The economy is slowly recovering, but expect to face serious challenges ahead, California Association of REALTORS® vice president and chief economist Leslie Appleton-Young told Silicon Valley REALTORS® last week.
Appleton-Young told REALTORS® to watch out for the following "shoes to drop" in 2010:
* The commercial real estate sector, which is now stressed in every category, is expected to worsen in 2010, as commercial loans mature and more defaults occur in this sector.
* Consumer confidence will not see much improvement because the public will continue to be concerned about unemployment and future job prospects. The index fell from 53 in September to 47 in October.
* The unemployment rate will continue to rise. Appleton-Young said continued job losses are her biggest worry. She expects the jobs sector "will get worse before it starts to get better" unless new jobs are created.
* The budget deficit will continue to be a problem. Appleton-Young said the most recent estimate is the state will still be $20 billion short next year. She said while the federal government continues to inject stimulus money into the economy, the state is cutting services and furloughing employees.
* Industries like construction, manufacturing, retail and wholesale have been hit hard this year. She sees a similar trend next year. Construction is an issue for California too, she noted.
"We're not building enough to sustain demand and meet the needs of a growing population," she said.
* Expect more foreclosures and price compression affecting the high-end market, as more loans re-set. She expects the high-end market to experience double digit declines over the next 18 months.
Appleton-Young reminded Silicon Valley REALTORS® that the situation is different depending on location. "Try to focus on the local data," Appleton-Young said. "Your clients are just reading the national housing figures. It's the local data that matters."
The green shoots are: sales are rebounding and it's a "bonanza" right now for first-time home buyers. Appleton-Young welcomed the government's move to extend through 2010 the current conforming loan limits of $417,000 for most areas in the U.S. and $729,750 for high-cost areas, including Santa Clara and San Mateo Counties and most of the Bay Area. She also hailed the extension and expansion of the federal tax credit for first-time buyers.
The tax credit will be extended through April 30, 2010, with a 60-day extension if a binding contract is in place prior to the deadline. First-time home buyers will continue to receive a tax credit of up to $8,000, while existing homeowners will receive a reduced credit of up to $6,500. Existing homeowners will be eligible for the $6,500 if they have lived in their current residences for at least five years. The bill also will increase the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers, to $125,000 and $225,000, respectively. The purchase price of the home is capped at $800,000.
Appleton-Young however remains concerned about financial literacy of home buyers, as a recent survey revealed 21 percent of this year's buyers surveyed admitted they did not know or were not sure about the terms of their loan. She urged REALTORS® to be more pro-active in educating their clients on opportunities in the market and responsible homeownership.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
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