2011 will be a year of change, that's for sure, but the market as a whole looks much more stable and consistent than in the last couple of years. The nation as a whole has experienced a great recession, and we are seeing the effects of the most severe economic downturn over the decades. It is believed that this year this stability will become even more stable if last year it was a rough roller coaster, not only for real estate, but also for the larger economy as a whole.
I would like to say that this year there will be a recovery season that everyone hires, but the basics point to the opposite. Depending on how you measure, there are somewhere from 15-25 million people who are unemployed. There are 7+ million households in some form of financial problem and face the possibility of foreclosure. Depending on how you measure, we have a deficit of 14-55 TRILLION dollars, and we create money like crazy and buy our own debt to disguise everything until the situation improves - this is crazy. Despite the social, environmental and geopolitical problems that cannot be ignored, you could basically say that we live in the most unstable, rapidly developing and exciting time to be alive in the history of mankind. I would say that never before in the history of our species has a single generation been able to impose such tremendous changes, both now and in the future. It’s safe to say that a lot is happening in our world, and so much that you need to rely more on your trusted advisors, so I’m happy to provide you with the best information and the best service for all your real estate needs.
Of the few negative issues mentioned above, there are an equal number of positive events that also occur when it comes to local real estate. The last couple of years have been difficult, but we all do our best to break through these difficult times. The three main obstacles that impede full-scale economic recovery are high unemployment, excessive inventory and a negative attitude of people towards the real estate market as a whole. Ill addresses each one separately.
Unemployment: everyone talks about unemployment, and this is very important, because when a decent person cannot find a job, the loss of this utility is insignificant, but if you multiply several million times for all the unemployed throughout the country, it causes damage to everyone to a reasonable degree. It is powered by GDP, because this potential worker does not make the money that leads to consumption, he takes the US to the mark on a global scale in total productivity, he removes from the tax revenues that are so necessary for our government, and it renders the image on the family unit when the breadwinner of the family can not find work. Until jobs are placed by this excess labor, we will have problems. Recently, Ben Bernanke, chairman of the FED, said that it would take 5 or more years to get 5% unemployment, which most economists consider the “natural” rate (unemployment). It is good to see that today the United States on the recent main page states that jobs are being created, and we are making progress, unfortunately, this is slower than everyone wants or expected. From the point of view of real estate, the more people who are unemployed, and the limited schedule of work (vacation), the fewer people there can really qualify for a home loan. Last year alone, 93% of all purchases at home were made using a kind of mortgage financing, so although it may seem that there are a lot of cash buyers, it is just the opposite, and this lack of buyer throughput will reduce the overall demand that will have debilitating effects on home values. We have seen how this effect has taken shape in the last 18-24 months, but the good news is that the worst is over.
Excess inventory: we are in the center of a huge real estate turnover. This turn was one that was considered to be an onslaught of foreclosed homes, but this did not happen. Banks are smart, and if there is a shadow inventory of houses that go out of the public, it is released in a very controlled way. After all, why do banks immediately issue assets for repurchase? All that housing supply will simply eat in their bottom line. The opportunity cost of holding these excluded properties is more than just selling fire to get them out of the books. There are many myths about all these lost homes and their relations with the banks that they own. Just know that this is a problem that is far from complete; in other words, banks own a reasonable amount of REO (Property) property and that these houses will become available at a controlled level over time until all excess property is consumed. In fact, this is the best way to get rid of excess property. This is good for banks, because they make more money, but at the same time, it is good for current homeowners, because values will remain stable and also be good for the economy as a whole.
Tomorrowmore, 2011 will be the year of short sale. On average, the bank will do 10-15% more by making a short sale, and not in the event of failure of the house. A short sale makes sense for the bank, because the seller in a short sale works with his agent to find a buyer and the entire bank that needs to be done is to “press a button” and approve the transaction. In the event of foreclosure, there are costs of withholding, real estate taxes, eviction costs, repair costs and attorney expenses for which the bank is responsible, and when comparing side by side, a short sale is win-win for the bank and the borrower. 2010 was a record year for foreclosures, when banks took over 1 million homes. Many experts predict that 2011 will be the absolute peak for the repurchase of funds, and estimates will exceed 1.3 million homes, which will be transferred to banks. However, these experts do not take into account all of these potential foreclosures, which will inevitably be sold as short sales, since in most cases short sales are much better than foreclosures in terms of the overall effect on the financial and credit health of the seller / borrower. The more people make short sales, the faster we can absorb the surplus of problem stocks in the market, but because the federal government has developed attractive programs that encourage cooperation for the bank and sellers in a successful short sale, this will add momentum to the short sale — the most popular and viable option for the absorption of inventory and significant progress towards economic recovery. As a result, you expect that at least in the next 18-24 months a consistent and significant stock of short-term stocks will be provided.
