PULLMAN, Wash. — The year-end 2000 Washington Real Estate Confidence Index reveals that commercial real estate professionals and mortgage lenders were somewhat disappointed by the second half of 2000, but believe that 2001 will be somewhat better, reports the Washington Center for Real Estate Research at Washington State University.
The index was developed to help the WCRER fulfill its mandate to provide tools designed to help real estate licensees react more quickly to changing economic conditions.
The new index, patterned on similar statistics developed by the Real Estate Center at Texas A&M University, registered .415 for the last six months and .553 for the next six months, for an average index value of .484. Statewide scores for commercial real estate professionals and mortgage lenders were remarkably consistent. “The fact that both groups were fairly upbeat about next year is in contrast to most recent economic news which suggests a slowdown is underway,” Glenn Crellin, WCRER director, says.
Index values can range from 0.000, which indicates a total lack of confidence in the real estate market, to 1.000, which indicates total confidence in the market. While the ranges of values from .4 to .6 represent uncertainty or neutrality, the fact that the expectation for 2001 is well above the 2000 experience is a positive sign. In addition to statewide measures for late 2000 and early 2001, similar measures are computed for six regions of the state often used by WCRER in its analyses.
“Just like housing markets, regional differences abound,” says Mitch Swenson, a commercial real estate broker in Spokane, whose colleagues were least satisfied with late 2000 (0.326). The best score for commercial real estate (.503) came from the Olympic Peninsula (excluding Kitsap County). Similarly, mortgage lenders had diverse opinions, with index values for late 2000 ranging from .307 in rural eastern Washington to .460 in Northwest Washington (around Bellingham).
The entire range of scores was higher for the first half of 2001, with commercial real estate salespersons and brokers recording indices from .521 in Southwest Washington (Vancouver, etc.) to .609 at the other end of I-5 in the northwest corner of the state. Mortgage lenders’ opinions ranged from .474 in the urban east region to .596 in the Central Puget Sound (greater Seattle).
A total of 201 real estate licensees and mortgage lenders from all parts of the state participated in this initial survey. Responses were weighted based on the proportion of business each person did in various parts of the state. Not many people are active in both commercial real estate and mortgage lending simultaneously. However, as the index is expanded into residential resales, home building, farm/land sale, and property management over the course of the next year, it will be necessary to similarly allocate responses by relative business activity.
“The real test of this measure will come in the weeks ahead,” says Crellin. “Matching expectations to market performance is the real measure of the success of a confidence index, but based on the initial acceptance of a similar statistic in Texas, I have high expectations for the WCRER version.”
The statistics are co-sponsored by several industry groups. They include the Washington state, Inland Northwest and Portland-Vancouver chapters of the Commercial Investment Real Estate Institute, the Washington Chapter of the Society of Industrial and Office Realtors, the Commercial Brokers Association (Seattle), the Washington Mortgage Brokers Association and the Mortgage Bankers Association of Washington.