Archive » March 8, 2007
Real Estate View
By Mark Schneidman
Facts and Forecasts
The California Economic Forecast held a conference last month at Fess Parker’s DoubleTree Resort. The following are excerpts from speakers’ presentations:
∆ Prudential Realtor Bruce Fisher was asked to discuss "Affordable Housing" in Santa Barbara. This was categorized as $3,000,000 and under. He said the dictionary definition of “affordable” is: “To be able to meet the expense of; to have sufficient means for.”
∆ The large gap between income and home prices looks like this: Between 1996 and 2006, the median income went from $58,000 to $84,000, a 45% increase. During the same time period, the median price for real estate units went up 271%.
∆ Santa Barbara condo sales mirrored national statistics. Forty percent of sales came from investors and second home purchasers. But there are fewer buyers. More listings and fewer sales means listings spend a longer time on the market. In 2006, only 43% of condo listings sold compared to 84% in 2004. Now we're in a normal market that we haven't seen in the past six years.
∆ Prudential Realtor Dan Encell addressed the “Estate Market,” defined as $5 million and up.
∆ The last two years each had 40 $5-million sales and beach properties were the strongest market. Out of the 40 2006 sales, six were on the beach and 30 were in Montecito.
∆ In January 2007, 13 properties went into escrow and January is not known as a “big” month. Due to low inventory, buyers need to compromise. They either need to pay more, buy a fixer or sit on the sidelines.
∆ Who is buying? Retirees, second home buyers and families with young children looking for good schools and a better quality of life (Montecito anyone?). We are seeing more buyers coming from out of state versus past years when two out of three buyers were local.
∆ 2007 prediction: Inventory will remain low (again, Montecito anyone?). Negative tax incentives will keep some owners from selling. Inventory could decrease while demand should continue to be strong because of reliable factors: Baby Boomers, their children, inheritance and a healthy stock market.
The future: prices will rise and you will see double-digit appreciation in real estate values during the next few years.
∆ Dr. Mark Schniepp, the director of California Economist Forecast, said last year’s decline in sales was the lowest in 22 years and in a real estate correction, volume corrects first. However, interest rates are falling and are still near record lows.
∆ While the median selling price is down, the decline isn’t precipitous. The dollar volume total has not dropped like the number of sales. For the industry, real estate-related employment is high.
∆ Mortgage defaults soared and are back to levels seen in the early 1990s. Most of them, however, are in North County.
∆ We still have buyer-seller stalemate. Credit concerns may be larger than predicted and the disposition of interest rates may be a key element impacting the market. Falling rates this year would help to offset the less than normal demand for housing seen in 2006.
Schniepp’s probable 2007 Outlook
• Job growth and income stable
• Appreciation, zero or less
• Buying will increase
• From 1989 through 1993, there was a 25% total real estate decline. In 2006, it was 8% and 4% is predicted for 2007. After that, the market should remain stable.
• More traffic and middle class flight
Schneidman’s MLS Update
As of February 23, 26% of single-family residences were in escrow with a net number of 383 listings available, compared to January 12, when only 15% were in escrow, with a net number of 403 listings. It is nice to see 2007 starting off strong with more listings in escrow.
My father used to say, “If winter is here, can spring be far behind”? Put a real estate twist on that and “If escrows are here, can closings be far behind?”
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