We attended this yearsÂ 12th Annual Residential Real Estate Conference at the University of San Diego and here is a quick summary of the event.
For both California and San Diego, the forecasts for 2012 are predictingÂ onlyÂ a slight decrease in the number of distressed homes and flat prices due to
Low consumer confidence
Tough credit qualificationsÂ
Lack of hiring by employers.Â
We are not yet at a long term equilibrium in home ownership rates and many more “strategic” defaults are in the pipeline for the banks & a higher % of distressed inventory is selling as short sales vs. REO. This strategy is helping banks minimize their losses and are processing the short sales in half the time.
At GII We can attest to all of this through our deals. It appears that not only will our single-familyÂ renovate and sellÂ strategy fit the market conditions in 2012 it may be time to start buying and holding more properties.
Highlights from Fannie Mae chief economist Doug Duncan, PhD:
New housing starts at long term rate for household formation by 2015
20% of us home values are underwater
0% growth in small business hiring in 2012
1.6% growth in US GDP in 2012
Gdp is at prerecession levels but employment has not recovered and will remain at same level through 2012
75% of americans think economy is headed in wrong direction
Reaching levels of historical % of ownership and rental properties
Long term home ownership level expected to be 65%
Highlights from USD Assistant Professor Ryan Ratcliff, PhD:
12% unemployment rate in CA
SD nonfarm unemployment increased 7%Â and has only declined 3%
CA average resale home price down 5% year over year
SD resaleÂ prices have only declined slightlyÂ year over year
$100-300k is the price range of most distressed sales in 2011 in San Diego
Best CA employment gains were in high tech and business services, worstÂ sectors wereÂ manufacturing and construction.
Highlights from USD Associate Professor Alan Gin, PhD:
Best SD employment gains were in health care services, admin. and support services, real estate and hospitality (theme parks)
SD gained 24k jobs in 2011
SD unemployment rate dipped just below 10%
Gin’s local consumer confidence indicator is down 2% in SD
Job growth in SD expectedÂ to beÂ 15-20k inÂ 2012
5k home and multifamily units authorized in 2011 – up from 3k in 2009 and 3.5k in 2010
2.5k of the 5k in 2011 wereÂ multifamily (comprised mostly from a couple big projects – this is up 128% from last year
Burnham-Moores Center Presentation Slides
Presentations from the 12th Annual Residential Real Estate Conference,
December 13, 2011:
Wow the city of San Diego wants to spend $31,000,000 to house ONLY 225 people in the world trade center building in Downtown San Diego.
This $31,000,000 is not to build new construction but to use an existing structures top floors for permanent and temporary housing. I am all for helping the homeless and in particular the homeless who want help or need help due to handicaps or mental illness.
Don’t get me wrong that it is not an important issue to me. My best friend died when about 14 years ago homeless (age 21) and alone so it is something near and dear to me. Chris turned out to have mental problems and did not get the help he needed and could not deal with everyday life like the rest of us.
As far as my understanding of this proposal for housing the homeless 1) this has no mental health component. Mental issues and drug rehab are probably the biggest things that need to be addressed and are probably the most expensive to deal with.
This is just for housing which is great as long as the person they are trying to help WANTS to get help (if they are capable) and be a contributing member of our society.
If that is the case there should be help and housing. But they are only able to help 225 peopleÂ for $31 MIIIIIIIIIILLLLLLLLLLLIIIIIIIOOOOOOOONNNNN DOLLARS!!!!!! Can’t that money be put to much better use and help a lot more people? How about all the homeless who won’t get help because they didn’t utilize that money effectively.
Why don’t they rent out the office building which is a prime high rent area of downtown (assuming they own it. If they don’t there are cheaper places that could then house more people. It’s not like they need the lap of luxury just food, shelter, and safety to start with) San Diego and use the income that is generated on an ongoing basis and which will grow in addition to the $31 million and use the money more effectively.
They could probably buy the old hospital that is not in use in El Cajon and house hundreds more? Or for $31 million they could buy about 364 apartment units around San Diego and own them free and clear.
That would be $85,000 per unit which is possible in this market. That assumes NO debt (loan) and they could use the proceeds from the world trade center business to pay for operations.
If they financed the purchaseÂ at a very low loan to value of say 50% and 4% government interest they could buy almost 800 units and if there was an average of 2 people per unit would house over 1600 people.
That’s 40% of the estimated 4000 +/- San Diego homeless population according to the article.
You could have different buildings for the different stages people were in and also in different parts of the county so people could live closer to where they found work. If you live in downtown how are they going to be able to commute to a job opening in Oceanside if they got it? If some of the units were in North County the people who worked in North County could live there, etc.
Stage 1 – Straight from the streets. This is where they would have a chance to get food and shelter. Acquire clothes, education and job training. To earn there keep they would need to volunteer and work for free as they were being trained but would not have to pay for food and shelter.
Stage 2 – This would be another building they would move into. This is where they would move once they got a job & and the residents are more stable. There rent would be subsidized heavily and they would be in an environment where they were seeing others succeed. Success builds from success and from being around success people ( I would consider success for someone who is now homeless to have a job, stability and able to feed there family)
Stage 3 – Less subsidy to the person and eventually they could be a contributing part of our society. Hopefully they could help others and encourage others who were in there situation.
Rules would be no drinking and drugs. they should be tested. They must slowly start to contribute to earn there keep. No free ride if they don’t have mental issues or major handicaps. If they are handicapped they should contribute to whatever level is appropriate depending on the handicap.
Like most things in life it would not be this simple and this does not address the mental health issues or drug rehab. The point is that $31 million can be spent so much better in helping this cause.
The Government is not good at managing money and this is a perfect example. They have so many resourcesÂ which they waste, primarily in OUR tax dollars. But when it comes to there salaries (a tree trimmer makes over $75,000)Â and pension benefits it is a joke.
The bottom line is it always easier to waste other peoples money.
What do you think?
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