Dr. Alex Villacorta, vice president of research and analytics at Clear Capital, was one of the first to identify the catalytic role small investors played in turning around failing Florida markets in 2011. He tracked the impact investors made in places like Orlando When they entered the market after first-time buyers fled. They created a price floor that restored confidence in the market and encouraged owner-occupants to return and participate as prices appreciated. The “Florida Phenomenon” was a precursor to today’s recovery and Villacorta did the research that helped economists understand the role that investors play.
Today, when someone asks you why we need residential real estate investors, just point them to the Florida Phenomenon and Dr. Villacorta’s research.
Now Dr.Villacorta has a new thesis. In recent market reports, he has been describing the end game of the recovery in terms of a New Normal. I’m aware of several “new normals” that define what real estate markets will be like once the recovery is complete, but his is the newest and it he makes a convincing case for it.
Related: The Elephant in the Real Estate Room
What is the New Normal?
Villacorta’s “New Normal” does not expect home values to return to the price peaks of 2007. It’s widely accepted that the boom in the housing boom was fueled by a system of housing finance that was close to fraudulent. Home prices bore little resemblance to what buyers could actually afford, rather financing created a house of cards that was bound to fall. However, millions of homeowners who bought at the peak and still own their homes silently hope that theirs will be one of the neighborhoods that will be the exception and that they will achieve positive equity in their lifetimes.
Villacorta agrees some …read more