Looking Back, Forward, and Around

By Erik Hare

It’s traditional to use the end of the year to look back on what happened and set goals for the new year. After all, we have to do it sometime. But the reason it can be a bit difficult is that there is no point in time when you can say, “Yes, that’s the end, let’s stop”. Things have a habit of still going on and on.

That’s why it’s important to remember the best way to look forward is to look backward. We got to where we are for some series of reasons, and most of them are still in place at any one point in time. We can draw a line at the trends we’ve seen and reasonably expect them to continue, unless there’s a good reason they won’t. The best way to look ahead is to look back – or, more importantly, look around at what is really happening around us.

The past year has been one of tremendous change in the real estate market in Saint Paul. Just a year ago we were still in a seller’s market where values increased constantly. People who had drawn a straight line from what had been happening for the last few years had every reason to think it might continue just about forever. Some of them made decisions about how far into hock they got and how long they expected to hold it based on these observations.

Here we are in a buyer’s market. The inventory of condos in Saint Paul runs about 20 months of sales. How did we get here?

The answer is simple, if we spend as much time looking around as we do looking back. The way we have encouraged new housing projects since 2002 has created a generation’s worth of inventory. Long term trends still favor a return to the city, but the market will only absorb what is being built so quickly. A kind of equilibrium is returning. The line that we have to draw forward into the future isn’t one from the start of 2006, or even 2002 – but back much further. The long-term advice still holds, at least over the long term.

We know that Saint Paul is changing. Real estate trends across the country are changing, too. But none of this is happening in ways that really should surprise anyone. An investment as large as a first property is always going to be a big deal. What has changed in the market, and will continue to change, is what is happening all around us in the large projects that are increasing our city’s housing stock dramatically. How that is all absorbed by the market will go down in ways that we can reasonably expect.

The real estate market will go on, and the new housing stock we have created will be absorbed. Taking the time to look around is good, but what we have to see isn’t so easily expressed in numbers or stats. It’s the city that is changing all around us every day. That isn’t going to simply stop, at least not because the calendar has changed. But if it takes the change of the calendar to get us to look back and around, that’s a good thing. That is the best look forward we have.