Gazarian Real Estate Center, CSUF, Fresno,
CA /October 4, 2013
SERIES/topic
Agenda topic Housing
Market Conditions – Views from the Top
Discussion/Conclusion:
1.
Jennifer Clark, Development & Resource
Management Director – City of Fresno:
a.
1945 – 2000 Fresno has had exponential growth
b.
1970s to 1990s we had top growth in the Country
c.
10 yr permit history – COF has largest # of
vacancies – 10,000+ vacant, unoccupied & depresses city values
d.
COF must use money to maintain
e.
Permits pulled in Dec typically 1400 – 1500
housing start average; this year we’ve exceeded #s
f.
Seeing return of the Move Up & 1st
Time Home Buyers
g.
Expectations for greater demands for SF Housing,
smaller neighborhoods, connectivity to schools, parks and multi-generational
living needed for mixture of housing types
h.
Challenges are with Long term funding needed for
planning demographics of 30 and younger which is Fresno’s average age at this
time. Housing needs are for minimalist
living – potentially over burdened
j.
10,000 vacant SFR homes in Fresno are available
for REOs.
k.
44% available infill housing lots, 55% outside
city limits
2.
Karen McCaffrey – McCaffrey Homes/Gazarian Board:
a.
State of the local housing economy is positive
and the housing goals have closed 44% higher than last year.
b.
Demand High, Affordability Strong, Supply Low,
and it’s a Great time to Sell
c.
Fresno County is seeing positive job growth for
the past 5 yrs.
d.
79% of US People still believe in the American
Dream
e.
2017, Gen Y the largest buyers in the US
i.
25 – 37 yrs old
f.
Building permits will stay moderate for 2014
g.
Prices to drop in 2014
h.
Up 5%+ annually for the next 6 yrs
i.
Resales will continue to have higher prices over
the next 5 years
j.
Cash sales have no effect on appraisals
3.
Michael Miller, President – Lennar Homes
a.
Nationally we are recovering
b.
Summer saw higher interest rates
c.
$1.5 M new homes needed each year needed
d.
Lending processes still slow
i.
Standards getting more lenient
ii.
Processing will moderate and normalize
e.
Locally
i.
742 Home Starts
ii.
Closing 638 – 30% increase
iii.
Closing 742 – 19% increase
f.
2014 Anticipation
i.
Inventory low
ii.
No land to build on
iii.
No strong subs
iv.
Gov Understaffed and Limited
v.
Inspection & Plan Ck from Weeks to Months
for Approval
vi.
Appraisals not keeping up with prices
vii.
Bakersfield highest price change
viii.
Buyer qualifications will continue to struggle
ix.
Battle with increasing pricing
x.
New Codes in 2014 coming
g.
New model homes will be for In Law Living
h.
30% of people live in Multi Generational homes
and they have a demand for more
4.
Richard Samuelian, Review Appraiser – Rabobank
America
a.
When appealing, you’ve told an appraiser they
didn’t do their job correct
i.
Be gentle when appealing and help with new info
b.
60% can afford to buy median price homes
c.
We are in Sub5 Interest rates
d.
Need to build job growth in order to sustain
prices long term
e.
Only thing keeping things moving is low interest
rates. Once that goes away the market
will stagnate.
f.
Appraisal changes
i.
No personal relationships
ii.
Less communication
iii.
No connection
5.
John Shamshoian , President - Realty Concepts
a.
2013 has been a transition market from
distressed to traditional sales
b.
Supply is down 32% from 2011 and up 21% from
2012
c.
Inventory increased 44% from 2012 to 2013
d.
REO supply went from
i.
19% in 2010
ii.
18% in 2011
iii.
13% in 2012
iv.
6% in 2013
e.
Short Sale supply went from
i.
26% in 2010
ii.
27% in 2011
iii.
16% in 2012
iv.
7% in 2013
f.
Traditional Sales
i.
55% in 2010
ii.
55% in 2011
iii.
71% in 2012
iv.
87% in 2013
g.
Actual Closings
i.
2011 to 2012 dropped 10%
ii.
2012 to 2016 dropped 8%
h.
Closing Types
i.
REO 13%
ii.
Aug 2013 Traditional 74%
i.
Median sales price up 26% over 48 months
i.
22% Aug 2012 – 2013
j.
Interest Rates
i.
Still under 5%, Low!
ii.
Historically 8 -10% average
iii.
Will not affect long term sales
k.
Forecast
i.
Healthy balanced market
1.
Dominated by Traditional Sales
2.
Owner Occupied
3.
Affordability will stay the same
4.
Slowing of the market
ii.
Appreciation will slow down
iii.
3 – 6% increase over the next 12 mo for SFR
iv.
Consumer confidence pushing and psychologically
we are being affected
Action items
|
|
Deadline
|
Prepare for slow down and steady
growth for 2014 while we experience a balanced market.
|
|
|
Affordability will remain good at
60%+; lending will continue to be challenging yet easier than before
|
|
|
Traditional home buyers will
dominate the market while distressed property fades out. Gen Y to be the next
largest buyer group in 2017
|
|
|
Multi Generational Living will be
the next wave of housing developments locally;
|
|
|
79% of people still believe in the
American Dream, and everyone needs to live somewhere!
|
|
|
It is a great time to Sell!
|
|
|
Agenda topic: Is
California Back? Will it Lead
again?
