From sddt.com:
San Diego County seems to be in the best shape in California and in better shape than most around the United States when it comes to recovering from the recession in terms of residential construction.
Jonathan Smoke, executive director of research for Hanley Wood LLC, gave a forecast of new home building in San Diego County at a Building Industry Association breakfast program Thursday and said San Diego County is closer to recovery based on data and research.
Smoke, a builder-turned-researcher, first mentions that San Diego is set to recover sooner rather than later since the county was one of the first infected by foreclosures, which led to people renting instead of owning and current supply versus demand data.
“Homeownership declined first in San Diego,” said Smoke, to a room full of homebuilders. “Expect San Diego to recover first in California because it got into this (mess) first.”
Smoke said to have avoided the vacancy of almost no new home construction the past few years, builders should have stopped building in 2006, based on supply versus demand analysis at that time. He added that supply of homes for sale was greater than demand in 2008 and 2009, but that in 2010 supply and demand for home sales and homeowners has started to level off.
“San Diego banks outsold builders five-to-one in 2010,” said Smoke, adding that he expects one more year of foreclosures, and then it will take 18 months for banks to sell them before builders are out selling again. “You, followed by San Jose, are the best home-buyer markets in California right now.”
Smoke added that the bright spots in San Diego County for homebuilders right now are Carlsbad and the city of San Diego, and traditionally the coastal region and the North County inland area are the most stable areas.
Smoke finished his discussion by telling new homebuilders in the audience that they should pay attention to age demographic trends, especially to the baby boomers now because the younger generation that does buy homes tends to buy used or foreclosed homes.
“Baby boomers are retiring at an older age than their predecessors,” Smoke said. “You need to find out what will they do? Will they buy a new home? Remodel their current home? Retire in a rest home? Will they move out of San Diego? Probably not, but baby boomers have different tendencies than their predecessors.”
Smoke said to avoid the same mistakes as before, homebuilders cannot go off their gut instinct. It is not a winning formula anymore when it comes to knowing where and when to build.
“Construction industry officials need to understand why one community is better than another so builders can make better business decisions,” Smoke said.
“I hear builders say, ‘I know a good piece of dirt when I see one,’” said Smoke, comparing it to the quote “I know talent when I see it” in the book “Money Ball.” He added that builders need to go away from gut instincts and follow leads based on research and data to tap new market opportunities.
Andre sent along this new-tract sales survey:
Got this from Credit Suisse:
San Diego, CA
(2,270 single-family permits in 2010, 53rd largest market in the country)
Traffic below expectations. Buyer traffic remained short of expectations in June, as our traffic index fell to 15 from 22 in May, short of a neutral reading of 50 (readings lower than 50 point to traffic below agents’ expectations). 77% of agents said traffic was below expectations, 15% said it was in-line with expectations, and 8% said it exceeded expectations.
Lower prices, higher incentives.
Homes faced additional pressure in June. Our price
index fell to 27 from 29 in May, short of a reading of 50 (readings below 50 point to sequentially lower prices). 54% of agents said prices were unchanged and 46% said they were lower.
Meanwhile, incentives were higher in June, as our incentive index came in at 36 (from 40 in May), short of a neutral reading of 50 (readings lower than 50 point to increased incentives). 55% of agents said incentives were unchanged, 36% said they were higher, and 9% said they were lower.
Length of time needed to sell a home increased – a negative indicator for future pricing trends. Our time to sell index came in at 33 in June (from 28 in May), remaining below a neutral reading of 50, pointing to an increased time to sell over the last 30 days (readings short of 50).
50% of agents said the time to sell increased, 33% said the time to sell was unchanged, and 17% said the time to sell decreased. We view the longer time to sell as a negative indicator for future pricing trends.
Comments from real estate agents:
“Buyers are waiting for the ‘bottom of the market.’”
“Buyers are worried about the economy and a potential double-dip.”
Standard Pacific and D.R. Horton have the greatest exposure. Standard Pacific has the most exposure to the San Diego market, as it represents approximately 4% of the company’s sales. San Diego represents 2% of sales for D.R. Horton.
After Smoke gave his presentation, Mr. Mirror was next up for comment. He forecast increased numbers based on the findings from a blue ribbon panel of economic experts from Ivy League colleges and universities.
After that Zig Ziglar gave an emotional speech and that was followed by both people in the audiance seeking their money back
Well, what’s the real story JtR? We know from here that Carmel Valley tracts are killing it. In general there’s not that much new inventory out there.
Clearly there was a deep pessimism in May and June but it does seem to be lifting.
Has anyone seen the U/T story today with the graphs? Good stuff worthy of bubbleinfo.
There are two main components that drive residential housing today; one, the most obvious, is employment and two, not so obvious but equally important, is the price of oil. The second component is especially critical in a driving state like California. The job front certainly does not look sanguine, to say the least. Oil is without a doubt going be much more expensive in five years, if not sooner. This is as close to a certainty as you can get in economic predictions. If I were a builder, I would build closer and smaller. Long commutes and 4,000 sq. ft. vacuums will be very impractical. This is especially true for the baby boomers who will be a major force in the market as they down size. The problem is who is going to be able to afford to buy their houses? This is accentuated in the high end coastal property. The long and the short of it is you better be nimble if you are going to survive in a very different market from the old build them and they will come market of the past.