Southern California home prices in January rose at their fastest pace in 44 months

From the L.A. Times:

Home prices in Southern California jumped 11.4% in January — the largest year-over-year gain in 44 months as the region's already sizzling housing market got even hotter.

The double-digit rise in the median price put it at $507,000, which was lower than December's peak of $509,500 when the six-county region surpassed bubble-era highs of $505,000 in 2007, according to a report out Tuesday by research firm CoreLogic.

Affordability drives everything in the Inland Empire," said analyst Patrick Duffy, principal of MetroIntelligence Real Estate Advisors...And while mortgage rates remain historically low at about 4.5% for a 30-year fixed loan, they are ticking up and the increases may be impelling some buyers to sign on the dotted line, Duffy said..."I'll bet some people on the fence are saying 'I am going to pull that trigger,'" he said. "Here's your chance to jump before prices go higher."

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Press release from 2010 Riverside San Bernardino Economic Forecast Conference

NEW ECONOMIC FORECAST FOR RIVERSIDE/SAN BERNARDINO REGION FINDS CAUSE FOR HOPE, CONCERN… BUT ABOVE ALL PATIENCE

November 9, 2010

RIVERSIDE, CA—A new economic forecast focused on the inland regions of Southern California finds signs of economic recovery mixed with examples of continued sluggishness.

The forecast, authored by Beacon Economics and released in partnership with the University of California, Riverside’s School of Business Administration, says that relative to California, the unemployment rate in Riverside and San Bernardino Counties is expected to fall faster. However, substantial job growth won’t be evident in the region until the last half of 2011, and the unemployment rate in Riverside and San Bernardino counties will remain above 8 percent through 2015

“The job recovery is beginning but it’s going to be slow. U.S. labor markets, in general, now take significantly longer to recover after downturns than they did in the past,” says Beacon Economics’ Founding Principal Christopher Thornberg. “The phenomenon of the ‘jobless recovery’ appears to be a permanent part of the economic landscape.”

David W. Stewart, dean of UC Riverside’s School of Business Administration says that the future of the economies in Southern California’s inland regions lie in the industries that drove growth before the housing boom.“We have a significant, though often overlooked, manufacturing base to build upon,” Stewart says. “And we have the key locational advantages of distribution infrastructure, ready access to both domestic and export markets, and the potential for stable sustainable electricity rates with the growth of solar, geo-thermal, wind, and other new sources of energy. No other part of the country has this winning combination.”

The School of Business Administration used to release an annual economic forecast, and it has now been revived. “As a land grant institution and the only research-based business school in inland Southern California, it is our mission to stay engaged with the economic welfare of our region,” Stewart says.

Key U.S., California, and Riverside/San Bernardino findings from the forecast include:

• United States: The decline in consumer spending has followed an extended period of overspending; do not look for a jump in demand driven by consumer spending.
• California: Total nonfarm employment will cross the 14 million milestone in 2011 but will not reach its pre-recession peak of 15.2 million jobs until mid 2015
• Riverside/San Bernardino Counties: Home sales will continue to fall into 2011 but will then return to growth driven by increasing population and pent up demand.
  

Riverside-San Bernardino Economic Forecast Conference, Nov. 9th, 2010

Where is The Economy Headed?

The stock market-fueled optimism that marked the beginning of the year gave way to near panic over a potential "double dip" as the recovery slowed sharply in the second quarter. More recently, better signals have started to emerge leaving many to wonder where the U.S. and California economies are heading in 2011?

And what about Riverside and San Bernardino Counties? For decades manufacturing, trade firms, and the logistics sector were engines of rapid and diverse economic development. With the bursting of the housing bubble, are these sectors once again poised to drive growth in the region?

Join some of California's most well-respected forecasters, economic development experts, and local business leaders as they reveal the direction of the U.S., California, and Riverside-San Bernardino economies.

