Summary: According to many news sources and economist reports, it looks like the residential market for 2007 will have a single digit decline in prices. Meanwhile, the commercial market will be healthy throughout 2007. New homes builders continue to offer incentives and lowered prices in the first half of 2007 as they try to sell off their inventory as quickly as possible. Interest rates remain low and stable.
Reports: Real estate market cooling. Real estate reports issued Tuesday offered a backward and forward look at the market for housing and business. Statewide, housing permits fell by 9 percent in November over October and by almost 34 percent compared with November the previous year. The first 11 months of 2006 showed a 22 percent drop from the year before. New-home construction will continue to dwindle until builders sell off their inventory, probably in early 2007. Robert Rivinius, association president and chief executive officer, stated in a news release that the market slowdown is unlikely to help ease the state's affordability problem. He said that California has a limited supply of privately owned land that can be developed and high developer fees. "While there remains great pent-up demand for lower-cost homes," he said in the release, "government constraints now make it all but impossible to build homes for first-time buyers, so most builders have no choice but to build homes to meet the demand in the higher price ranges." Source.
2007 Predicted to be Poor Real Estate Year. This year is predicted to be a bad one for those either looking to buy or sell a home in California. Construction, sales and prices will keep plunging, according to Chris Thornberg of Beacon Economics. "I am extremely negative about 2007," Thornberg said. "I see foreclosures going up in 2007. I think prices are definitely not going to bottom out. I think prices will continue to go down slowly." Thornberg said those in the most trouble are newer home owners whose mortgages will re-set this year. The higher interest rates will mean larger monthly payments for many borrowers. He expects the real estate market to bottom out this year and start to recover in 2008. Source.
Google, Apple, Yahoo boost valley market in real estate. Commercial real estate in Silicon Valley turned a corner in 2006 that it had been approaching for three years, thanks largely to property purchased by high-tech behemoths Google, Apple Computer and Yahoo. In the past year, Google gobbled up yet another portion of land and buildings in Mountain View's Shoreline Technology Park for $319 million; Apple announced plans to buy 50 acres in Cupertino for more than $160 million; and Yahoo worked under the radar to buy 46 acres in Santa Clara for about $50 million. Source: The Mercury News.
Further home sales slowdown expected. Fewer houses will move, and at lower prices, due to oversupply, real estate experts say. A second year of a cooling market could bring more painful adjustments for some of Inland Southern California's home sellers in 2007. A continued slowdown in home construction, more foreclosures and price declines are in the offing, several economists said. A serious downturn could damage the rest of the economy, costing jobs and curtailing retail sales. Robert Kleinhenz, deputy chief economist for the California Association of Realtors, said sales of existing homes in Riverside and San Bernardino counties in 2006 plummeted about 25 percent and may fall another 7 percent this year. Steve Cochrane, senior managing director at Moody's Economy.com, predicts that in the first half of 2007, Inland median home prices will fall 5 percent to 8 percent. Inland economist John Husing said he projects a 5 percent year-to-year drop, with homes in areas farthest from job centers taking the biggest hit. Source: The Press Enterprise.
How to Make Your Home Worth More in 2007. With an uncooperative housing market, this year's home improvements call for focus, patience, and a bit of elbow grease. First, rule out needless projects by comparing your home to the others in your neighborhood. Ask your real estate agent for a list of homes for sale nearby so you can see what is being offered, and take advantage of open houses. You will probably want to focus on the areas that are most important to prospective buyers—the exterior, the kitchen, and the bathrooms—and skip over frivolous renovations and additions of offices, sun rooms, and master suites. Of course, remodeling on a budget means more work for you. But do-it-yourself projects can have a major impact on a home's value, and they can be as simple as cleaning up. Then, starting with the front yard, eliminate all waste and clutter. Weed the garden and mow the lawn. Wash the siding and walls. Scrub the kitchen and bathroom. Shampoo the carpets. For the handier among us, tiling can be an amusing way to perk up the kitchen or bathroom. Discontinued tile can cost as little as $1.50 per square foot, and stores such as Home Depot and Lowes even offer tiling classes. Refinishing kitchen cabinets is also much easier than you might think. Sand, apply a lighter stain or finish (this will make the kitchen seem bigger), and replace old knobs and handles with new stylish ones. When all else fails, a few coats of semi-gloss paint in a light color can go a long way, making your walls appear brighter and your rooms seem larger. Last year, homeowners in the Pacific region (Alaska, Hawaii, Washington, Oregon, and California) saw the highest percentages of remodeling costs returned in resale. Minor mid-range ($19,000) kitchen remodels in that region recouped 106.4% of their project cost in resale, while mid-range ($15,000) bathroom remodels had 103.2% returns. A good agent can spot buyer turnoffs, advise you what to improve, and figure out your home's true worth based on the local market. If you have made all the necessary improvements and you still don't like what you hear, simply wait for the storm to pass, and in the meantime, enjoy the fruits of your labor. Source: Business Week.
Lennar to shed stake in housing venture. The builder sells control of Newhall Ranch amid a slump. The deal hints at an improving market. Lennar Corp. said Tuesday that it would sell a majority stake in a joint venture that owns one of the largest residential developments in Los Angeles County, the latest example of a home builder selling land to cope with a bruising housing slowdown. But the fact that buyers are snapping up such land is a sign of improving confidence in Southern California's home-building market, analysts said. Miami-based Lennar, the nation's third-largest home builder ranked by unit sales, had no trouble finding a new partner in its venture, which involves the proposed 20,000-home, 15,000-acre Newhall Ranch community in Santa Clarita Valley. Source: The Los Angeles Times.
Office rents to rise on healthy economy. A healthy economy will fuel growth in the U.S. office market in 2007, although the outlook for commercial real estate markets exposed to the weak housing market isn't as bright, according to a new report.This year, businesses will add staff and lease more space, helped by an economy that will strike a balance between recession and inflationary expansion, according to the 2007 Global Real Estate Forecast from real estate company Grubb & Ellis Co. About 300,000 of the year's expected new jobs will be located in office buildings, the report said. Rental rates for the most prestigious buildings should rise by 5 percent or more in 20 central business districts including those in Washington, D.C. and Los Angeles -- expected to be the two top U.S. office markets through 2011, the report predicted. Source: The Washington Post.
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