___________
Mark started by asking, "Why you should feel better about the economy and housing?" and followed up his question by stating: a) The recession is over, and b) Why aren't you convinced? I can't get a job.
(He says that our response mirrors the broader response.)
Mark stated that the recession ended in the first part of last year and that "data shows solid recovery but concerns remain." He always begins on a macro level, speaking to global and national issues, and then dives into data on the State of California and then specifically into Santa Barbara South County. (That's how these notes will be laid out as well.)
Mark stated there are mixed signals for the recovery, including housing. Housing starts are way down. The country lost 8.3M jobs in the recession. This is improving, but latest job creation has not yet mopped up the full size of the loss. Interest rates are the lowest ever, since we've been tracking them (beginning in 1971). The credit markets are the only thing limiting housing. Recovery is underway, although it is losing pop as the second half of 2010 arrives. Mark said that in recent news commentary, the weak reports are overstated. The workweek is lengthening in terms of hours across almost all sectors. which is creating stronger stream of income. There is greater confidence in economy. U.S. economic indicators clearly point to growth. We have surging stock profits and higher prices. Credit is moderating... Most lenders are no longer tightening their loan standards.
We are expected to have 3-4.1% GDP growth this year, but the GDP growth isn't high enough to mop up the unemployment rate. The higher unemployment rates will persist for an extended period, and will also prevent the Fed from raising rates soon. This will evolve the recovery into an expansion, and Mark states this is an important factor for a durable recovery.
California State will lag behind U.S. due to the budget. "It's broken!"
Commercial real estate is still weak. Business/Vacation travel is up. Labor markets are beginning to recover. Trade has risen sharply at world ports. We are seeing lots of exports. The Los Angeles film industry is up 25%. For California, housing sales have been strong since lows were hit 18 months ago. Even prices are rising. They are way off the lows, which were so exaggerated downward & influenced by distressed sales. They are 32% off the trough in California.
Notices of Default (or NOD's) are at the lowest level since 2007. We're seeing distress decline. What about the "shadow inventory"? Foreclosures were expected to rise but they're lower. More lenders are accepting short sales, altering principle, conducting loan modifications, and using other new solutions, as well.
Santa Barbara County:
The labor market is weak and the commercial real estate market is weak. The unemployment rate is improving, but there is not much job creation. We are also seeing more tourism but not enough to correct the jobs we have lost. Office vacancy rates are at about 14%, but Mark stated that this is still not bad compared to other areas. Santa Barbara Bank & Trust will probably survive and this saves 1000 jobs locally. Home sales are sharply higher in Santa Barbara South County.
Santa Barbara South Coast Real Estate (Single Family Residences):
With our number of sales, we are seeing a big improvement since last year.
By area:
Carpinteria +30.81%
Montecito +7.7%
Santa Barbara East +50%
Santa Barbara West +10.3%
Hope Ranch +42.9%
Goleta South +18.6%
Goleta North +12.7%
South Coast Overall +21.9%
The percent of sales over $1M is now at 38%, which is a great number. It was up to 60% at the peak of the market. The overall median price for the area increased 4.6% compared to 2009. The percent of sales under $800,000 is at 42%, and it hasn't been there since 2002 or 2003.
The origin of the buyer being from outside south coast hit the highest level since 2005. We are beginning to see investors enter the market again. We are also seeing more 1st time home buyers...the highest number we have seen since 2004 when we began to conduct surveys on where they buyers are coming from.
Condo sales are also up, and the inventory of condos is down, relative to where it was.
Here is our unsold inventory for homes:
$1M + = 16.3 Months
$750- 1M = 7.5 Months
$500-750 K = 4.3 Months
*You can see that the inventory goes way down as the price brackets go down. We have more inventory in the high end, specifically the $4M+ bracket, than we do in the low end of the market. We have 3.8 months of supply for California inventory.
Our median is currently $855k without Montecito and Hope Ranch. It is $911k if you include those two areas. This is higher than it has been for 12-18 months. Our median price for Montecito is currently $2,994,000, and the median price for condos is $458,000.
We do not have many short sales closing per month in S.B. County. We have roughly 6-8 sales per month. The same is true for REO (or bank-owned) sales. We have about 8-9 per month.
For the month of May, we had 6 foreclosures (1 in Carpinteria, 1 in Goleta, and 4 in Santa Barbara).
Summary
Homes are selling, especially cheap ones. Selling values have stabilized. Unsold inventory is low. There is virtually no new home building. Imbalances are growing. Home distress is down and foreclosures are in decline. A healthy market is waiting to emerge. Conventional recovery Q4 2010. Input observed by Q2 2011. It's coming, just slowly. 2010 is the transition year. Bumpy! It's why you feel the way you do. More convincing signs this quarter. Companies will begin hiring again.
Commercial Real Estate lags (as usual). State government will produce a drag. Interest rates are likely to rise from this point on.
Mark Schniepp, P.h.D.
California Economic Forecast
6489 Calle Real, Suite C, Goleta, CA 93117
| mark@californiaforecast.com |
Thanks Mark! The next economic outlook will occur in September, and I will provide more data at that point. Feel free to call me at 805.252.2773 or email me at emily@villagesite.com for discussion.
Posts
No comments:
Post a Comment