Prudential California Realty held its annual Luxury Properties Division meeting at the St. Regis in Monarch Beach, CA. This year marks the third year of the meeting of the group of agents (of which I am one) who specialize in the luxury residential market and, once again, the conference was rich with creative ideas and suggestions to effect better results for our clients, as well as presentations of market conditions delivered by the most respected real estate professionals in the industry.
Ron Peltier, CEO, Home Services of America (the division of Berkshire Hathaway, which owns Prudential CA Realty), delivered the yearly market perspective. Ron is an outstanding speaker and commands a wealth of knowledge and insight. In summary, he said:
There are 4 major factors controlling the real estate market today:
High Unemployment, which will continue through 2010. Not only do we have high unemployment, but also under employment. And, as employment drives the buying market, recovery can only start with job growth.
Foreclosures, which numbered 1.50 million in 2008 and 2.0 million in 2009, are projected to be 2.5 million in 2010 and staying at 2.5 for 2011. Also, of the 55 million mortgages in the US, 8 million (approximately 16%) are delinquent–delinquent being defined as 90+ days late in payment). Obviously, delinquency is the first step toward foreclosure.
Consumer Confidence is historically low. When the equity market collapsed, Americans lost 10 years in gains. Additionally, real estate, tradionally considered a “haven” lost approximately 25% of its value. Combined, the “wealth destruction” totaled $7 trillion. People NOW know that real estate is volatile.
Inventory is high. Historically, the 10 year average is 2.5 million properties on the market; today we have 3.7 million homes on the market–40% more than normal. Plus, 8 million homes are in distress. Distressed homes are driving prices down.
Where is the “Silver Lining” for the market? Buyer or Seller?
Essentially, the positive factors are: Affordability has NEVER been better (Buyer)
Interest Rates are Very Low (Buyer)
Inventory presents Great Choices (Buyer)
and, finally, Mr. Peltier believes that price destruction will end after the 1st half of 2010, a celebration for SELLERS.
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