San Diego Economic Forecast Conference - Residential Real Estate

As part of its ongoing association with Beacon Economics, MetroIntelligence authored the residential real estate section for the recent San Diego Economic Forecast Conference, which took place on September 20th at the Hilton San Diego Bayfront Hotel.

If you'd like to read the section in its entirety, as a service to current and potential clients, we've made it available for free on our Web site (a $175 value). So next time you have consulting needs, please be sure to contact us to discuss how we can help. Don't be shy!

Please also register on our Web site to keep updated on future reports and presentations.

Click here to download the report.

Click here if you'd like to register for updates.

Here were some of the major findings from our report:

• Falling home prices in San Diego County have made them much more affordable, with 52% of households able to buy the median-priced home at current interest rates, up exponentially from the mid-single digits noted from the last half of 2004 through the end of 2006.
• While tax credit programs did help the S&P/Case-Shiller Index to recover some of the losses in home prices noted between 2006 and 2009, since their expiration the index has been slowly declining, hovering close to levels last noted in the last quarter of 2009.
• Although slowly recovering, new home sales remain quite depressed as they continue to compete with discounted foreclosures and short sales, with prices softening to $447,166 following the expiration of the tax credit programs of 2009 and 2010.
• While sales of existing homes are still down by 45% from their 2003 peak, over the last 18 months they’ve continued to range from 5,500 to 5,900 homes per quarter; prices are up by about 11% from the lows of early 2009 but have softened in recent months to about $360,000.
• After staging a minor rebound in early 2008, sales of condominiums have again softened to about 2,600 sales per quarter as first-time buyers look instead for single-family bargains; after falling by nearly 50% since the 2006 peak, prices have rebounded moderately but continue to range from $210,000 to $225,000.
• After several years of struggle, the local apartment market is definitely on the mend, with vacancy rates slowly trending down towards 5.0% as quarterly rent hikes have bounced back into positive territory and are projected to continue rising by 0.7% to 1.0% per quarter.
• Both default and foreclosure activity is trending downwards, with defaults – often the precursor to a foreclosure – at the lowest levels seen since early 2007.
• After experiencing considerable declines, building permits are slowly rebounding. Most of the single-family activity is taking place in the outlying areas of South Bay and North County, whereas most of the multi-family activity has been noted in the City of San Diego, Escondido and Chula Vista.

San Diego Economic Forecast Conference - Commercial Real Estate

As part of its ongoing association with Beacon Economics, MetroIntelligence authored the commercial real estate section for the recent San Diego Economic Forecast Conference, which took place on September 20th at the Hilton San Diego Bayfront Hotel.

If you'd like to read the section in its entirety, as a service to current and potential clients, we've made it available for free on our Web site (a $175 value). So next time you have consulting needs, please be sure to contact us to discuss how we can help. Don't be shy!

Please also register on our Web site to keep updated on future reports and presentations.

Click here to download the report.

Click here if you'd like to register for updates.

Here were some of the major findings from our report:

• Having reached a cyclical trough in the second quarter of 2011, the San Diego office market should slowly begin to improve, with vacancies falling below 17% and rent growth squeaking out a small gain of nearly 1% by the end of the year.
• With the county’s retail market finally on the rebound by the second quarter of 2011, look for economic vacancies to fall by 80 basis points to 8.4% by the end of 2011 as rent growth rises by just over 1.5%.
• Because San Diego’s industrial/warehouse market is so closely intertwined to the local economy, its rebound will likely trail those of the office and retail sectors, with vacancies not falling below 12% until the third quarter of 2011 and rent growth remaining under 5% per quarter until the end of 2012.
• Based on commercial building permit values, many building owners are investing in additions or alterations to existing properties; for new development, the strongest rebound in the second quarter of 2011 was for future office properties, followed by sporadic growth in the retail sector and declines for new industrial properties.
• With interest rates for 10-year U.S. Treasury bonds recently trending down towards 2%, cap rates during the second quarter of 2011 for all commercial property sectors look quite competitive by comparison, ranging from 6.4% for industrial/warehouse properties to about 7.8% for the office and retail sectors.

San Diego Conference materials now online

If you missed the April 14th Economic Forecast Conference in San Diego, you can still review the speakers' presentations as well as download a copy of the 100-plus page book which was given to all attendees:

Click on the links below:

Conference Book

Christopher Thornberg Presentation

Brad Kemp Presentation

Gary London Presentation

The next forecast conference by Beacon Economics will cover the Inland Empire and take place on the morning of May 19th at the University of Redlands.

Click here for more information or to register!

San Diego Economic Forecast

Miss the San Diego Economic Forecast Conference on Tuesday, April 14th? Fear not, as you can still download the presentations by Beacon Economics' Christopher Thornberg and Brad Kemp. As soon as the .pdf is available online, you can also download a copy of the nearly 100-page conference book which accompanied the presentations.

