On Thursday, Sept.11, 2008 The San Diego Building Industry Association hosted the second program “The Road to Recovery” at the Del Mar Hilton. The builders on the panel included; Bill Davidson, Davidson Communities, Ure Kretowicz, Cornerstone Communities, Steve Doyle, Brookfield Homes, Kent Aden, The Otay Ranch Company and Russ Haley, City Mark Development. The room was more than full with San Diego BIA members eagerly waiting to hear the prognosis, opinions of some of San Diego’s eminent home builder presidents. The program was moderated by Peter F. Dennehy, Senior Vice President, SULLIVAN GROUP REAL ESTATE ADVISORS
Peter shared the following statistics:
New sales: 2,164 sales through 8/31/2008 (Hanley Report) - Dataquick
• Projection: 4,000 sales in 2008 - Prior low = 4833 sales in 1993
Prices: Resale SFD: $399K in July ’08 vs. $550K in July ’07 (-27%),
• Resale Condo: $257K in July ’08 vs. $377K in July ’07 (-31%).
• Affordability improving: low of 10% (or less) able to buy median home – now up to 30%
Building Permits: At lowest level since WWII and lower than at any point in early 1990s (during recession).
Foreclosures: Thru July ’08 - 23,000 Notices of Default, -11,560.
• Foreclosures 16.5% of all real estate transactions are foreclosures.
• Prior peak – 1996 – 5900 foreclosures in whole year and 5.6% of all transactions. Rate of increase slowing – but still too many
Unsold Inventory: Existing Homes: As of 9/10/2008 17,093 homes on market (includes about 1,400 foreclosures and 3,300 short sales). This time last year there were 21,000 listings in early Sept ’07. This leaves about 6.0 to 7.0 months of inventory at current sales rates
New Homes Fewer active projects – 208 now vs. 302 last year same week (and 3120 units available vs. 4485 last year). New projects declining as production at low levels, projects sell out – are not replaced and condo conversions revert to rental.
Employment: 1.3 million jobs in San Diego County (July ’08) – down about 4K in 2008 (and only small job growth in 2007). Weakness/job loss in construction and related industries no longer being offset by gains elsewhere (although some industries – i.e.: Qualcomm – are still growing)
Rental vacancy up slightly – but still relatively low (indicating that job weakness not hurting demand for rentals) – strong demand for rentals from those being displaced from their homes as well…
The Panel Discussion: Overall, the builders speaking and comments reflected a commitment to staying in San Diego. They seem to think that it is about as bad as it is going to get and it should begin to recover soon, and it will take some time
Some of their comments I recall were: Bill Davidson, Davidson Communities, ‘Sales will improve in next 12 months and San Diego will come back faster than other areas.’
Ure Kretowicz’, Cornerstone Communities, stated this is the worst year, recovery to start 2009. The public companies are gone and it will shift back to private builders. Cornerstone is buying land now for product in 2009/2010. Ure thinks sales will improve in 2009 and pricing discounts will start to disappear – with real price gains in 2010.
Steve Doyle, Brookfield Homes commented that ‘lot supply is a constraint. Nobody wants to lend money, and the recovery will take a few years. ‘ Brookfield is still working on a few upcoming projects – including one in Imperial County. In addition to mapping and generating lots for builders, Brookfield also builds houses; understanding and knowing the ‘real costs’ which keeps pricing lots and their value in check when selling lots to other builders.
Kent Aden, The Otay Ranch Company, commented, ‘Housing affordability is back. It is a great time to buy with 2008 Incomes and 2003 prices.’ Kent sees bottom as close, not continuing to get worse. Kent also thinks the money will be back. He feels the recovery starts in 2009 and The Otay Ranch Company will focus on entitlement for the future (The Otay Ranch Company has 14,000 units in planning)
Russ Haley, City Mark Development about the market current and future: ‘No new buildings have started in Downtown for 2 years – inventory is diminishing. There is a lot of money out there, but they (lenders, investors) are looking for opportunity and distress – but there are not enough deals for them. There are a lot of opportunities for an infill builder, but on smaller projects.
‘While everyone was hoping to hear more positive and encouraging news it was understood; “it is what it is.’ We do what we do, we build and sell houses, communities and we are passionate about it. It is going to take time, patience and perseverance and we will get to the other side. In the mean while, like a quote shared by Kent Aden; “Life isn't about waiting for the storm to pass... It's about learning to dance in the rain.”
Barbara Rossoll
V.P. Marketing
NewHomesDirectory.com
Phone (951) 894-6621
Fax (951) 894-6622
brossoll@newhomesdirectory.com
