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Real Estate Market Held On During 2001
Despite a sluggish economy and consumer uncertainty, low interest rates and high demand for new housing helped sustain local market
BY JOSE L. CARMONA
January 3, 2002
Fueled by low interest rates, increased property values, and a high demand for new housing, 2001 turned out to be a buyers market for real estate.
Due to higher interest rates in 2000an election yearmany families, especially government employees, held back on buying or trading their homes over concerns as to what would happen in November and beyond. Nearly one third of Puerto Ricos labor force works in the public sector.
As a sluggish economy prevailed and consumer confidence plummeted in 2001, the real estate market received a much-needed boost when the Federal Reserve reduced interest rates a record 11 times throughout the year. Firsttime as well as existing homebuyers took advantage of low interest rates to buy or refinance.
Enjoying favorable rates (6.5% to 7.5% for a 30-year loan), many families traded their existing homes for bigger ones, particularly walkups and middle-to-high income single-family homes. People in Puerto Rico were buying homes in 2001.
Consequently, low interest rates dealt a blow to the rental market, as more consumers qualified as homebuyers. Also, market competition among existing and new properties intensified, due to an abundance of new projects in the $200,000 to $300,000 range.
In spite of economic uncertaintydue to plant closings and layoffssale of property in the $500,000 and higher range did well in 2001, although not selling as quickly as in previous years.
Sale of high-priced second and third (investment) homes continued during 2001although at a slower pacebecause of their tax shelter advantages.
Local realtors are comparing 2001 with 1999, which was an excellent year for the industry.
According to Planning Board reports, during the first seven months of 2001 (January to July), the number and value of permits for new housing units increased 10.3% and 15.6% respectively, when compared to same period in 2000.
Additionally, local mortgage banks have reported a record loan production year, with some doubling their 2000 results.
This Caribbean Business article appears courtesy of Casiano Communications.