacation here instead of the more-vulnerable Panhandle or the Florida Keys.
Still, the oil spill added uncertainty to the region's economic woes. Timmerman dates Southwest Florida's recession beginning in October 2005, earlier than the nation's decline that started in December 2007. “That's a long time for an economy to be in recession,” he says.
While real estate prices have stabilized at lower levels, the recovery will be slow. When they do return this winter, second-home buyers who make up a large percentage of the market are more likely to look at less-expensive existing homes than new homes, Timmerman says.
What's more, second-home buyers looking at new housing won't pay exorbitant prices like they did in the past, avoiding anything that costs more than $2 million. “People are not going to spend that kind of money on a second home,” Timmerman says.
In the short term, the supply of existing homes must come down. Although foreclosures have declined this year, “we know banks still have properties on their books,” Timmerman says. For example, the supply of existing homes in Collier exceeds one year at the current sales pace.
Because of the recently passed financial reforms, Timmerman says financing new developments by banks will be more difficult. Instead, private investors will likely provide the financial backing for new projects in the future, albeit at a higher cost.
The outlook is bleaker for commercial real estate, which generally trails housing by two years.
“The commercial market started its slide in the last year and a half,” Timmerman says. He suggests that empty buildings in the region could eventually be torn down because the cost of maintaining them empty will be too high. “We're seeing dramatic drops in office and industrial occupancy,” he says.
Timmerman sees some signs of improvement, such as increases in the number of sales of lower-priced homes. That will pressure median sale prices higher and will result in fewer homeowners being “under water” on their mortgages.
Economic engines such as Southwest Florida International Airport and Florida Gulf Coast University provide economic sustenance while prospective economic development projects such as Jackson Laboratory in Collier County provide hope for future employment, he says.