Tuesday, January 31, 2006

Sunny Forecasts for Lodi, Stockton, and Modesto

From the Modesto Bee:

The Northern San Joaquin Valley and California should experience strong future growth in jobs and personal income, according to an economist who studies the region. Sean Snaith, keynote speaker at the Economic Outlook Breakfast on Thursday at the University of the Pacific, said those gains should continue through 2008...

Snaith, director of the Business Forecasting Center at UOP, said Stockton and Modesto specifically should see job growth in construction, professional and business services, education and health through 2008. "They're both going to continue to be beneficiaries of this inland migration in California," he said, after his 20-minute speech...

Snaith also put a new spin on fears of a real estate "bubble" popping anytime soon, saying he thought a souffle is a more accurate metaphor. The reason is that a souffle is made of ingredients -- in this case, low unemployment, steady interest rates and innovations in financial markets -- that keep it stable, he said. If one of those ingredients suddenly disappeared, the souffle would flatten, but not burst, he explained. "Barring one of those big changes, I don't see anything that would cause a collapse," he said.
Stick with "soft landing." Souffle is so overused.

From the Stockton Record:
Look for the economies, regionally to nationwide, to see a soft slowdown this year, but there will still be bright spots in Central Valley business sectors.So said this year's real-estate market outlook by CB Richard Ellis commercial brokers.Alan Gianini, senior managing director for CB Richard Ellis' Sacramento area, predicted that the national, state and regional economies will see a soft landing this year as they move from a consumer-led expansion, fed by home-buying, to a business-led expansion...

Wayne Craig, regional director of CB Richard Ellis' land group, said that home sales would be down about 8 percent this year and that prices would hold flat. New homes priced above $600,000 will be rare, he said. "2006 will be a good year, but not a great year." He also said that in an attempt to offer homes that local buyers can afford, builders will develop smaller floor plans as well as cluster and attached housing.
From the Lodi News-Sentinel:
Several local business people talked with News-Sentinel staff writer Jake Armstrong to give their input on that very question. They included Kent Steinwert, president and CEO of Farmers and Merchants Bank; Ron Addington, president of the Business Council of San Joaquin County; Nancy Beckman, executive director of the Lodi Visitors and Conference Bureau; Paul Mertz, president of the Lodi Association of Realtors; Dale Gillespie, a partner with the development firm San Joaquin Valley Land Company; Bob Wheeler, plant manager of General Mills; and Pat Patrick, president and CEO of the Lodi Chamber of Commerce...

2005 was a banner year for real estate. What will 2006 hold?

Mertz: I think we're going to see interest rates pretty much stabilize throughout the remainder of the year. I've heard they're coming down, I don't understand why. But I see prices going up. I think we're going to be closer to 8 and 10 percent (price appreciation), only because there is still a lot of demand in California. I think we'll see a little bit of a slowdown in new homes this year ... so I think that is going to help out the re-sale properties.

Patrick: I think we'll see a leveling off home prices, but I don't think they'll fall all the way back to where they were before the run-up.

Addington: Well, if you can believe what you're reading, I certainly think it's a slowdown as far as home sales are concerned. But it is still a very positive market.

Steinwert: We see a slight slowdown, probably the result of the recent rise in interest rates, but expect expenditures on housing to remain above typical years and we do not anticipate a drop in values. We believe that it is possible to have another 50 to 75 basis points rise in short-term and long-term interest rates throughout the remainder of 2006, but also believe that we could see interest rates fall after that as we end 2006 and begin 2007.

Gillespie: It will create more of a buyer's market, but I don't think entirely a buyer's market. I think we're reaching a point in time where we'll have a more balanced market between sellers and buyers. I see continued appreciation, but at more historically normal levels. I think the speculative land market and a lot of investment properties, the value will likely drop.

Wheeler: It's going to slow down. You see a lot more inventory in the market right now. You're also going to see that the prices are going to be a little more flat -- a normal to modest increase. Financing options now, I think that has helped. I don't think people have realized how creative these financial institutions are being. I think some of the reason you're seeing a lot of the movement in real estate is due to financial institutions.


Lander said...

Thanks to a reader who submitted these links. (Pardon my French, Blogger doesn't like accent marks.)

Happy Renter said...

Soufle seems to be catching on, I'm seeing more as part of the anti bubble speel. I know it's overused but I'm really tired of hearing "Balloon" and welcome the change.

Happy Renter said...

Posted on the Sac realestate blog you have a link for.
We recently found a new blog among our incoming links, Sacramento Land(ing). This one’s definitely worth a look, and there’s a lot of good information from multiple sources.

On the other hand, there’s a lot of emphasis on those round soapy things. You know. Will they burst and the like.

drwende said...

Snaith is Stockton's low-budget Lereah. He's always first to get the call when there's a need for someone to say that it's normal for housing prices to be set where payments on a conventional mortgage (w/ 20% down) would be about double what the same house would rent for.

Never mind that this isn't how prices usually are, or that a good quarter of Valley sales in the last few years are to "investors" who need that rent to come close to their mortgage payments. This doesn't matter in Snaith's New Economy.

Lander said...

happy renter-Thanks for the heads-up.

Welcome Sacramento Real Estate Blog readers.

Anonymous said...

drwenende should read Dr. Snaith's reports.

He is member of several prestigious national forecasting panels. He is hardly low budget.

the mortgage market has changed - the 20% down payment is an anachronism in many markets