OK '08 seen for Bay Area real estate
Source: Mercury News, by Sue McAllister
November 14, 2007
LESS IMPACT FROM SUBPRIME LENDING WOES
LAS VEGAS - While the national forecast for home sales remains relatively flat for the coming year, the chief economist for the country's largest real estate trade group told reporters Tuesday that San Francisco and Silicon Valley are in stronger shape than many parts of California.
Lawrence Yun, economist for the National Association of Realtors, said sales will remain the same - that is, slow, on a national basis - as the market works through the effects of summer's credit crunch. That's because a few months ago, mortgage lenders suddenly yanked away many popular loan programs and tightened their lending standards in response to a spike in defaults by subprime borrowers.
But over the past few years, a lower portion of home buyers used subprime loans to buy homes in Silicon Valley than did so in outlying areas, which is one of the factors keeping the valley's market stronger than in places like Sacramento or Riverside.
That was among the messages Yun delivered in a revised 2008 housing market forecast during the trade group's annual meeting, which began Tuesday and continues through Friday. At least 30,000 Realtors and real-estate-related professionals are attending.
While Silicon Valley saw home prices rise steadily from about 2003 until 2006, Yun said, they didn't skyrocket as they did in less expensive areas like Riverside, Sacramento or even Las Vegas, which attracted both first-time buyers and real estate speculators.
"I would characterize San Francisco as not really participating in the housing boom, believe it or not," Yun said, adding that he includes Silicon Valley in that description.
He said San Francisco and Silicon Valley were still shedding jobs after the dot-boom bust as many other areas were seeing a buying craze take hold.
With technology employment returning to the region, the question is whether it will result in more sales and higher prices. "So far it has not done so in any measurable way," he said.
San Jose mortgage broker Mike Donohoe, a past president of the Santa Clara County Association of Realtors who was in Las Vegas for the conference, said he's heard "mixed reaction" among his fellow participants about next year's market. Those with the rosiest outlooks say things will bounce back in spring, he said.
"I'm also hearing from others who say they don't see it."
Meanwhile, along with Detroit and Sarasota, Fla., Yun said California's inland counties are among the three worst-performing markets in the country.
"I am closely monitoring the inland counties of California," including Riverside, San Bernardino and the Sacramento area, he said.
Subprime mortgages were used to finance a high percentage of home sales in those areas in recent years. On the other hand, the inland areas are "continuing to create jobs at a respectable pace" he said, which might soften the landing for home prices there in the face of high foreclosure rates.
Subprime loans are those typically made to borrowers with imperfect credit, but in recent years were also made to many people who might have been able to qualify for prime loans but who opted not to provide documentation of their income.
Yun said a combination of pent-up demand and greater availability of conventional mortgage products will help nudge home sales up slightly nationwide in 2008, to 5.69 million sales of existing homes, up from a projected 5.67 million this year.
The country's median home price for 2008 is forecast to be $218,300, flat from a projected figure of $218,200 for this year. This year's projected median price would represent a 1.7 percent decline from a record high $221,900 in 2006.
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