California Association of REALTORS® vice president and chief economist Leslie Appleton-Young didn't try to sugarcoat the state of the housing market for REALTORS® when she spoke to them early this month. The worst is over, but the market continues to struggle, she said. when she spoke to them early this month. The worst is over, but the market continues to struggle, she said.
"The tide has turned for housing, but now it's stuck," said Appleton-Young.
Appleton-Young explained that the economy started to gain a bit of traction and seemed to be moving forward at the beginning of this year, then things happened here and abroad – Japan's earthquake and tsunami, oil price spikes, uprisings in the Middle East, stock market volatility, the looming U.S. debt and then the debt crisis in the euro zone. These confounding events made consumers nervous and, as a result, the housing market that appeared to be recovering is now stalled.
C.A.R.'s chief economist likened the market to being in "a state of walking pneumonia." Lenders aren't lending and consumer and entrepreneurial confidence remain low. As long as the jobs problem continues, she doesn't expect consumer spending to improve much. Even though mortgage rates have experienced a historical drop, "you can't push on a string. You can't make people borrow; you can't make lenders lend," she said.
Absent more wild cards that could upset the economy, Appleton-Young expects 496,000 unit sales statewide in 2012, just a 1 percent increase from the expected 491,000 unit sales by year-end. She projects the median home price to hit $291,000 by the end of 2011 and to increase 1.7 percent to $296,000 in 2012.
California's foreclosure problem will be here another four to five years, she said. Currently, 30 percent of California homeowners are currently underwater; 4.6 percent are 90 days away from being underwater.
The good news is Santa Clara County is doing better than most parts of the state with just a 9.6 unemployment rate. In fact, the Bay Area has the best economy in California in terms of income and job growth.
"Companies in this valley are in the cutting edge, leading growth in the economy," said Appleton-Young.
In Santa Clara County, 35 percent of homes that closed escrow in September were distressed, but this is a far cry from Solano County, where 73 percent of homes that closed escrow in September were distressed sales.
Locally, in October, 25 single-family homes closed escrow in Los Gatos, down 19.4 percent from the previous month and down 30.6 percent from October 2010. The median price of a single-family home in October was $1,150,000, down 4.1 percent from the previous month, but up 9 percent from the previous year.
In Saratoga, 17 homes sold in October, down 19 percent from the previous month and down 32 percent from the same month last year. The October median price of a single family home in Saratoga was $1,372,500 down 12.9 percent from the September median and but up 18 percent from the median of the previous year. Inventory continues to be low in both areas.
"Sellers are nostalgic for 2006 prices. You have to work them through that," she told REALTORS®.
There's no easy fix for the economy. Trouble looms ahead as all levels of government will have to wrestle with budget issues, including pensions and cost of health and other benefits for public employees. "It's hard to do when in some places the coffers are empty. You can't spend more than you take in, even if you are the U.S. government. Everyone is going to have to give up something in the end," she said.
Appleton-Young said in 2012, REALTORS® will need to watch the following issues closely – the future of Fannie Mae and Freddie Mac, changes in the tax treatment of real estate, including the definition of the QRM (Qualified Residential Mortgage), which could make purchasing a home even more difficult and costly for consumers.
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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