On Thursday last, I had the privilege of taking one of my clients and my assistant to hear the Chief Economist of the California Association of Realtors, Leslie Appleton-Young, speak about the 2011 Housing Market, especially about Los Angeles County and the South Bay. I’ve heard Ms. Appleton-Young several times before and, as usual, she does not disappoint in her breadth and depth of knowledge about the California housing market.
Ms. Appleton-Young’s presentation began with an overview of the job growth pictures in both the U.S. as a whole and California. Her data showed that the recovery began, albeit sluggishly, in early 2010. Job growth appears to be positive now. Based on the current level of mortgage rates and positive signs of strong international growth, the stock market recovery, rising rents, strong demand for distressed properties, and lots of all cash sales (33 percent of all transactions in California are now all cash), she feels that the real estate market is definitely the place to be. Interest rates are expected to be at least one percent higher in a year, so buying power is at its’ peak right now.
Ms. A-Y’s presentation then discussed the impact of being able to get Fannie Mae/Freddie Mac GSE loans — without these loans, there will be a serious lack of loans for residential purchases. The movement in Congress for Qualified Residential Mortgages, while well-meaning, has the potential to disrupt the fragile recovery. The expiration of the higher loan limit for California of $729,750 this coming fall, is also worrysome. ( If you are thinking about buying, NOW is definitely the time!)
She also showed evidence that, for the most part, what got people into trouble wasn’t their original home purchase but their refinancing of those homes. She showed the history of sales prices showing that previous recessions did not reduce the median price, although they did reduce the number of units sold, but this “Great Recession” did reduce the median price from about $550,000 to about $300,000. Recent sales show improving prices AND a decreasing supply of inventory, which will ultimately result in increasing prices as supply becomes scarce. (I am already seeing this trend when properties are particularly well situated or have great design features.)
To finish up the presentation, she discussed the number of foreclosures in Los Angeles county versus our beach cities. As would be expected, the Beach cities have had significantly less foreclosures than areas such as Bakersfield.
This presentation was extremely informative. If you would like to see a copy of the charts, I’d be happy to give them to you. In the meantime, do you agree that the housing market is improving in our area?
