Undermined by the mortgage crisis, which are still wreaking havoc,
the housing market will not be saved in 2008, analysts say.
Foreclosures from adjustable rate subprime mortgages are expected
to peak in the fall and continue through the end of the year, dragging
prices and saturating the market with foreclosed properties.
Though good news for bargain hunters and contrarian investors,
difficult times will continue for most homeowners, especially those
paying a premium on recently purchased homes and now face historical
high prices for gasoline, said economist Alan Gin with the University of
San Diego.
"It just compounded things. It makes it more difficult for
some people to make payments," Gin said. "High gas on top of a
mortgage hurts in terms of spending. People are spending money on gas
instead of going out to eat."
Gin predicts further declines in home prices by 5 to 10 percent
through the year.
"I think prices will continue to edge downward. We may see the
bottom in 2009. I actually think most of the damage has already been
done," he said.
A recent report from UCLA's Anderson School of Business
predicted the housing sector will begin recovery in early 2009--helped
by the precipitous fall in prices.
Meanwhile, commercial real estate appears relatively sound compared
to the residential carnage.
Demand for space, however, has not kept up with new supply coming
on line, said George Gramm, vice president of research for Grubb &
Ellis BRE Commercial.
Job losses in the residential real estate sectors are also leaving
office space empty.
Trickle-Down Effect
"The overall general economy is not projected to be good and
that trickles down into commercial real estate," said Gramm.
May numbers published by the state Employment Development
Department showed construction jobs were down 10 percent on the year and
real estate jobs were off 7.9 percent.
"If we see in three months or six months from now the job
growth numbers start to jump back up from all industry types, we're
right back in," he said.
In submarkets Carlsbad and Rancho Bernardo, which have seen lots of
new construction, vacancy rates are higher. Carlsbad's vacancy rate
of 23.7 percent in the first quarter is "an area of concern,"
said Gramm.
Second quarter statistics should be available in early July.
Looking at the first quarter, Gramm said, "Overall San Diego
County is 12.8 percent, which is not anything to be too concerned about.
We're pretty close to the 10. We were at 8 percent in '04 and
'05."
Unleased, landlord-controlled office space was 15.1 percent
countywide in the first quarter, according to CB Richard Ellis.
Taking the long view, a recent survey by the UCLA Anderson Forecast
and real estate firm Allen Matins reported upbeat expectations for the
office market by 2011.
Investment in commercial real estate is a little trickier.
Until the larger investment banks, like Bear Stearns, Washington
Mutual and Citibank stabilize themselves from the residential mortgage
debacle, analysts expect lower institutional lending and soft investment
demand.
"As we continue to hear about large investment banks having
trouble--like Morgan Stanley profits being 60 percent off--it's not
a good outlook from the investment market," Gramm said.
COPYRIGHT 2008 CBJ, L.P. Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.
Copyright 2008 Gale, Cengage Learning. All rights
reserved. Gale Group is a Thomson Corporation Company.
NOTE: All illustrations and photos have been removed from this article.