The rebound continues.
Those three words sum up the best of hopes, and a realistic prediction, for the Western New York real estate market in 2000.
The soft markets -- both commercial and residential -- of the early- and mid-1990s are history, but these are still far from boom times.
Buffalo-area housing is still a buyer's market, but is coming into better balance. After a 12 percent jump in home sales in 1998, the momentum was sustained in 1999 with another 4 percent increase in home sales volume, according to records from the Greater Buffalo Association of Realtors.
Property values in most neighborhoods remain stagnant, but that could also be on the verge of changing. Pending tax cuts -- both state and county -- and a shrinking housing inventory will push up property values in 2000, some real estate experts believe.
There were 5,749 houses listed for sale with local realtors on Dec. 1, 1999, compared with 6,635 the year before and 7,285 in 1997.
"I think we're going to see appreciation for the first time in a very long time," said Peter Hunt, president of Hunt Real Estate.
The commercial real estate market also has seen sustained demand for office and industrial space in the last two years. The area's suburban markets absorbed 1.2 million square feet of new office space between September 1997 and September 1999 as local developers built new facilities for growing employers, such as Ingram Micro and EDS.
"The perception is that the markets have been at the bottom and are coming back," said Daniel Monte, senior managing director for Holliday, Fenoglio & Fowler, a commercial real estate finance company. "We have a very controlled market, with local developers in control and local banks making solid lending decisions. It's boring, but it's stable."
The one variable that could derail the local real estate market this year is interest rates. While mortgage and commercial loan rates remain low, by historical standards, they increased in 1999 and could continue rising in 2000.
"If interest rates in the market remain stable, you're looking at a pretty good 2000," said Paul Ciminelli, president of Ciminelli Development Co.
The commercial real estate market will be a key indicator for further economic growth in Western New York this year. If the area's economy continues improving, companies will absorb more office and industrial space.
The resulting growth in private sector jobs could spur demand for more housing, which helps firm up area property values.
Skulogix is a perfect example. If the company can accomplish its plans, announced earlier this month, of employing more than 800 area residents at an e-commerce distribution center in Lancaster, the job growth could have a trickle-down economic impact.
Skulogix executives said many of their positions will be good-paying computer jobs.
"We need better private sector jobs. That's the only thing that's going to turn our economy around in my opinion," said William Horohoe, president of the Greater Buffalo Association of Realtors. "You can't replace the industrial jobs we've lost with jobs paying $6 an hour."
Commercial realty on upswing
Local commercial real estate brokers talk about their market like cats who just swallowed canaries.
"I'm very optimistic on the future," said Jim Militello, of James R. Militello Realty in Buffalo. "There appears to be, in the year 2000, a couple of large, back office operations shopping the Amherst market . . . You'll see some announcements coming soon."
Most of the demand for commercial space, and the job growth, has been in Amherst and Cheektowaga in the last two years. But signs now show downtown Buffalo on the verge of a comeback.
The downtown office vacancy rate was 18.6 percent in early 1999, 2.5 percent lower than a year earlier, according to the Greater Buffalo Building Owners and Managers Association.
Things improved more in 1999 with the growth of telecommunication firms looking to locate near Bell Atlantic's downtown offices, call centers and high tech firms. Digicon Imaging, a high-tech printing services firm, brought 85 jobs downtown in December by leasing 32,000 square feet in the former Trico building.
The biggest symbol of downtown's resurgence may by the south tower of KeyCenter. The Class A tower sat vacant for years as a 170,000-square-foot monument to the bust of commercial real estate in Buffalo.
Ciminelli Development Co., which manages the building with Emmes Asset Management, expects the tower to hit full vacancy in 2000. Delaware North outgrew its headquarters in another downtown property and moved into 130,000 square feet in the tower in December.
A better year downtown
Brokers expect 2000 to be another good year downtown.
"We are as busy as we've ever been at this time of the year. There's a lot of people looking at the area -- and for the first time in a long time, we're seeing new people look at the area," said Bob Schell, president of Pyramid Brokerage Co. of Buffalo.
"I'd be willing to bet that downtown will be down in the 12 to 15 percent vacancy range at the end of the year. . . . It's exciting stuff."
Home builders also had a better year in 1999. There were 1,102 building permits reported in Erie County through November, a nearly 30 percent increase from 854 during the same period in 1998. Although home construction is picking up, the pace is still far off the 2,500 to 3,000 local homes built annually in the late 1980s.
Growth pushes east
Some of the growth has pushed east, with new housing in Clarence and Lancaster. Clarence had reported 199 building permits through November, up from 95 through November 1998. Lancaster had issued 296 permits as opposed to 179 during the same period in 1998.
"The reason Clarence has done well is there has been a great disparity in the Clarence and Amherst tax burdens. Amherst is going into a total revaluation (of real estate assesments) this year and that should help equalize and stabilize things," said JosephMcIvor, executive vice president of the Niagara Frontier Builders Association.
Buffalo is also getting its share of the housing action. The city's effort to renovate residential neighborhoods got a boost from the federal government in 1999.
The Department of Housing and Urban Development awarded Buffalo $12.7 million to help demolish old houses, renovate sites and give qualifying buyers mortgage subsidies.
M.J. Peterson Corp., one of the designated builders in the city's home ownership zone, has 20 houses under construction this month and another 25 under contract.
"Our projection is we'll probably have the biggest year in city housing in our company's history," said Dennis Penman, executive vice president of M.J. Peterson. "It wouldn't be out of the realm of possibility to see 200 units in the city of Buffalo this year, and that rivals any suburb."
The company's average sale price for a new build in Buffalo last year was more than $100,000.
A big factor in residential real estate for 2000 could be the implementation of county property tax cuts and continued phasing in of the state's School Tax Relief (STAR) program.
Since home buyers deal with one monthly mortgage figure covering the principal, interest, taxes and insurance, a reduction in taxes will offer buyers more money to put into principal and interest.
"That will automatically affect affordability. I believe, over the course of the year, we will see steady appreciation," Hunt said. "If you take greater affordability and couple that with a lower inventory, you almost have to see appreciation."
Horohoe thinks the 2000 tax cuts will help, but local leaders have much work left to be done.
"Even with the tax cut, still more has to be done to reduce the property tax burden in the area," he said.