This time horizon is the same for foreclosure properties, and the reason is that the peak of the market in terms of prices was at the end of 2006 and at the beginning of 2007. Up until this point, there were still 0% down and sub-prime loans, and many of these loans were written at a fixed interest rate of 5 years. By the time it is 5 years old, the terms of the loan will significantly increase the payment, but your typical borrower was given a notice at that time in 2006 or 2007 that they could easily refinance from their loan, no problem ... well, everything has changed. These loans are loans that will be your next buyout or short sale this year and next. These are loans owned by borrowers with indebted and overly extended loans that cannot keep up with their monthly liabilities. As these toxic loans continued to last until 2008, we will continue to consider the negative effects and consequences until 2013.
Owners who own houses that are 40-50% less than what they bought several years ago can see that their value will not be returned in the near future. They are smart enough to know to clean themselves up now when everyone else is doing a short sale so they can be in a decent position to buy a house again in the future where prices will still be good enough. This mood is booming, and I know because I get more calls and referrals about short sales than ever before. For the market as a whole, it’s great because it takes a house that is turned upside down and a borrower who is financially shitty and he drops the cost to a qualified buyer who can afford the house and is more than a couple of homeowners years. This is a type of stabilizing mechanism that will help us when we need to be, and a short sale is one of the main ways to get us there.
People Perception: Call this perception or call it consumer confidence, if it is negative, then we are on a rough trip. Along with this New Year, an overwhelming revival of spirit and hope appeared; (at least what I see and feel). At the end of 2010, the year that many of them would like to forget was closed. I see that wonderful events are happening all over the world, and in general I see the general feeling of the mood of people. Although we are cultivating at a slow and difficult pace, we are nevertheless moving in the right direction. Without the fact that most of us believe that we are moving in the right direction, we will be less secure and more susceptible to potential obstacles and pitfalls, while on the road to recovery. To look at it in a different way, consider the unobstructed optimism of real estate in general for 2004-2006. This was, in fact, the pinnacle of consumer confidence, and people paid crazy sums for homes that sold hundreds of thousands less than a year ago. There is a higher herd mentality with real estate, as well as in the stock market and many other everyday social interactions in this regard, and the herd mentality has never been more interested than with the housing boom in 2004-2006. People believed that prices would rise constantly. Unfortunately, the opposite was true, and during the subsequent correction and recession, the perception changed, and most people felt that prices were perceived to decline steadily, but I argued that this was in 2008–2009. Now we are in a position to try to find modesty of stability and confidence, and this is what I see in development that will continue throughout the year, with the exception of any unforeseen anomaly. In fact, a national survey showed that 7 out of 10 people report that household values have stabilized in their area. In other words, the shit hit the fan, but the worst is over, and we slowly bring the pieces back. Although it may not feel great, it is much better than where we were only a year or two ago, and over time the population is becoming more and more positive.
Look ahead
Overall, in San Diego over the past couple of years there has been a healthy correction, and it is ready to remain stable and remain one of the best places in the country so that the buyer can invest their money in real estate.
At some point at the peak of the market in 2006, only 12% of households could afford the average price of a house - seriously! How could people expect prices to rise when only 12% of all families in San Diego can afford to go down the middle of the road ... crazy. Today this number is more than three times, and for the average size - more than 50%. Availability is 40 years old, and a recent survey reported that 8 out of 10 people believe that buying a home right now is a good financial decision, and 68% of people think that now is the right time to buy a home.
