Experts in the residential real estate industry seem to be more upbeat than they were a year ago, but distressed sales and foreclosures continue to drag on the market.
The status of the residential real estate market and availability of financing were the topics of a recent roundtable sponsored by North Island Credit Union and the San Diego Association of Realtors at The Daily Transcript office.
While it seemed homebuilding had ground to a halt during the recession — including the shutdown of Carlsbad-based Barratt American, Inc. — some muddled through.
Builders such as Brookfield Homes (NYSE: BHS), Pardee Construction, and custom-and semi-custom home developer Davidson Communities soldiered on. Even the remnants of Barratt American were resurrected by former President Michael Pattinson, who fixed existing housing and re-selling the homes as a way of re-starting his business.
"Pardee has been building right through this crisis," noted Daniel Phelan, Pacific Southwest Realty Services president and CEO.
Alan Nevin, The London Group principal, cited 27 projects in Otay Ranch for sale that will likely be sold out within a year. He said the problem is developers aren't building nearly enough for the demand he insists is coming.
"The big guys (large publicly-traded homebuilders) have left town and we're going to be out of lots," Nevin said.
On the multifamily side — with many still unable or unwilling to make the leap from renting to buying their first single-family home — Nevin noted developers are girding themselves to develop more than a dozen apartment projects downtown, and another dozen elsewhere.
He emphasized that given that it takes around two years from groundbreaking to completion, these aren't expected to keep up with demand. In short, Nevin expects apartment vacancies to remain quite low.
Phelan agreed with the assessment.
"A whole generation is going to see what happened to their parents and that's going to influence how long they stay in rentals," Phelan said.
"I have never seen so many people as I have seen crammed into apartments today," said certified public accountant and business owner Bob Kevane.
That said, Nevin said that roughly 25 percent of all housing units are occupied by a single person in the county.
"It's about 50 percent in London or Paris," Phelan said.
With apartment vacancies comfortably under 5 percent, does this mean rents will spiral upward? Not necessarily at once.
"The only reason rents are as low as they are is the low interest rates," Kevane said, adding he doesn't expect any significant hike in interest rates for as long as a decade.
The rents are high enough and the vacancies low enough that the per-unit prices on apartment properties are on the rise.
"We're seeing $90,000 to $100,000 per unit on sales," Kevane related.
For those who are already in single-family housing, Kevane lamented the fact that people used their overvalued homes as piggy banks, with many of them ending up in trouble.
"Some $4 trillion was taken out of houses in a five-year period," Kevane said.
For those wanting to make the leap into a single-family home, Donna Sanfilippo, San Diego Association of Realtors president, repeated the phrase "this is a great time to buy."
"The interest rates are incredible and people need to be getting out there," Sanfilippo said.
Linda Lee, a broker with the San Diego Metro office of Keller Williams Realty, said Chinese buyers already realize that this is a good time to purchase U.S. real estate, but with distressed sales and foreclosures still out there, a reluctance remains among domestic buyers.
"They believe the prices will go down further," Lee said.
On the commercial side, offices are leasing up, but David Smyle, Churchill Mortgage loan originations director, said the activity may not be as brisk as all landlords would like.
"Many companies are awaiting the outcome of the health care debate and the election before they make their move," Smyle said.
Some companies aren't waiting to hire. Phelan said General Atomics, with offices both on the Torrey Pines Mesa and in Poway, said the company is hiring between 40 and 60 people per month.
Bob Kevane, CPA & Owner, The Kevane Co., Inc.
Linda Lee, Broker, Keller Williams Realty, San Diego Metro Office
Larry Murnane, President & Founder, Regal Properties
Alan Nevin, Principal, The London Group
Daniel Phelan, President & CEO, Pacific Southwest Realty Services
Donna Sanfilippo, 2012 President, San Diego Association of Realtors (sponsor)
David Smyle, Vice President & Director of Loan Originations, Churchill Mortgage Corp.
Jeff Stone, Chief Credit Officer, North Island Credit Union (sponsor)
Scott Vinson, Broker/Owner, Coldwell Banker Royal Realty