Here are some excerpts from the residential section, written by MetroIntelligence as part of our partnership with Beacon Economics:

San Diego County closely followed statewide trends during the recent boom-and-bust cycle, with total new home sales (including homes that are not part of major subdivisions) reaching a nadir of over 4,200 units by the second quarter of 2005. Since then, however, sales have fallen steeply, declining by as much as 73 percent between the fourth quarters of 2006 and 2008.

Sales have also dropped faster than most experts anticipated, falling to 752 homes by the final quarter of 2008, representing a decline of 61 percent from a year earlier and 21 percent from even the third quarter of 2008. Projections are for continued declines in 2009, with fewer than 2,500 annual new home sales at major subdivisions.New home prices in San Diego, however, took a slightly different path than new home prices in California from 2003 to 2008. Whereas new home prices in California continued to rise through the first quarter of 2006, in San Diego County prices experienced several drips and rebounds.

For example, according to DataQuick, after rising to nearly $488,000 at the end of 2005, median sales prices fell steadily to $415,000 in the beginning of 2007 before rising again to exceed $530,000 in the first quarter of 2008. Consequently, new home prices rose by 6 percent over the past year and have changed by little more than 1 percent between the third and fourth quarters of 2008.

According to new home data provider Hanley Wood Market Intelligence, new home prices at the subdivisions they track have also risen. Between the fourth quarters of 2007 and 2008, median minimum asking prices rose by 20 percent, to $560,000, although not all sectors performed the same. For example, median asking prices for condominiums rose by 52 percent, to $479,000 (a rise that probably stems from the conversion of more affordable developments to rental stock), while median asking prices for single-family homes fell by 2 percent, to $725,490, and prices for townhomes and duplexes fell by over 8 percent ,to $348,686.

At the same time, new home sales tracked by Hanley Wood fell by 78 percent during the fourth quarter, to just 197 homes, with condominium sales falling to almost zero. Sales of single-family homes closely tracked the overall market, showing a decline of 57 percent. The decline in net sales activity occurred in part because of the sharp rise in the cancellation rate, which more than doubled at 44 percent. For condominiums, the cancellation rate soared to 103 percent, indicating that nothing is moving. For all of 2008, cancellation rates rose from 13.6 percent to 18.6 percent, with cancellation rates for condominiums doubling from 14.5 percent to 30.2 percent

The absorption of new homes, or the rate at which new home communities sell their inventory, fell by nearly 70 percent, to just .31 units per month per development during the fourth quarter, although absorption rates for single-family homes remained slightly healthier at .47 sales per month. For all of 2008, monthly absorption rates fell by 46 percent, to .90 homes per project.

Even though builders are pulling back on new building permits, in some cases existing phases of active developments must be built out, especially for large attached projects which are built all at once. Consequently, although the number of new homes that are under construction but unsold fell by 36 percent, to 1,321 units by the end of 2008, the level of standing inventory rose by 6 percent, to 1,262 homes. Of these unsold units that have been completed, most are condominiums. At current net sales rates, these unsold homes would take 19 months to sell for standing inventory and 13 months for homes still under construction.

Street gang added mortgage fraud to its roster of activities

According to a post at the L.A. Now blog of the L.A. Times, 24 members of a street gang have been indicted for mortgage fraud in San Diego. From the post:

Two dozen people have been charged with racketeering in a fraudulent mortgage scheme allegedly run by a street gang member, according to an indictment unsealed in San Diego federal court today.

The group allegedly profited from loans arranged for amounts in excess of the price of the housing, among other tactics. The homes quickly went into foreclosure, according to the indictment.

The alleged mastermind was Darnell Bell, 38, a member of the Lincoln Park street gang long known to law enforcement for violence and drug sales. Bell, already serving a jail sentence for distribution of cocaine, was arraigned in federal court today on a racketeering indictment.

From 2005 to 2008, the scheme involved the sale of 220 homes and mortgages worth more than $100 million issued by 70 lenders, U.S. Atty. Karen Hewitt said at a news conference.

Keith Slotter, FBI special agent in charge of the San Diego office, said the case showed that street-gang members had gone "from dealing dope on the street ... to delving into this much more sophisticated crime."...

Bell used his status as a gang member to recruit phony buyers and to "maintain discipline" among the co-conspirators, the indictment said. FBI and IRS agents today arrested Bell's 23 co-conspirators, Hewitt said.

The 24 are charged with racketeering, which could lead to much tougher sentences than other real estate fraud cases. "That's never been done before in a real estate fraud case," Slotter said.

The homes were mostly in the cities of Spring Valley and La Mesa and the San Diego neighborhood of Encanto. According to the indictment, Bell and others would look for properties that had been on the market for months.

Among the co-defendants are people in the real estate, title insurance, appraisal and notary public businesses.

I've been saying for months now that one way to prevent future mortgage fraud is to see a constant stream of perp walks for TV cameras. Just an idea!

Beacon Economics announces San Diego Economic Forecast conference for April 14th

Beacon Economics, a partner to MetroIntelligence Real Estate Advisors, has announced the first of several Economic Forecast conferences to take place in San Diego on April 14th. MetroIntelligence will be researching and writing the real estate-related sections of the forecast books which all attendees receive. Want to register or find out more? Click here.