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San Diego Daily Transcript-July 13, 2010: Local real estate pros asked, 'Is the market back?'
July 13, 2010
Local real estate pros asked, 'Is the market back?'
By ANDREW KEATTS, The Daily Transcript
Local real estate professionals are cautiously optimistic that the market has returned. "Cautious" being the operative word.
A panel answered the question "Is the residential market back?" at the Urban Land Institute's (ULI) monthly breakfast Tuesday, disagreeing on the extent of a recovery in the residential market, but agreeing on particular short- and long-term bright spots.
Tony Pauker, vice president of development at City Ventures, moderated the discussion. The panel was composed of Connie Emmitt-Stern, senior vice president of investments at Resmark Equity Partners; Graham G. Weiss, founder and principal of GW Realty Co.; Matt Battiata, CEO of the Battiata Real Estate Group; and Ure R. Kretowicz, chairman and CEO of Cornerstone Communities Corp.
Battiata quickly established himself as the least optimistic of the group, beginning by saying the market is 12 to 24 months from being healthy. Distressed sales, he said, are putting too much downward pressure on price. "We have to flush all of these distressed sales through the system to hit bottom. The problem here has always been affordable housing. Well, we've fixed the affordable housing problem. A first-time buyer can now afford to buy," he said.
Battiata said the market's biggest problem now is that there is no trade-up market.
"If anyone that bought at the peak needs to sell right now, they're upside down," he said.
Kretowicz played the foil to Battiata, agreeing on specific points but generally insisting that the market was improving, and would continue to improve. He said there's been a reduction in inventory coinciding with population, income and job growth.
"We're starting to shift to what would be a seller's market," he said. "There's a lack of urgency now, but it will re-emerge as inventory continues to get low."
Pauker asked the panelists for their thoughts on so-called shadow inventory, whether lender-owned properties that are being withheld from the market, or properties in the foreclosure process that will likely result in a foreclosure or short sale.
Kretowicz said if lenders were to dump all their foreclosed property on the market at once, it would be like De Beers flooding its market with excess diamonds.
"If lenders dump all of their property and a $300,000 home falls to $250,000, homeowners on the edge may throw in the towel," he said. "And lenders know that."
Emmitt-Stern added that many investors are buying distressed properties in bulk, squeezing out the typical buyer.
Battiata said he doubts the amount of lender-owned homes that have yet to be released to the market is as high as some have speculated. A bigger problem, he said, is the homeowners in the foreclosure process who are looking for modifications from unwilling banks, because they can't afford or don't want their home.
Weiss, who specializes in residential land deals, said home prices haven't caught up with land prices yet.
"It's sort of parallel to the stock market. The prices ran up a little fast," he said.
Echoing sentiments from the rest of the panel, Emmitt-Stern said buyers like hearing about sustainability and green features, but aren't willing to pay for them.
The event was held at The University Club. Next month's ULI breakfast is scheduled for Aug. 10, from 7:30 to 9 a.m.
Send your comments to Andrew.Keatts@sddt.com
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