Dr Richard K Green, Director & Chair, USC Lusk Center for Real
Estate
Discussion/Conclusion:
·
Cal State schools good for social mobility
·
Real Estate has cooled off
·
2 – 3% interest rate increase possible in 2014
·
4 Elements determining the market
o
New Construction
o
House Prices
o
Home Ownership rates
o
Apartments
·
We’ve been through the worst housing recession
since WWII
Agenda topic: WHAT
HAS TURNED THINGS AROUND?
Discussion/Conclusion:
·
Good news is we still need housing in the US
o
1.5% shaving of GDP
o
Fresno County under building @ 2000 units vs
4000 units typically
§
The Economy Will Get Better
·
ITEMS THAT HAVE SORT OF TURNED things around:
o
Time
o
Harp helped to shorten up the loan terms from 30
yr to 15 yr terms
o
Short Sales
o
Investors Saved the Economy
§
Questions to considers… are we changing
demographically?
·
Gen Y will not be moving out anytime soon and
anticipate living with their parents the longest.
o
Like 40 yrs old
·
Immigration getting back to normal
·
Divorce rate is picking up again
o
when the economy is bad, people stay together
for affordabilit
·
Employment growth by state
o
1.5% good job growth for CA
o
TX is booming economically, last in the US to
come back
§
Houston is the most booming city in the US – NO
CODE ENFORCEMENT
·
Globe is investing in US as we are cheap land
o
½ Venture Capital in the US goes to California
o
Asia/Beijing most expensive real estate in the
world
·
Chinese & Hispanics primarily purchasing
property
o
`They are here to buy land, park and get visas
Agenda topic DO
AMERICANS DESIRE HOME OWNERSHIP?
Discussion/Conclusion:
·
Do American Value Home Ownership?
o
% went down for a while
§
Married Homeowners
§
Single Renters
o
Most people today are renters in their home
§
Rent ratio is much higher- great time to hold
and rent!
o
Partial phenomenon is age
§
Women waiting to marry later
§
Women with college degrees want men with degrees
·
Agenda
topic AGING & DEMAND
Discussion/Conclusion:
o
Home ownership will drop for time
§
Lending & Net Income guidelines are being
miscalculated now and causing lag
§
25 to 29 & 70+ will be a strong rental
market over the next 10 yrs due to shift in life!
§
Marriage is a huge predictor of home ownership
·
Divorce & staying Single may depress home
ownership
§
People will become home owners late in life!
·
Fresno has had better growth than the state
overall
o
Bay area is the strongest economy in the world
·
Construction starts in CA are low, we need more
building, Fresno same
·
IT is a driver
o
CA is the leader then WA & NY & Colorado
has the best IT available in the US
o
Hollywood and the gaming industry is the largest
next to SF IT ability
·
Educational attainment
o
Bachelors 15 to 20% in Fresno
o
Needs kids to get degrees!
o
Ride to Work states do better, get one!
o
Transportation infrastructure needed
o
SouthWest Airlines is a MUST and a NECESSITY!
§
They have a major economic impact on the local
economy
o
Interstate designation needed too!
Agenda topic: INVESTOR
BUBBLE? WHERE ARE PRICES?
Discussion/Conclusion:
·
Investor cost of capital is low
·
Vacancy rates are low
o
Will rents continue to rise?
§
Investor loans tend to have balloon payments –
watch out!
o
Fresno has a low vacancy rate of 5.8% usually 8%
is typical
§
Affordability becomes a problem when prices
continue to rise
§
At some point purchasing will be better
Agenda topic: Miscellaneous
Topics
Discussion/Conclusion:
·
SEQUA makes CA difficult & water &
pollution is challenging to deal
·
Length of time to develop is difficult
o
In CA we can’t build what we want to build!
o
2 yrs to what takes 2 months in TX!
·
Fracking
& homeownership will cause fragmenting of the housing market
o
People only stay for approx. 5 yrs
·
Shut down of Gov is intersting – if we miss debt
payments how will this affect us?
Action items
- Watch for VACANT lots, 10,00 of them in Fresno ready to affect the community
- Watch for Move Up & 1st Time Home Buyers
- 30% people live in Multi Generational Living and demand more... the next episode
- FIND YOUR MONEY NOW, it will be tight and difficult to get!
- Cool resource: www.FresnoHistoryMap.org
- Over 40% of infill lots are available in the City, find a builder!
- Watch for Gen Y, they are our next buyer!
- Gov processing for building and construction have gone from weeks to months in Fresno
- Appraisals not keeping up with price changes, Realtors must do a better job to prepare the appraiser
- New Building Code change for 2014
- Supply is up slightly at 44% causing sales to slow down making
- HEALTHY BALANCED MARKET
- Forecast from 3 sources show shows 2 to 6% annually, the economist predicted 2 to 3%, Realtor 3 to 6% and Builder 5%
- Consumer confidence is straining and psychologically people are being affected
- Fresno County is Underbuilding
- Divorce is picking up, single living up, economy is getting better
- The Globe is investing in us heavily due to our cheap land
- VCs are investing in Cali, primarily Hollywood
- US is a Rental Economy
- Homeownership will drop due to divorce, Gen Y waiting til 40 to move, lending being tight, women waiting later to marry, etc
- Marriage is a huge predictor of home ownership
- People will become home owners later in life
- Rental market strong, hold and rent!
- Vacancy rates are low 5.8%, typically 8% for Fresno
- Affordability may become a problem
- Degrees needed in Fresno!
- Ride to Work program needed
- SW Airlines needed
- Interstate designation needed
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