Monday, December 1, 2008

Looking Forward

It’s December, boy the year has moved at a rapid pace towards the final four weeks of 2008 and for many of us in the Real Estate Industry we will be happy to see this year put to rest. With the financial meltdown, a housing bubble and political election the last thing we would like to do is think about the next 12 months with all that must be done between now and New Year’s Day.

The folks over at Money Magazine have already started the madness of forecast what next year will look like in an article titled “2009: Year of the Thaw” . For 94501 Real Estate I wanted to see how their predictions stack up in the Real Estate sector.

According to Money if you are looking to buy you need to track real estate inventory.

Historically, the number of months' worth of inventory on the market has reliably predicted home prices. Six months of inventory appears to be the sweet spot for a healthy market; right now it's 10 months. The National Association of Realtors puts out the inventory data each month, usually between the 22nd and the 25th. Go to and click on Research to find the data. I have provided the Realtor link in my favorite links section.

The authors of the article are looking at national numbers, but a look locally shows that Alamedaover the last 12 months averages about 38 closed transactions per month. The current inventory is 168 units; so we have about 4.5 months of inventory. So to look at the surface the Alameda market looks to be in good shape.

Money writes – YOUR HOME: THE PREDICTION Prices will fall further before year-end.

FORGET THE OLD SAW that all real estate is local. What's pummeling housing prices in your nabe is the same thing that's hurting them around the country: the credit crisis. You know the drill—banks' troubles have made it harder for many home buyers to get mortgages, and those who do qualify have to pay more. A borrower with good credit and a 20% down payment recently got charged an interest rate of 6.7%, on average, according to HSH Associates.

To some extent Money is right on track with this prediction. Prices have continued to decline in
Alameda and the credit crisis has yet to resolve itself. The encouraging news the last two days is that interest rates have fallen. The bad news is you will need to have a substantial down payment, good credit and document sources of income. So the pool of buyers may shrink based on the ability to qualify for a loan. Fewer buyers and more inventory can put pressure on sellers to lower prices even further.

The scary statistic:

Then look at the fact that 18.6 million homes in this country are now sitting vacant, more than at any other time since the Census Bureau began tracking that figure in the 1960s. And that 2.8% of loans are now at least three months in arrears, up from 1.4% a year ago. That rate is projected to peak in early 2009. But if a recession lasts for three-quarters of the year, as some economists are predicting, the number of foreclosures could remain high longer.

In Alameda the MLS inventory shows 13 foreclosures and 21 short sales, this represents a little more than 20% of the inventory. This is the number I would pay attention to in the next couple of months to see where the market is trending for 2009. If the banks still need to unload properties in 2009, the inventory will see pressure.

Money is obviously not high on real estate for the next year, but the perpetually optimistic National Association of Realtors, Chief Economist Lawrence Yun, says he expects prices to rise 2.8% in 2009 if you are looking for the half glass full answer.

So as we begin to wrap-up 2008 it is good to take a look at the past, but the real prediction is we don’t know. No of the experts could have predicted what happen the last 12 months a year ago, we just need to watch what is happening and take advantage of opportunities when they present themselves. Have a great Monday and enjoy the last 30 day of 2008.

Weekly Inventory Report -- Total Alameda Inventory

Data Pulled November 30, 2008 at 6:22 AM

Total Listings: 168

Single Family Residences: 98

Condominiums: 40

Multi-Family: 30

Short Sales:21

Foreclosures: 13

Highest List Price: $1,995,000 – 4 Bedroom; 4 Bathroom; 3,876 Square Feet

Lowest List Price: $199,900 – 1 Bedroom; 1 Bathroom; 710 Square Feet; Foreclosure

If you want to see “Mr. Prediction” Jim Cramer on Mad Money talk about the housing Market back in August click on the link I would have embedded but MSNBC does not have this feature.  But it is worth a view, Cramer loves to predict everything. Warning it is a long video: you get the idea in the first two minutes.

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