Real estate group looks on bright side – Is this the time to buy??????

Real estate group looks on bright side

Emerging trends favor buyers who have cash

Wednesday, November 18, 2009 at midnight
Hotels are in the worst shape in the real estate world, home buyers can’t get mortgages easily, and retail and office developments will suffer from large vacancies for years to come, real estate industry leaders said yesterday.
But speakers at the seventh annual trends conference by the Urban Land Institute’s local chapter reassured the gathering of about 200 that the cyclical nature of real estate means that things will eventually improve and now’s the time to get ready for the rebound.
“Forecasting in this environment is a fool’s game,” said Kenneth Rudy, head of U.S. capital markets for Jones Lang LaSalle. But tying into the day’s theme, “a recession is a terrible thing to waste,” he said, “Let’s not waste this opportunity now and into the future and not waste an opportunity to learn from the past.”
Rick Kalvoda, principal in the real estate advisory practice at PricewaterhouseCoopers, which prepared the recently released national ULI report on emerging trends for 2010, spoke of a “generational opportunity for those that have cash.”
Commercial buildings have lost half their value, he said, and billions in commercial loans coming due but with no prospect for refinancing. With the recession reducing demand, many tenants and owners are on “life support.”
“Commercial real estate is always the last to the party and the last to leave the party,” he said. But the good news, he said, is that San Diego is rated the nation’s 10th best real estate market in the ULI report, though all 10 offer comparatively poor prospects for the immediate future.
He said hotels have been hit hardest by the economic downturn — some properties in San Diego are in foreclosure — but they are more resilient than other real estate, because managers can increase room rates as the economy and travel pick up.
Lora Heramb, vice president for sales and marketing at Brookfield Homes in San Diego, said financing home purchases remains difficult with many buyers able to proceed with a purchase only by tapping Veterans’ Administration- or Federal Housing Administration-insured loans.
But contrary to smart-growth advocates, Heramb said the American dream of a single-family detached home remains alive, even if it takes hours to get to.
“We’re seeing buyers willing to commute for the right price,” she said, and if gas prices rise to $5 per gallon, they will carpool and take other steps to live in distant but affordable suburbs.
She cited sales last weekend at a Brookfield project in southern Riverside County, where three of the four purchases were by San Diegans.
And despite the popularity among Gen Xers to live downtown, the moment they marry and have children, they look to move away. Besides, she said, first-time buyers have trouble coping with homeowner association dues that can be $800 a month or more. They’d rather spend that money on a mortgage.
“We have to figure out how to curb HOA dues,” she said.
Retail has been hard hit and will continue to suffer, said Nancy Johnston, managing partner at Epsteen & Associates, which represents tenants and develops shopping centers.
“San Diego is in pretty good shape,” she said, citing as one example the success recently of refilling 23 of 48 vacated big-box stores, formerly occupied by such merchants as Mervyn’s and Circuit City. In contrast, there are 254 such vacant stores in Phoenix.
But at least half of all landlords have been asked for rent reductions, she said, and some are allowing tenants to stay even when they can’t pay rent because owners fear being unable to fill vacancies.
Lynn LaChapelle, managing director of capital markets at Jones Lang LaSalle in San Diego, said the office market is laboring under a large “shadow inventory” of subleased properties and leased but vacant space.
Asked about San Diego’s water supply problems, Heramb said Brookfield has spent hundreds of thousands of dollars to secure building permits, in case the state imposes a drought-related building moratorium.
LaChapelle said talk of “green” construction that is more energy efficient and sustainable sits well with environmentally minded tenants, but building owners often find upgrades too expensive. New office buildings will undoubtedly go green, she said, but no major ones are expected to be built for at least three or four years.

Two quotes particularly resonate with our current  high-end real estate market and they specifically apply to our Rancho Santa Fe clients who often are all cash buyers:
1) “Urban Land Institute’s local chapter reassured the gathering of about 200 that the cyclical nature of real estate means that things will eventually improve and now’s the time to get ready for the rebound.”
Historically real estate has always been cyclical. Value will increase in the future.
2) “Rick Kalvoda, principal in the real estate advisory practice at “PricewaterhouseCoopers, which prepared the recently released national ULI report on emerging trends for 2010, spoke of a “generational opportunity for those that have cash.”
“A GENERATIONAL OPPORTUNITY FOR THOSE THAT HAVE CASH” Isn’t this  the best time in our generation that buyers can acquire real estate at such compelling prices?
If you have cash what are you waiting for???? How are you going to make it work for you???