Grand New Homes

Yesterday was an amazing day in terms of people viewing and following the inauguration events and festivities. I know that my Internet access was very slow yesterday do to the volume of people clicking and streaming to follow the day’s events. Here at 94501 Real Estate it is time to get back to looking at how housing in Alameda is holding up and what the future may hold.

Lost in the news yesterday, New Home Builders gathered in Las Vegas to get a handle on direction that segment of the housing market and where it will head in 2009. Frankly, the economist and builders do not hold out much hope for this year.

"We do expect '09 to be the down year, to be the bottom," David Crowe, chief economist for the National Association of Home Builders, said during a news conference at the International Builders' Show

Crowe said he expects the number of new homes constructed to fall by 29 percent this year from last year, but then jump by 34 percent in 2010. He sees new home sales falling 14 percent this year.

For Alameda, new housing is always very limited, but we do have one active project Grand Marina and two in the planning stage (FISC Property and Alameda Point).

Grand Marina is being built by Warmington Homes the same builder for Bayport and with anticipated opening of April 2009 the timing on this project may not be the best. Here is a description of the project from the company’s website:

Located near Alameda's Grand Marina at the estuary end of Grand Street, this picturesque waterfront community will offer views of Oakland and Coast Guard Island and is set just minutes from Park Street downtown near shopping and restaurants. Here you will enjoy charming three-level Craftsman and Bungalow-style homes with approximately 2,152 to 2,373 square feet-just steps from the water, a variety of berths, secured gatehouses and a full-service marine center.

The pricing for homes in this project will be similar to Bayport. The builder anticipated pricing - from the high-$700,000s to low-$1 millions. At that price point you need some serious cash flow. A simple calculation ($800,000 home, 20% down, 6% interest) suggest that you will need $212,305 in annual household income that is after plopping down $160,000 for a down payment.

What the Grand Marina project does have going for it is that it is a relatively small project just an estimated 40 homes so the overall economy may not have much impact on a project this size.

Given that the economy has yet to gain any footing and job loss stacking up the economist are very cautious. Frank Nothaft, Freddie Mac's chief economist expects home prices to continue to decline into 2010, but says the housing market should begin to show signs of improvement beginning in the second half of this year as government efforts to stimulate the economy kick in.

Nothaft expects the U.S. recession to be "relatively long, relatively deep." He projects the U.S. unemployment rate will rise to 8.7 percent by the fourth quarter of this year. The rate hit 7.2 percent last month.

"The single most important trigger event leading to (mortgage) delinquency is unemployment," he said.

Not surprisingly, Nothaft's outlook also calls for default rates on mortgages to keep rising this year, particularly on home loans made to prime borrowers.

Alameda other new housing projects at FISC and Alameda Point are to far down the line to know the impact of the current housing market on these projects. New housing is always good to look at even if you like the charm of older homes. These projects impact inventory and the housing stock in Alameda is very low. If more foreclosures come to the market, then even a small project like Grand Marina could have some big issues.

A MSNBC Story related to New Home Builder Sentiment: