Mountain Real Estate Update and Predictions for 2012

Steven Keefe, Broker/Owner
Coldwell Banker Sky Ridge Realty

www.mountainmoves.com
steve@mountainupdate.com
909.744.7690

Mountain Rotary
March 13, 2012

Good Afternoon, I am Steve Keefe… My Jamie who is in the back and I own and manage Coldwell Banker Sky Ridge Realty the largest real estate firm on the mountain. We currently have 61 agents on our team. It is great to be back with you folks this afternoon.

I last visited you on March of last year and at that time, I discussed the current state of Mountain Real Estate with you. This afternoon, I want to recap where we have been, and in particular, what happened in 2011.

I made some predictions last year about the overall market…. I will be sharing with you how the market performed relative to those predictions. I also want to share some current market trends, and some predictions for the coming year so I can come back next year and see if I get it right.

I would first like to discuss Peak to Peak Home Sales. The first matrix in the package shows peak to peak home sales from 2004 to 2011.

· As I stated last year, the recent peak in the number of home sales was 2004. We experienced the greatest drop in the number of home sales from 2004 to 2006. In 2006 there were 738 less homes sold than in 2004 representing a total decline of 41%.

· Over the last 5 years, we have experienced a “stabilization” of the market where we can likely expect the market to remain for the next several years.

· 2009, 2010, and 2011 ended up being very similar years. 2010 started out strong the first half, mid year when the first time buyer credit expired, we saw a lull that extended into the first half of 2011. 2011 started out sluggish, then finished strong. Nothing to write home about… but finishing strong always feels better than the alternative.

· The numbers indicate that for the number sales, we have hit bottom and as we saw in 2011 we have a modest increase in the number of sales. That coupled with the increase in average sales price is some positive news for the local market.

I predicted last year that we would see a total of 800 sales with an average sales price of $285,000. We had a total of 782 falling short by 18 sales, but beat the prediction on average price coming in at $287,562 for the year.

For the first two months of 2012 vs. 2011, we have seen an increase in home sales peak to peak from 98 in 2011 to 129 in 2012. Again very good news for the number of sales in the market. If the numbers hold true, we are on track for a 800+ sales year.

Last point on the first matrix. We discussed the dramatic impact of the real estate market decline on the local economy last year.

· From the peak in 2005 of $35,568,070 of dollars being pumped into the local economy to just under 11 Million in 2010, it is no wonder why the mountain is so “tight”.

· It has taken almost everything a business owner has to withstand the downturn and hit to the economy.

· 2011 appears to be reversing that trend taking us back to 2008 levels. Should we experience that 800 transaction year, the numbers on Commission Dollars move up modestly, a far cry from the hey day of 2005, but absolutely going in the right direction.

Lets talk about distressed property sales. The second matrix shows all single family home sales peak to peak broken down by the type of sale and area. Bank owned foreclosures, Short Sales, and what we call normal sales. Bank owned and short sales are what are considered “distressed”.

· Overall peak to peak, in 2010 the percentage of distressed sales was 51%. That number dropped to 46% for 2011. Primarily due to the fact that non-distressed sellers began to recognize what they needed to do to be more competitive against the distressed properties.

· I predicted last year that 2011 would see the distressed sale percentages drop down below the 49% which it did to 46%.

o Lake Arrowhead Woods actually saw an increase in the distressed sale percentage from 37% in 2009, 31% in 2010, to 38% in 2011. Primarily due to lenders easing up on the short sale process and more sellers being able to manage that process.

o Crestline/Lake Gregory went from 58% in 2009, 68% in 2010 to 56% in 2011

o Running Springs went from 62% in 2009 to 66% in 2010 to 54% in 2011.

· The distressed sales are the most significant factor in holding down market values. Until the inventory of distressed sales is depleted, we will not experience any meaningful increases in values. Nearly 50% of the sales are of distressed type.

· Based upon the statistical data available on defaults, it is likely that it will take another 2 to 3 years to flush through all of the “bad” inventory.

There are a couple of current issues I would like to address that are affecting the real estate market.

1. Declining enrollment in our schools is a tell tale indicator that fewer families are coming to the mountain and some are leaving the mountain for better opportunities.

2. Vacancy factors in the Village and other areas of commerce mountain wide are indicators that fewer people are coming to the mountain. Fewer activities, and amenities continue to be the most significant objections we receive from buyers that don’t buy.

3. The overall economy for “Joe Six Pack” is keeping them and their families closer to home. We are seeing fewer people willing to invest in vacation property.

4. A run down appearance in some of areas of the mountain communities is not attractive to potential buyers.

5. The growing proliferation of Drug and Rehab operations in the mountain communities is beginning to impact certain neighborhoods.

As an industry,

1. Mortgage home loans qualification guidelines and programs continue to be tight. Limiting the number of individuals who can or will qualify for home loans.

On the positive side:

· Interest rates are at 40 year lows and are expected to continue through the next year.

· Housing affordability is extremely good. The current market is back to 2001, 2002 pricing.

· Certain sectors of the market have shown some significant increase in activity ie Lakefront sales as I reported earlier this year. The last 6 months of lake front sales saw a huge increase in activity netting 21 sales vs. the same period in 2010 4.

So what is 2012 going to look like?

I came pretty close to my predictions for 2011. I will come back next year if invited to see if the following holds true for 2012:

· I expect modest increases in the number of transactions and a flattening in average sales price for calendar year 2012. I am looking for a total of 811 home sales with an average sales price of $288,000. I believe that in 2012, we will continue to flush through the inventory of distressed properties holding prices down to current levels.

· I predict that the number of distressed sales mountain wide will decline by a couple of percentage points from 46 to 44% as sellers of standard sales become further educated on how to complete with the distressed sales.

· I am asked frequently when the market is going to turn…. I believe it has already turned, but my opinion is that we will continue to bounce along a sloppy bottom for the next 2+ years. Those that have a need to sell and bought prior to 2004 will likely be ok… those that have purchased after in most cases will be experiencing some significant pain as they come to grips with current values and how this market correction has impacted equity they once had.

It is my belief that we will continue to experience small gains on the market over the next few years, the mountain communities has a lot to offer those who choose to take advantage of it. It has been very difficult, and I have been challenged as a business owner to “keep it going”. The support of my team, and our loyal customers is what has got us through it so far. This mountain is my chosen home, I am grateful for the opportunity to work, live and raise my family in the mountain communities. I will continue to do those things that I can to promote the mountain. Please call on me personally, if I can be of service to you.

You don’t have to wait a year for current information… visit www.mountainupdate.com regularly for up to date market information and commentary. Thanks for the opportunity to be with you today.

 

 

 

Comments

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[Lenihan Sothebys Realty]

With 2012 nearly upon us, many of us will be spending this week reviewing the events of 2011 and setting resolutions, goals or visions for what we'd like to accomplish next year.