Tuesday, January 16, 2007

Solano Experts give opinions on 2007 residential market

Forecasting the future

Experts give opinions on 2007 market

By Barbara E. Hernandez/Contra Costa Times

Article Launched: 01/13/2007 07:01:15 AM PST

Most residential real estate professionals are calling 2007 a transitional year, for better or worse. While there's some disagreement about what the new year will hold, the only consensus is that it will not be a year of booming appreciation or sales like those seen in the past five years.

The majority also said that home prices will drop slightly in 2007, but sales may stabilize to historically normal levels. Most said that sellers have to be more realistic and buyers should be warned there is no huge decline in prices projected, even by the most objective economists.

Here are some of the outlooks given by several professionals in the residential real estate industry.

Ed Leamer, Director, UCLA Anderson Forecast

Comfortable in the role of real estate agent bugaboo, UCLA Anderson Forecast Director Leamer rarely holds back on bad news. However, Leamer doesn't foresee the residential real estate market changing dramatically in 2007.

"We expect that existing home prices will continue to slide just a little because buyers and sellers are looking in opposite directions," he said.

Leamer said that new homes will fare better in 2007 with more competitive marketing and pricing.

Price appreciation will not be considered normal, meaning 5 or 6 percent a year, but probably closer to 2 or 3 percent, he said. This period could last anywhere from another year to five years.

The problem with home sellers is that many aren't seriously selling, they are testing the market to see if they will get their ideal price, he said. There's no immediate need to sell, so they won't.

He said buyers should also stop thinking that the longer they wait, the better the deal.

"Prices will come down a little, but they will come down so slowly the strategy of waiting and waiting will not work," Leamer said, adding that in the past prices dropped 25 percent - but over five years. "They need to lock in that mortgage rate and stop reading the real estate page."

Bob Dorsett, Broker and Owner, Gateway Realty, Fairfield, Vacaville

Dorsett believes the 2007 residential real estate market will largely mirror that of 2006.

"I think the market we have is the market we're going to have, at least for the first six to nine months," he said.

After that, Dorsett said, there may be a slight up-tick in movement in terms of sales.

"If the sales increase," he added, "the prices will at least stabilize - whether they'll go up or not I'm not prepared to predict."

The sellers concessions and buyers incentives prevalent in 2006 will likely increase for the first nine months of the year, he said.

"It's just going to take greater and greater incentives to sell; we're competing with the new home construction, which will give almost anything to sell houses," Dorsett said.

Robert Kleinhenz, Deputy Chief Economist, California Association of Realtors

"I would be surprised if we saw any huge deterioration in home prices, but I would expect some small declines," Kleinhenz said.

He expects interest rates to stay fairly low throughout the year, a sign the housing market could hold steady or improve. "I would suspect in the second or third quarter the Federal Reserve Bank may cut rates," he said.

Prices won't be languishing into the next decade, Kleinhenz said. "I think if the economy continues to expand and does not head into a recession, we shall see the housing market stabilize in 2007," he said.

Drew Kusnick, Territory President, KB Home South Bay

Kusnick said that he's much more optimistic about the coming year.

The past six weeks have been profitable and he's able to raise prices on new homes after six months of cutting them.

"I think it will be a transitional year," he said. "I think we're seeing prices stabilize right now and seeing more people buying. Now there seems to be some real demand in the marketplace."

The decrease in inventory and more buyers starting to look serious has contributed to this, he said.

"I think we've seen the depths of where we were going to go. I think the key factor is buyer confidence and demand," Kusnick said.

Payam Zamani, Chief Executive Officer, Reply! Inc., San Ramon

Zamani said that he expected to see a lot of changes in 2007.

"While in 2006 we saw a slowdown of sales, we did not see a slowdown in consumer demand," he said. Zamani said that in the last year their Web site from rose from 50,000 to 80,000 consumers per month, so the consumer "demand is there."

However, he expects the market to reach its bottom in 2007. "I don't necessarily see an uptick in 2007, I think it's still too early," he said.

Zamani said he also saw the role of real estate agent changing and having to merge with technology including his company's interactive Web site, Reply.com.

"Brokers are still not that sure if we are their friend or potentially their enemy," he said. "But we represent a more efficient marketing solution for them. . . . I think more will join services like ours."

Business Editor Amanda Janis contributed to this report.

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