Get Answers to the Following Questions:

• Is the economy out of the woods or is there a real chance of a 'double dip' recession?
• What is not up? Interest rates. Is it a bond bubble or are deflation fears real?
• Tax increases or deficit expansion... which poses the bigger risk?
• How is California shaping up? Are we ahead or behind in the recovery?
• Riverside and San Bernardino Counties were some of the hardest hit economies in the nation... but is a new phase of growth beginning?

Registrants Receive:

• 2010 Riverside-San Bernardino Economic Forecast Book - a data-packed analysis of the region's economic indicators
• Quarterly updates to the forecast for one full year
• Chance to interact with forecasters and speakers
• Prime networking opportunity
• Breakfast buffet
• Hosted self-parking

Want to register? Click here.

Tuesday, November 9, 2010

Riverside Convention Center 3443 Orange Street, Riverside, CA 92501

Registration and Breakfast: 7:00 AM Program: 8:00-10:30 AM

Tickets: $100 /Individual $75 /Discount Affiliate Rate $40 /UCR Student Discount Rate (ID required) $500 /Table of 8

Seating is limited so register today!

Featured Speakers
Christopher Thornberg Principal Beacon Economics Brad Kemp Director of Regional Research Beacon Economics Roy Paulson President & CEO Paulson Manufacturing Dr. Alfredo Martinez Morales Managing Director Southern California Research Initiative for Solar Energy Peter B. McWilliams Managing Director – Industrial Services Jones Lang LaSalle Iddo Benzeevi President & CEO Highland Fairview

Investors returning to California's Inland Empire

The rapid decline in prices in the Inland Empire is now starting to draw various investors, who either buy/flip, buy/fix up/flip or buy/rent for cash flow. From an article in the Riverside Press Enterprise:

After retreating in fear from housing's sudden collapse, those who buy homes as an investment are reappearing in Inland Southern California's beaten down marketplace.

Sharply discounted foreclosed properties are luring back the first wave of professional investors and amateurs, both those hoping to "flip" for a quick buck and those wanting to buy and hold for a future rebound...

The process of "flipping" is still risky, many experts warn, since the investor has to take into account that home values continue to fall, which could erode anticipated profits from a resale..

Brokers say most prospective investors, many of whom were burned by waiting too long to sell properties before prices plummeted, still remain timidly on the sidelines.

Mike Novak-Smith, a broker-agent with Re/Max Results in Moreno Valley who specializes in selling repossessed houses, said since the summer he has seen an influx of investors, who he said now account for about 30 percent of his buyers. He said most seem to be novices, while the more seasoned are waiting for prices to fall further.

Investors also must cope with government regulations designed to rein them in. Fannie Mae and Freddie Mac enforce a limit of four homes per borrower, and the Federal Housing Administration requires the seller of a house purchased with an FHA-insured mortgage to have owned it at least 90 days...

The rekindling of investor interest is bad news to some people who blame investors for having fueled the recently burst real estate bubble.

Investors say they are generally targeting the cheapest and most dilapidated houses nobody else wants and turning them into the nicest-looking houses in the neighborhood...

Not everyone agrees that investors perform a public service.

John Marcell, an Upland mortgage broker, said the FHA will lend up to $35,000 to first-time buyers for repairs or improvements. He said he worries that investors will again inflate home prices by flipping.

Marcell also said that investors who buy houses for income and future appreciation will contribute to an oversupply of rentals.

Prudential California Realty agent Marni Jimenez said in competition for houses, investors generally have an edge over first-time buyers. She said that is because investors come with a substantial down payment.

Investors also tend to have conventional financing that lenders prefer over the FHA mortgages that are geared for entry level buyers that take longer to arrange.

Inland economist John Husing said investors who are buying bank-owned houses for rental income further deteriorate neighborhoods and attract crime. "It is a great strategy for the investor but a disastrous strategy for the community," Husing said.

California tries to avoid another RTC-style hit

When the federal government created the RTC to mop up the mess created by the S&L failures, California's Inland Empire took a huge hit to property values since so many properties (both homes and land) were dumped on the market at the same time at greatly discounted prices. This time, however, California officials are trying to avoid a similar fate. From a Wall Street Journal story:

Officials in San Bernardino and Riverside counties are determined to avoid a repeat of what happened 20 years ago, when the savings-and-loan crisis led to a massive selloff of distressed real estate in the area by the federal government's Resolution Trust Corp. Many of those properties, including foreclosed homes, were sold at fire-sale prices to investors who unloaded them quickly. In some cases, entire neighborhoods of what had once been homeowners turned into largely rental communities, further depressing property values and delaying an economic rebound...