In addition, interest rates are constantly falling. They have never been so good, and that says a lot. If you accept the average mortgage rate over the past 30 years, it is about 7%. Today the rates are below 5%, and this is simply amazing. Over the past 70 years there has never been such a period when there was a real estate situation with low interest rates and lower prices. This is truly a historical time to participate in the market, because I firmly believe that we all look back in a few years and see what kind of purchase it was. I will argue that 2009-2014 will be a five-year window of wonder in terms of buying real estate in the long term. This does not mean that you buy a house, and 5 years later its cost twice as high as what happened in the last market boom was an anomaly, and this would not have happened if creditors and large banking institutions justified the risky behavior of lending to subprime borrowers and excessive use of exotic lending programs. All this has led to the fact that this recent correction has become more serious. Hope we learn about these errors. In this case, buyers today must be ready and willing to expect a modest assessment of their real estate investments. In the long run, this leads to a significant gain, especially if you aggressively pay off your mortgage. I just feel that what we have watched over the past decade was an once-in-a-lifetime episode, so we should not expect such a market imbalance to ever again.
As we work on excess inventory, we will find ourselves in a more stable real estate environment. I started working and building my career in this industry back in 2006, and I will be the first to say that I have never seen the “normal” real estate market; I have no idea what a normal feeling is. In this case, as soon as the disturbed element of the property being sold is absorbed, we will find ourselves in a reliably stable and normal market, but not for long.
I apologize that in two years San Diego (along with the rest of the country) will experience a housing shortage. I wrote about it earlier in 2010, but I just put it, for the last couple of years we have seen a trickle of new equipment and new construction. As a rule, we Americans need 1.3 million new housing units each year to accommodate population growth and the need to replace old and dilapidated structures. If you tried to get a construction loan for the last 3 years, you would know that it is almost impossible to do this. Of my numbers, about a third of the actual housing needs were reached, which means that over the past few years, the demand for housing has arisen. This, apparently, does not make sense due to all foreclosures and short sales, but as this excess inventory breaks off, the housing shortage will manifest itself in full.
Essentially, we are switching from overvoltage to voltage supplying housing. Prices will increase as this happens, and there will be a further increase in prices caused by the adjusted and expanding economies, as well as inflation. This is good news for a homeowner given the medium and long-term prospects for home ownership and provides a window of opportunity for those who are considering a new home purchase. It is reasonable to act now, as long as the prices and the cost of money are low, and to build a safe and secure future for yourself financially.
In general, San Diego is going to emerge from this great recession in the first place, because it was one of the first real estate markets to move into a correction phase. This is also a very desirable area, in contrast to the supercooled and rebuilt sprawl of places like Phoenix, Las Vegas, and the Inner Empire. We are a city formed and surrounded by the ocean, canyons and mountains. Our land supply is really limited, and only on the periphery of our district you will find accessible land for new construction. Our local economy is no longer dependent on the ebb and flow of the military-industrial complex, as it has been throughout its history. We have a growing biotech, telecommunications and computer industry that offer jobs that justify our current real estate values. Through the recession, there were many investors and first-graders who willingly choose property because they believe in San Diego prospects in the long run. San Diego is different from Stockton or Fresno, Bakersfield or Viktoravilla, where you can get a newer home for $ 125,000, but in all cases there is a foreclosure, and there are not enough buyers to absorb all the troubled stocks. Нам повезло и привилегия жить в такой прекрасной и желательной области, как это, и цена, чтобы жить здесь, отражает это чувство соответственно.
Безусловно, Сан-Диего довольно хорошо выдержал бурю. Среднее снижение общей цены с пика рынка в округе Сан-Диего в целом составляет около 20-25%. Будущее может сильно отличаться в зависимости от того, из чего вы получаете информацию, но исходя из рынка и основ, мы должны ожидать дальнейшей стабильности и равновесия, когда экономика восстанавливается, рабочие места восстанавливаются, избыточный инвентарь поглощается, а люди в целом полагая, что будущее оставит нас лучше, чем сегодня. Хотя мы не увидим восстановление в темпе, который мы хотели бы, мы движемся в правильном направлении. Перед нами яркие моменты, и нам нужно помнить об этом, когда мы подвергаемся противоречию. Я за оптимизм в покупке недвижимости в Сан-Диего, и моя цель в этом году с моей женой Джессикой - сэкономить первоначальный взнос за наш новый дом вместе и воспользоваться феноменальными процентными ставками. Давайте успешно и процветаем вместе, и я желаю вам всего наилучшего на 2011 год.
