The realtor trade union released a report on its expectations for California going into 2010. Among the predictions is a slight dip in home sales to just above 527,000—or 2.3 percent less than their 2009 prediction for home sales. The report also puts its members on notice of looming loan resets which it projects will trigger a fresh stream of loan defaults and foreclosures—mostly at the upper end of the market. However, they see fewer foreclosures overall for 2010.
ft take: How can the quantity of housing drop to a level in 2010 that will not even be achieved in 2009? The figures from recorded home sales in California call for no more than 475,000 home sales this year. As for loan resets—yes, these will be prevalent, but adjusting mortgages will only add to the current trend of increasing foreclosures.
The trade union is accustomed to offering a most rosy view of the future for its members. More frankly, the time has come for agents and brokers to view the industry with a heightened sense of realism. For instance, pricing and financing are factors that have traditionally received a high gloss by the trade union. During the boom years, home values and prices were treated as if they would trend ever-upward. Few, if any, roadblocks were placed in the way of a subprime buyer seeking to buy a home with ARM financing at rate that could never pass the “straight-face” test.
Look for a return to square foot pricing for upper-tier homes as the main means for setting value—the comparable price approach will be thrown out the window as appraisers scramble to hit the number on the purchase agreements they receive.
What remains in this Great Recession climate is the need to learn how to cope with the decreasing availability of financing and a staggering correction in home values yet to come. But the state’s intrepid agents and brokers will not be deterred from conducting business. They will, however, need to re-evaluate the optimistic perspectives of the past and align their selves with the realities of the present while looking ahead with plans for the future. Knowing what is actually going to (or most likely to) occur will be helpful
For related articles, please see “The rise in square foot pricing” and “Interest-only loans a source of present and future woes.”
Re: “Economist expects California existing-home sales to fall in 2010,” from The Sacramento Bee