In a span of one week, two top officials have told Silicon Valley REALTORS® that, at least for the Bay Area, particularly the Silicon Valley region, the worst for home sales is over, that there are better days ahead. However both of these officials said a full recovery will take time.

At a general membership meeting of the Silicon Valley Association of REALTORS®, National Association of REALTORS® Chief Economist and Senior Vice President of Research Dr. Lawrence Yun told REALTORS® “the worst in (home) sales is clearly over. … Even in the worst market, the bleeding has stopped.”

Dr. Yun at the SILVAR general membership meeting.

Yun said, particularly in the San Francisco –San Jose area, the bottom has already occurred and prices are beginning to firm up.

California’s housing market recovery started even before the home buyer tax credit, according to the national economist. “California’s housing market correction was short, sharp and fast,” Yun said.

The key test will be this winter. “If this winter’s sales match up with other winter home sales, I would say that would be a very positive sign,” Yun said. “Let’s give it time.”

In the meantime, Yun said those with strong credit who can buy, should buy, while mortgage interest rates are still at a 50-year low.

“I don’t expect rates to remain low. They may increase next year,” Yun said. “If you’re willing to stay well within a budget and are comfortable with it, at a 4.4 mortgage interest rate you’re protected under inflation.”

Check out Yun’s PowerPoint presentation here.

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California Department of Real Estate Commissioner Jeff Davi spoke at a SILVAR District tour meeting in Los Gatos last week and said much of the same thing. He told REALTORS® that “there are better days ahead.”

Davi marveled at the vast improvement in housing affordability and historically low interest rates.  “I promise you this, rates are not going to stay at 3 or 3.5 percent fixed. The affordability index is fabulous. Buyers are now better off. They have great opportunities in this market,” Davi said.

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Left to right: SILVAR President-elect Gene Lentz, DRE Commissioner Jeff Davi, Board Director Suzanne Yost, Los Gatos/Saratoga District Chair Bill Rehbock and C.A.R. Past President Jim Hamilton.

 

So, what’s holding back a full recovery?

Yun said the unemployment rate has stopped rising dramatically, but it is still high, and while we are seeing some job creation, it’s not coming quick enough and not large in numbers. Corporate profits are rising, but business spending is down. Businesses continue to hesitate because they’re uncertain about how they will be impacted by health care legislation, the recently passed financial regulatory bill and potential taxes. Right now, they realize they can still make a profit with fewer employees.

“We need job creation. If business spending increases, the economy would be more robust,” Yun said.

Pay attention to foreclosure numbers, as these numbers will signal what’s ahead, Davi said. In 2006, there were 12,000 foreclosures. In 2008, there were 240,000 foreclosures. Last year, the number of foreclosures slightly fell to 200,000 – still a lot, but a good sign, nevertheless. Foreclosures need to get back to the 2006 level, Davi said.

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