Visionary Home Builders of California

Ringing in the New Year, the situation for the local housing and real estate industries will unfortunately continue to be bleak as foreclosures and defaults continue to be extremely high in Stockton and the rest of San Joaquin County. According to Realtytrac as of 1/5/2009 there are 1,968 Defaults, 1,136 Trustee Sales and 5,625 Bank Owned REO’s in Stockton. For San Joaquin County there are 3,473 Defaults, 2,058 Trustee Sales and 9,623 Bank Owned REO’s. Despite the fact that foreclosure remains a big problem for Stockton and the rest of the County there appears to be some good signs. According to the Record (Spence, 2008, D1) home sales throughout San Joaquin County have increased 341% in November 2008 versus November 2007, going from 288 in November of 2007 to 981 in November 2008. Part of this is attributed to declining interest rates that have been steadily falling and are now reaching record lows, hovering in the lower five percent range for a 30 year fixed rate mortgage. Another reason for the dramatic increase in home sales from the previous year is the availability of low priced foreclosed and bank owned homes. Local realtors are reporting that first time homebuyers are taking advantage of low prices and interest rates and are driving the spike in home sales.

Also the Mortgage Bankers Association reported on December 24th that the drop in interest rates has caused a spike in the number of mortgage applications. The MBA reports that as of 12/19/08 the Market Composite Index increased 48% from the previous week, going from 841.4 to 1245.4. The MBA emphasizes that the index has not reached these levels since June of 2003. Interestingly, the MBA reports that the bulk of these mortgage applications are mainly from individuals looking to take advantage of the current rates by refinancing. Although it isn’t specifically mentioned, this is good news as many of those refinancing into the current rates are likely to be less at risk of facing foreclosure.

Despite the fact that there are some good indicators in certain segments of the housing market, for the most part the outlook for 2009 remains bleak. In an interview by the Record (12/8/2008, D1) with Gregory Paquin, President of The Gregory Group, a real estate consulting firm, Paquin predicts that 2009 will be a “bottoming out” year for new home builders in terms of new construction which is mainly due to the sluggish economy and competition from cheaper foreclosed homes, which appear to be driving prices so low that builders cannot compete. Although Paquin predicts 2009 to be a “bottoming out” year he sees 2010 and 2011 as years where we will see more growth and stability in the homebuilding industry.

In summary, as we enter the New Year, the local real estate industry will continue to be hampered by the high rate of foreclosure. However, with much lower interest rates and lower prices many first time homebuyers will be looking to purchase homes which can offset some of the damage caused by the rash of foreclosures. Unfortunately for new home developers, competition from lower priced foreclosures and REO’s could mean another dismal year in terms of sales which would hamper new development. This in turn affects the local economy by not providing much needed construction and real estate related jobs that are associated with new development.