Optimism and globalism carry Tahoe real estate conference
June 15, 2010
INCLINE VILLAGE, Nev. – Despite significant risks that still lurk in the economy, attendees at a real estate conference Monday believe the worst is over.
Realtors and real estate and economic professionals relegated the economic crisis to the past while painting the present as a time for bridled optimism at a conference this week at the Hyatt Regency Lake Tahoe.
“Home values have stabilized in many markets throughout the nation,” said National Association of Realtors’ Head Economist Lawrence Yun, during a Monday presentation. “In general, the industry is much healthier than before.”
Another central theme of Yun’s talk was the global nature of the economy and how growth in Brazil, Russia, India and China has led to the emergence of a middle class in each of those countries – and the potential for U.S. Realtors to woo more international residents.
“Those countries will witness the addition of 30 million middle class families next year,” Yun said. “Members of the top end of that class have become interested in owning a home in Miami or Vail, Colo. Foreign investors are becoming increasingly interested in buying high-end property in the United States.”
However, the global economy has also hampered the real estate industry, as concerns over Greece’s public bankruptcy has banks in the United States reluctant to fund loans for interested parties.
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“Profits in the banking industry – after weathering the crisis of a few years ago – are equal to peak levels, but it is still difficult to obtain money from the banks,” Yun said.
Yun said worries over impending financial regulation by U.S. federal government could account for some of the stringent loan policies currently in play. Compounding the problem is that the economic recovery – despite encouraging signs – has yet to find a solid track, Yun said. The unemployment rate hovers near double digits nationwide, and states like Nevada and Michigan are still severely impacted by the recession.
Nevertheless, it is the inability of the Greek government to get its books in order that has led to growing uncertainty in the global economy, Yun said.
“If Greece defaults on its loans, then the German banks will take a significant hit,” Yun said. “This, in turn, will trickle down to countries like Portugal, Italy and Spain, and banks worldwide will not have enough capital to lend.”
Other risks looming in the global market include high budget deficits, which may lead to high inflation.
Also, the nationwide slowdown in the construction of new homes may incur a housing shortage, Yun said, which would lead to an a spike in housing prices, creating a wealth of unaffordable homes and a reduction in mortgage lending.
Yet, Yun believes the slow, albeit erratic recovery of the worldwide economy bodes well for both the short- and long-term future of the real estate industry.
“Even in Michigan, where the economic stats are the worst, they are starting to create jobs,” he said. “The growth is not robust, but the economy is recovering.”
“As the California market goes, so goes the entire resort market,” said Debra Howard, chair of the National Association of Realtors Resort and Second-Home Committee.
Steve Goddard, president of the California Association of Realtors, said the median sales price across California had stabilized for the last six months, while home values have steadily risen.
“The market has come up appreciably,” he said.
The median sales price for California homes was $306,230 in April 2010, according to the California Association of Realtors, which represents a 21 percent increase from the same time in 2009. To provide context, the median sales price for California was $245,230 in February of 2009, which represented a 59 percent decline from peak levels in May 2007, when the median sales price was $594, 530.
Goddard said recovery in South Lake Tahoe was a little slower than the rest of the state. According to Clarus Market Metrics, South Tahoe witnessed a 2.6 percent drop in the median home sales price during the first quarters of this year compared to the first two quarters from last year.
However, Goddard believes that will change soon.
“The market has reached the bottom here,” he said, referring to South Lake Tahoe. “If (Realtors) tell buyers the market is at the bottom, the buyers will come running.”
Nevada was ground zero for the real estate industry crisis, said Linda Rheinberger, president of the Nevada Association of Realtors.
“For the last 42 months the state of Nevada was the worst place to be based on the amount of foreclosures,” she said, adding that a 14 percent statewide unemployment rate did not help.
Yun said while some markets in the United States have seen home values stabilize, the Reno and Las Vegas areas have not seen their prices return to pre-peak levels.
“The number of transactions is strong, but prices have yet to firm up,” he said.
Nevertheless, Rheinberger outlined reasons for guarded optimism.
“Real estate is booming in Elko due to the increased mining activity in that region,” she said.
Las Vegas underwent a meteoric rise before the bust and became a hotbed for predatory lending practices, Rheinberger said.
“As fast as the region rose, that’s how fast it fell,” she said. “But, stabilization is just around the corner. We don’t want Nevada to be stigmatized as a declining market because it becomes a self-fulfilling prophecy.”