Real estate, both residential and commercial, has found itself in a slump, a nadir from which the industry has stayed down without any significant rise. But housing does not exist in a vacuum, and employment and the economy are tied directly to real estate’s recovery. Such issues are being addressed this week at the REALTORS® Midyear Legislative Meetings & Trade Expo, where real estate professionals will be speaking with legislatures regarding homeowners and investors.

9,000 professionals are expected to attend the event, which goes through May 19. Although speakers and meetings are planned, influencing Capitol Hill legislatures to improve access to affordable financing, make the short sale process run smoother, reforming the mortgage market, supporting liquidity, preserving tax benefits, and reauthorizing the National Flood Insurance Program are all primary objectives. Particularly for the latter of this group, a portion of Americans rely on this program, which additionally affects home sales in certain areas.

One of the more important events at the expo is the Rally to Protect the American Dream, scheduled for May 17. For this 10,000 REALTORS® are expected to gather in the Washington Monument area to demonstrate housing’s integral role in national economic recovery. About this portion, National Association of REALTORS® President Moe Veissi said in a statement:

“We need to keep housing and real estate first on the nation’s public policy agenda, because these issues affect all Americans. Realtors(R) are committed to working with members of Congress, regulators and industry leaders to ensure public policies and industry practices that promote responsible, sustainable homeownership and encourage real estate investment. We want to make sure that our country’s leaders, now and into the future, understand the vital role that real estate plays in both the long- and short-term health of this nation.”

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It’s a cliché to think of success as one step forward and two steps backward, but this overly-used saying simply describes the current state of the real estate market. Although homes are for sale in all metropolitan areas, the average home price has decreased, according to a piece in The Wall Street Journal. While minor declines have been seen over the past year, the 1.3-percent decrease from October to September is cause for concern and contradicts with the recovery of retail and manufacturing industries.

Earlier this year, the housing market appeared to be in a state of recovery: the average home price had increased slightly – but not too much – while sales were up. But the WSJ isn’t the harbinger of bad news; such a drop was predicted over the summer. And, while this news applies mainly to homeowners, what about commercial real estate’s notable recovery?

The points contributing to this decline, as expressed in the WSJ piece, include:

• The job market correlates with housing. When job growth is slow (unemployment is currently 9.8 percent), housing is too risky of an investment.
• The tax credit for first-time homebuyers expired and, as of April, the amount of sales dropped, taking this figure back to early 2010 numbers.
• 20 metropolitan areas saw declines, with prices in Las Vegas and Cleveland dipping so low they’re back to 2000 levels. Las Vegas real estate, as we discussed months earlier, has a high percentage of foreclosures, which influence the average price.
• As seen in Las Vegas, foreclosures still make up a significant amount of home sales – about 30 percent – and, as foreclosures and short sales go for less than average, they bring the price down.
• Mortgage rates are rising, and current homeowners are stuck with underwater mortgages. This leads homeowners to wonder, “Why sell my property for less than when I purchased it?”

How would you characterize this current real estate market? While in some areas we’ve seen a rise in home buying and a significant decrease in prices compared to 2007 values, other markets simply remain flat. Nevertheless, current real estate trends on both coasts indicate that, even with the home buyer’s tax credit ready to disappear, the market is favorable to buyers. This often is a case of prices being affordable to more, and, as a result, more are buying homes. Although foreclosures may be factored into these figures somewhat, the average price of a home on the market has come down to a level in which most looking to buy a home have more options.

One such instance is in Delaware, in Sussex County. The area is not only experiencing more homes purchased, but also a slight increase in commercial real estate in the form in increasing revenues. This has come in the form of realty transfer tax, building permits and inspections, and property recordings. Overall, the revenue generated from real estate has put the county in better financial standing than a year ago.

On the other side of the county, Napa Valley in California has found itself becoming more of a buyer’s market overall in median home prices and in commercial real estate. Although the Napa Valley market has a lower median home price compared to 2006 and 2007, sales for the area are up overall. Although, on average, the area has experienced a 15-percent drop in the median home price over a three-year period, this varies by town. Napa city, for example, has seen the median price drop, while nearby town Yountville has seen an overall increase. These figures incorporate commercial real estate, which, for the area, includes vineyards and wineries.

Think the real estate bust is officially over? It may be, unless you’re a property owner. During the period from 2007 to 2009, at the height of foreclosures, hearing that building owners were evicting tenants was somewhat common, especially if the building was short on residents. This concern continues, however, but isn’t directly correlated with foreclosures in the present. Instead, the recession with unemployment has used fewer people to look for places to rent and, as a result, property owners are seeing lower occupancy rates. More empty units in an apartment building, for example, mean that the owner may not be able to pay the mortgage and make all repairs.

As mentioned in the article under the link above, a commercial property summit has been held in Memphis in regards to this concern. While the conference serves as a gathering place for property owners to discuss current market trends, it also serves as a place for those in the industry to give tips to each other. Building owners across the country feel this concern, especially as those tenants who lose their jobs may move out and not renew a lease and, with still high unemployment rates, fewer are looking to rent an apartment.

But, while the newly unemployed and recent college graduates may go off to live with their parents instead of looking for an apartment, an increase of jobs will allow this aspect of the real estate market to rebound. Like home prices, values on commercial real estate also lost 35 to 50 percent of the value and, to keep tenants, property owners needed to lower monthly costs. Nevertheless, while such a conference can give some survival tips to those in the industry, those owning property will simply need to wait for the employment rate to increase and recover.