Little Bit of Heaven in 2007
This is from Gary Watts seminar held in Ontario California on February 28th, 2007. This is his Real Estate Outlook for 2007.
Who is Gary Watts: Gary is a full time real estate agent who used to do economic forecasts for the Mission Viejo Company. His nickname “Scary Gary” was born from his prediction in the early nineties that the California housing market was about to crash. Gary makes annual predications about housing and the score since 2000 is Gary 102.5% to an Actual of 104.1%. Pretty darn close. Gary
is predicting 7% increases for 2007 and CAR (California Association of Realtors) has changed their forecast to a range of 6.5% to 7.0% for 2007.
Housing inventories are reducing, jobs and the population are increasing. National Gross Domestic Product will be in the 2.5% to 3.0% range. Anything over 2.0% is stellar. Unemployment is approaching record lows. Southern California is adding 200,000 to 300,000 residents each year.
Seventy-five percent of all the commercial permits issues in California were for the Inland Empire, which means more jobs and, unfortunately, more cars. Last year Riverside County was the 2nd fastest growing county in California with San BernardinoCounty 6th.
While sales volume in total home sales was down over 2004-2005, the majority of the volume downturn was in new home sales. Nationally, existing home sales volume and price were both up, though only slightly. The western states fared much better with RiversideCounty showing 5% upward appreciation and San Bernardino with 5.5% upward movement.
In the second quarter of ’07 the media will begin reporting the good news in the Real Estate market, reporting sales and values higher than in 2006. This will trigger additional sales interest from those buyers sitting on the fence.
Though predicting interest rates can be tricky, Gary is predicting a slight downward direction, if the Fed pays attention to now retired but still influential Greenspan. The Fed, reacting to Greenspan’s criticism, may actually begin to reduce interest rates which would reduce upward pressure on long term rates.
Foreclosure ratios of 1% or less are considered excellent and the present numbers are still below that magic mark. Of those actually in foreclosure, 80% are estimated to be outright fraud with many more subject to scrutiny for unethical lending standards. The only real scare on the horizon is the worry about subprime loans. FannieMae and FreddieMac may soon beef up their underwriting to lessen risk, requiring more documentation and slowing the process.
Another cloud on the otherwise bright horizon is affordability. Affordability is presently measured against fixed rate mortgages, and when 60% or more of today’s loans have low entry payments, affordability may be just a scare word.
The bigger worry should be pre-payment penalties, which will create short sales, but only for those who have to sell, which comprises a very small portion of the listing market. Most people are selling to move up or move out, but without strong motivation.
In all, with the state and national economy booming, consumer confidence on a high, population in California increasing, new construction slowing, inventory reducing and jobs being added, there appears to be nothing but good news to report.
Though crystal balls are in short supply, the numbers are pointing to a strong rebound for Riverside County and San Bernardino County housing in 2007. What that means to you is: If you already own your home, good job and well done. If you are waiting to buy your home, the wait is over. Call me before the word gets out. Let's find your new home today!