Government representatives in the area are now scrambling to muster support for a federal bill that would allow local businesses and governments to buy up some of the real estate to make sure it doesn't fall into the hands of speculators who have no stake in the community. The bill, introduced Sept. 27 by Rep. Gary Miller, a Republican who represents some of the areas in Southern California hurting from the mortgage meltdown, promotes the formation of regional public-private partnerships that could buy homes in their geographic area from the Treasury. This approach, they argue, would help stabilize neighborhoods and maximize financial returns to taxpayers...

The concern in parts of Southern California illustrates the risks that could lie ahead for other communities as the Treasury begins a massive churn of assets. Depressed real-estate values in areas across the country could slide further if homes are sold to large financial investors who then flip them to others who want to make a quick profit.

Mr. Miller said he tried unsuccessfully to get his bill incorporated into last week's federal rescue package. He said he has spoken to other members of Congress who support the bill and that there is still time to debate the measure when Congress reconvenes in January...

Counties such as Riverside and San Bernardino are already trying to gear up for what is expected to be a massive real-estate sale once the Treasury program gains steam. Last week, they passed resolutions supporting the formation of the "Regional Asset Value Recovery Corporation," an Inland Empire partnership to "preserve and restore neighborhoods and communities."...

Mr. Miller's hastily written bill, H.R. 7189, is vague about how the proposed public-private partnerships would work. It would allow the Treasury to retain a stake in any of the properties that the partnerships acquire. Mr. Miller argues that the local partnerships would have better odds of ensuring that the assets rise in value, thus allowing the Treasury to retain a stake and "greatly improve the likelihood that the federal government makes a profit."

One of the biggest challenges, however, will be the unbundling of assets intertwined with various kinds of complex securities. In order to attract regional buyers, the Treasury would first have to group different assets by geography.

Death of the suburbs? Not in the Inland Empire

With the long-term trend towards higher energy prices, a major theme lately has been the death of the suburbs in favor of urban areas. In fact, on a global scale, cities are expected to continue increasing their percentage of overall population.

According to an article in The Economist, however, that doesn't necessarily mean the death of all suburbs, especially if they're located in Southern California's Inland Empire, or the IE. While the IE has seen housing prices plummet more than in neighboring Los Angeles or Orange counties, so far that's been due more to rising foreclosures and the use of sub-prime and Alt-A mortgages during the housing boom than higher fuel prices. And, according to the story, the IE has a few more tricks up its sleeve to benefit from the eventual rebound:

The Inland Empire is America’s warehouse: goods, mostly from China, are sorted and assembled there before being distributed across the country. Until recently increasing trade could be counted on to prop up the economy. Traffic through the ports of Long Beach and Los Angeles, America’s two biggest by container volume, levelled off only briefly during the early 1990s recession and continued to grow in 2001. Now it is declining. In June imports through the two ports were 15% and 12% below last year’s level. Moreno Valley’s office-vacancy rate is already the highest in the region...

The Inland Empire’s housing market did not collapse because people chose not to live in sprawling suburbs. They clearly did, hence the huge growth there. The problem was that buyers could not really afford the houses that were being built. Now they can...House-builders are at last creating smaller homes, and a few buyers are returning. Now the task is to ensure that neighbourhoods are not snapped up by slumlords...

Places like Moreno Valley retain two enormous advantages over traditional cities. They have lots of cheap, available land and a pool of workers keen to avoid the ever-lengthening commute to Los Angeles and Orange County. When it comes to attracting businesses, these two factors outweigh high petrol prices. The city of Ontario, which contains the Inland Empire’s main airport, already has more than two jobs for each home. Greg Devereaux, the city’s manager, reckons it will eventually have more than three.