Has the next housing recession started?

Q: Given that sales have fallen on a year-over-year basis for eight consecutive months, has San Diego County’s next housing recession already begun?

Murtaza Baxamusa— Gerald McClard / Union-Tribune staff

•Murtaza Baxamusa, directs planning and development for the Family Housing Corporation, of the San Diego Building Trades in Mission Valley:

No. Summer should tell which way the market is headed in San Diego. Unfortunately, projections of a spring recovery in home sales, including my own, were too bullish. The deadwood of distressed inventory took longer to burn off, the domestic market demand was not as strong as anticipated, and growth in sales tempered by an expected increase in mortgage rates. Nevertheless, the economic winds of consumer confidence, new construction and labor-force employment, are gently blowing in the right direction. There continues to be a healthy uptick in home prices and active inventory. So I remain optimistic about a continued recovery.

Michael Lea— Peggy Peattie / Union-Tribune staff

•Michael Lea, real estate professor at the Corky McMillin Center for Real Estate at San Diego State University:

The decline in housing sales reflects two underlying trends. The volume of distressed sales has fallen sharply. As distressed sales are replaced by normal transactions the health of the housing market improves. However this replacement is relatively weak due to significant portion of homeowners with low or negative equity. These homeowners are reluctant to sell either because they don’t want to take a loss or that they cannot qualify for a mortgage on a replacement dwelling. As house prices gradually increase and the lending environment improves, sales volume should return to normal levels.

Leslie Kilpatrick, 2014 president of the San Diego Association of Realtors— Courtesy

•Leslie Kilpatrick, president of the Greater San Diego Association of Realtors:

No. The market remains fundamentally strong with recent price gains, shortened market times and low interest rates. The number of active listings recently surpassed 7,000 for the first time in two years yet that only represents 3 months of inventory. Resale homes are on the market an average of a brief 40 days. The median price point of single family homes reached $500,000 in May for the first time in seven years. Underneath all that, we are facing a long term housing shortage and rising rents in a recovering economy. The time to invest in San Diego is now.

Bill Davidson, CEO of Davidson Communities— Courtesy

•Bill Davidson, president of Davidson Communities:

Absolutely not. The outlook for the San Diego housing market continues to be positive with moderately increasing prices and a strengthening economy. The economy has recovered all of the jobs lost during the Great Recession and strong underlying fundamentals include rising employment, increases in tourism, rising home construction, and a declining volume of distressed homes. Although the housing market started the spring home buying season somewhat slow due to limited inventory, higher prices, and lower investor sales, the forecast for 2014 continues to be solid as relatively low interest rates and job growth contribute to an improving market.

Robert Vallera— Gerald McClard / Union-Tribune staff

•Robert Vallera, senior vice president of Voit Real Estate Services in San Diego:

Declining year-over-year sales are observed at the beginning of almost every recession, but a market slowdown does not necessarily signal a recession. My initial suspicion was that the extremely low interest rates of the past few years accelerated transactions in 2012-13, effectively cannibalizing buyer demand from 2014. However, the revised GDP figures released this week suggest that this slowdown extends beyond the residential real estate market. Employment trends have a broader impact on the overall economy than home sales. California’s civilian labor force expanded by 1 percent in the past 12 months. While positive, this is hardly robust.

Kurt Wannebo— Gerald McClard / Union-Tribune staff

•Kurt Wannebo, real estate broker and CEO of San Diego Real Estate and Investments:

I would not characterize this as a real estate recession yet. I would call it a “cooling” of the market at this point. We are at a normal point in time where inventory increases seasonally, and thus, prices have stabilized and softened. But we had seen prices doing well, even though sales were down this past year. I anticipate when the inventory recedes later in the year, that prices will stay even. Many of the sales from years prior were investor purchases, and with them leaving the market we are moving more towards a normalized, traditional market that we saw in prior years.

Source: Jonathan Horn / UT San Diego / June 27, 2014
Link to article.

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