What is in Store for the Real Estate Market in 2008?
Jerome Sierra
Certified Mortgage Planner
Are we heading into a Recession?
• Definition: “A decline in the Gross Domestic Product (GDP) for two or more consecutive quarters.”
What do you think?
Economic Growth
We are here
A Soft Landing?
Real GDP growth will slow sharply in 2008 to 1.2% from an estimated 1.8% in 2007.
Growth will recover to 2.8% in 2009 as the worst of the housing downturn passes and
recent monetary policy loosening takes effect.
Weak $ is An Opportunity
The US dollar will remain weak during 2008, averaging US$1.45:€1. A recovery will set in from 2009, reflecting the narrowing of interest rate differentials and a revival of
confidence in the US economy.
How did we get here?
• Greed from: – Consumers:
• Over extended beyond their financial means• Purchased speculative investment properties
– Wall Street and Investors: • Create highly risky Hedge Funds with Mortgage
Back Securities (MBS) to sell to investors
– Brokers and Banks: • Sold risky financial products package in MBS to
consumers with questionable advice
We are here
2008
Home Sales
New Homes
Local Market
All Homes Number
SoldDec-06
Number Sold
Dec-07
PercentChange
MedianDecember
2006
MedianDecember
2007
PercentChange
Alameda 1,589 983 -38.1% $589,000 $540,000 -8.3%
Contra Costa 1,788 971 -45.7% $569,500 $505,000 -11.3%
Marin 268 193 -28.0% $804,750 $760,500 -5.5%
Napa 127 72 -43.3% $590,000 $590,000 0.0%
Santa Clara 2,106 1,265 -39.9% $656,000 $655,000 -0.2%
San Francisco
589 445 -24.4% $745,000 $731,000 -1.9%
San Mateo 685 468 -31.7% $735,000 $733,500 -0.2%
Solano 622 360 -42.1% $439,500 $370,000 -15.8%
Sonoma 598 308 -48.5% $525,000 $410,000 -21.9%
Bay Area 8,372 5,065 -39.5% $618,000 $587,500 -4.9%
Mortgage Rates
The Good News!
• Fed Fund Rate lowered by .75%
• New law to temporary increase liquidity that will increase conforming limit up to $730,000
My humble forecast
• This is a bump and it is not time to panic!• Real Estate will pick up in 2009• 2008 is a great year to buy because
– low interest rates– discounted purchase price– $ and € exchange favorable rate
• Savvy and well qualified borrowers will take advantage of it whereas over extended borrowers will suffer.