The V-Shaped Recovery Model Is Great For Tampa Bay -- But Is It Real?

Way, way, way, way back when I was taking marketing classes in college, I remember the ol' professor talking about inverted bell-shaped recovery curves. Essentially, it meant that what was common in a market change was a slow downward trend followed by a longer period of no growth, then a slow upward recovery trend -- when he drew it on the blackboard it really did kind of look like an upside-down bell. He said the inverted bell shape was a good thing because you wanted markets to move slowly and steadily, not fast and eratic. "Remember," he would say, "when markets move up or down slowly you have time to make decisions. When things happen fast, well, you can end up losing a fortune."

Those were the years we can call "BC" for Before Computers. Computers put real time data into your hands, and the losers are the people who cannot or will not act on it immediately.

For example, take the latest predictions for real estate in the Tampa Bay area as developed by Moody's Economy and reported recently in Forbes Magazine. They call for three kinds of recoveries ...

• V-Shaped, in which the market falls fast and sharply, bottoms out quickly and climbs back fast and strong;
• U-Shaped, in which the market falls more slowly, stays at bottom a bit longer and then slowly recovers; (kinda bell shaped!)
• L-Shaped, in which the market falls fast and, unfortunately, stays there.

The researchers at Moody's are saying the Tampa Bay real estate market will experience a V-shaped real estate recovery. They base this on the strength of the local economy and the fact that subprime lending is relatively low.

The problem, they say, is that Tampa Bay has a high investor share which leads to a high vacancy rate. When the market turns south, investors are the first ones to leave, thus creating a glut in unsold housing inventory. That's why they think the market went sour in 2005. Tampa Bay is a pretty affordable market compared to other major metros, however, so the glut of unsold properties should disappear soon -- thus the V-shaped recovery pattern. In fact, some at Moody's believe Tampa Bay should burn off the unsold inventory during the first quarter of 2008 and that prices should then move upward at a rate of about 10.6% the following year.

I suppose this could all be true. The people at Moody's are smart -- a lot smarter than me and they have access to all kinds of data and computer models and research of every kind. Me? Well, I'm just a real estate agent and market observer with old ideas from the years BC. But it seems to me that the problems with real estate in Tampa Bay are as much based on politics, taxation, insurance, income levels, mortgage rates and other things as they are based on market conditions and investor goals. I don't think Moody's is taking that into account. So, I have to say that I still believe that until the property tax, insurance and personal income problems are addressed in Florida, the real estate market in Tampa Bay and everyplace else in this state will remain depressed as compared to where it was in the early years of this decade.

I think we are looking at a recovery that may begin in 2008, but not until the citizens vote on tax reform measures and those measures are put in place by the legislature. If we have a real estate bounce-back, it will depend greatly on the results of that election. If people vote to reduce property taxes, then I think we are looking at my old college professor's inverted bell-shaped recovery model instead of Moody's V-shaped model. I think the market is going to bounce back, but I think it will take a longer period of time than do the people at Moody's.

If the people vote not to reduce the property taxes in this state, kiss the real estate recovery good-bye, and there's not one thing that Moody's can say that will change that. Instead of being a V-shaped recovery, we'll have an L-shaped real estate market. It all depends on the election.

For more information on real estate in the Tampa Bay area, visit my web site at http://www.thestpeterealestatesite.com/.

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