It’s been a busy month. We held our Mid-year meetings in Washington D.C. in May as well as attending the Chamber of Commerce Business & Legislative Summit in Sacramento so I’ve had the opportunity to talk with both our state and federal legislators as well as hear updates from numerous economists and industry experts. I’ll give you links to articles I’ve written on these meetings if you’d like more detail on their views.

 

In summary, while Florida and other areas of the country are still ‘toast’, California, and in particular Southern California, are faring better than most. Our prices are stable or appreciating, our sales are strong and our inventory is very low – 2 months compared to 2 years in many parts of the country.

While most agree that we may have turned the corner and will not experience a ‘double-dip’ in prices, we’re still in for at least 2 more years of a market dominated by distressed properties. 1/3 (about 15 million) U.S. homeowners are upside-down and 1/3 of those are either in foreclosure or 60+ days delinquent. 50% of U.S. home sales are distressed (70% locally) and we won’t reach sustainable price support until that number falls to 5% or less.

 

The average delinquent homeowner remains in their home for 18 months today owing to the prevailing bank philosophy ‘a rolling loan gathers no loss’. Fortunately or unfortunately, these people are not saving their money but pumping it back into the economy thus contributing to an economic picture that is stronger than employment and GDP numbers would dictate.Those who work in the administration believe that they are responsible for stabilizing the market and stimulating a recovery. Most of the rest of us believe they precipitated the decline and are only delaying the true recovery. Constantly changing signals and policies out of the Fed and other entities have lead to mass confusion and amazing lack of success in both loan modification and short sale programs.

On the upside, many insiders no longer foresee the ‘shadow inventory’ many feared but rather liken the inventory to a ‘pig in a snake’. Improving employment numbers and continued low interest rates will restrict the number of people entering the pipeline while attrition through a few successful loan mod’s and short sales together with increasing auction activity will keep the volume that eventually gets dumped on us to a manageable level.

 

Finally, and in a nod specifically to our area, several economists agree that we are facing another potential housing crisis – one that I have been pointing out for years. With minimal inventory levels and high demand, if builders don’t start ramping up soon we will face a very real housing shortage and the possibility of a price spike. The question comes down to the ongoing strength of consumer demand given the potential for higher interest rates and less federal stimulus from tax credits and securities buy-backs.

 

Last month several of you asked for an extended graph of 1^st quarter sales and median price history longer than the ‘09-’10 charts from last month. You can see that sales volumes are up significantly over even previous record sales years. Median prices are relatively stable with average price/SqFt stable within a $5 range since the first of the year.     

 

You can read more detailed background with access to national charts and commentary at:

‘Economic Update with Dr.’s Yun & Zandi’, ‘FHA Commissioner Dave Stevens: YOU made the mess, WE’LL clean it up. Oboy’, ‘Upsides & Downsides of Mortgage Tax Relief’, ‘Struggling Homeowners Led To Slaughter by False Hopes’, ‘Updates from the Pro’s’, ‘Jury Duty Scam Sweeps into SW County’  and much more.

 

As always, your questions and comments are most welcome.

 

Gene Wunderlich is the Government Affairs Director for the Southwest Riverside Association of Realtors.  You can direct your questions and comments to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .