Last night was the third annual panel discussion of real estate at UCSD, put on by the Financial Executives Networking Group of San Diego. About 60 people attended.
The panel consisted of Bruce Norris, Alan Nevin, Gary London, and a certain part-time blogger.
Here are some of the thoughts:
Gary London, The London Group Realty Advisors, consults with developers of residential and commercial real estate. Two weeks ago the San Diego Business Journal featured his article on the commercial market: http://www.sdbj.com/article.asp?aID=142541&link=perm
He noted that the recent ‘Pending Home Sales Index’ that was up 32% was “not meaningful” because last year’s numbers were so anemic. He agreed that the number of transactions are what counts when surveying the market. Until we get back to ‘normal levels’ of sales, we really won’t know where we are at.
He mentioned that there is hardly any new homes being built, and when demand returns there won’t be any new-home inventory because it takes a while for builders to identify properties, prepare them for construction, and to build the houses.
Alan Nevin and Market Pointe Realty Advisors, has been consulting with real estate developers for three decades.
He mentioned that “we don’t learn” from our mistakes, and that California is a cyclical state. Traditionally there have been around 10,000 houses per year built in SD County, but this year there will only be about 2,000, and almost all of them north of the I-8 freeway.
Bruce Norris, The Norris Group, had a seven-page handout. He noted that he has purchased about 50 homes to flip this year, primarily in Riverside County.
He had a list of 30 homes that had $10,141,900 in loans against them, that he purchased at the trustee sales for a total of $2,921,717 – many in disrepair or stripped. He has had trouble with appraisals when re-selling, and has kept some as rentals, rather than lower the price when a buyer is willing to pay $125,000 but the review appraisal comes in at $85,000.
The most powerful data of the evening was his chart that showed that there were projections of 549,383 foreclosures to happen in California by now, but only 238,054 have happened. The shortage of 306,329 is what is haunting the market – when will the shadow inventory hit the open market?
He suggested four solutions:
1. FHA 203k rehab loans be expanded.
2. Change the Fannie/Freddie loan limit for investors from a max of 10 mortgages, to unlimited. If they qualify, why should they be denied?
3. He supported zero-down financing for qualified owner-occupiers, and allow those loans to be assumed by the next buyer without qualifying.
4. Get rid of the 90-day FHA flip rule.
He’s convinced that the primary reason that the foreclosures are dragging is because banks don’t want them back. Currently the average bank loss in California is around $250,000 per foreclosure.
We talked about trustee sales later, and he mentioned Ward Hanigan, and how beneficial Ward’s trainings are: http://www.foreclosureforum.com/
Yours truly mentioned that I thought next year will be exciting, with many more buyers getting in the game, but not much more inventory for them to consider – could be the Big Stalemate. I also said that I thought buyers will tolerate a mortgage rate under 7%, but higher than that would bring trouble.
As long as the banks stick with the ‘drip system’ for liquidating the REOs, they’ll have us right where they want us – and that this could take 10 years to resolve.