Two economists on home buying & home selling agree we’ve entered recovery

At year-end, two noted economists spoke at two local real estate meetings. The first was Lawrence Yun, the chief economist for the National Association of Realtors, at the Silicon Valley Association of Realtors general meeting in October to discuss the Bay Area housing market. He clearly stated “The worst is [home] sales is clearly over. Even in the worst market, the bleeding has stopped.” Some other points from Yun’s talk:

• California’s correction was “short, sharp, and fast.” Tax credits boosted home selling.
• Demand is high for people to live in the Silicon Valley region
• The only thing holding back the Bay Area housing market is the unemployment factor & psychological outlook
• Mortgage rates are still at a 50-year low
• Distressed sales will remain a fixture in the market for at least two more years (short sale homes, reo/bank-owned properties)

The second Realtor-economist to visit Silicon Valley at year-end discussed the Bay Area housing market

The second was the Vice President & Chief Economist for the California Association of Realtors, Leslie Appleton-Young who also spoke to the Silicon Valley Association of Realtors, again to discuss the Bay Area housing market. She agreed that the worst was over & both economists agreed that we are at the beginning of a slow recovery, but she contended that 2011 will be a lackluster year. More points from her talk:

• The GDP is slowly on the rise. Consumer confidence in october was at 50.2, up from 48.6 percent in September.
• Unemployment is at 12.4 percent for California, but Young thinks by year end 2011 it will be 11.4 percent.
• Distressed home sales (short sale homes, reo/bank owned properties) will continue to be a factor in the Bay Area housing market for 4 or 5 more years, since so many homeowners are still underwater. However, Notices of Default are down 36.5 percent and Notices of Trustee Sales (foreclosure auctions) are down 7.6 percent. She also noted that in a recent survey on distressed properties, over 50 percent of the properties had multiple offers, with an average of four offers per transaction.
• She predicts a change in the median home price, up by 2 percent.
• Wild cards she sees are: another potential recession, federal economic policies, negative equity homeowners & shadow inventory (not knowing how many homes will enter as distressed properties into the Bay Area housing market due to underwater homeowners).

Much of this information is positive — especially the 2% upside for median home price gains. However, another recent article from the Associated Press on Yahoo.com did not paint such a rosy picture.  It cited the recent Standard & Poor’s Case-Shiller 20-city home price index newly released which had fallen — that all cities recorded monthly home price declines. And that this was the first time this has happened since February of 2009. The article felt similarly to the above two economists that distressed properties (short sale homes, reo/bank owned properties) will be in play for at least two more years. The article went on to say that many U.S. cities will still see a 5 to 10% drop.

Realtors or consumers — what are you seeing out there? Especially in the Bay Area housing market or even more locally, with Santa Clara County property? Would love to hear your comments.

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