“When is the real estate bubble going to burst?” a lingering question from 2005 that was created due to the Federal Fund rates rising from 1% to 4.5%. Fortunately, mortgage rates never cooperated by only ascending upwards from 4.5% to 6.5% due to the bond yields.
Thus residential real estate sales declined only slightly and prices have stabilized. Therefore, consumers remain free to continue borrowing and spending. Cash rich industries such as aerospace, computer, electronics, transportation and defense have continued to spend on equipment and facilities. As a result, the 2005 GDP remained solid at 3.7% and the national unemployment rate declined to a four year low of 4.7%. Since the commercial office market is ultimately determined by unemployment it too has reached a four-year low average vacancy rate of 12.1%.
The Long Island office market has not kept pace. While the vacancy rate remains stabile at 9.6% it is no longer among the lowest in the country with at least ten markets lower. This is due to these other markets being driven by the aforementioned growth industries, Long Island remains dependent on the stagnant but stabile health, finance and service industries.
Fortunately for the economy there is no end in sight. As inflation begins to cool, the new Fed chair will ease rates creating the perfect soft landing for the economy and the real estate market. Therefore the “robust residential real estate bubble will remain engorged”
– Ross Selinger