I just attended the Wenatchee Valley Chamber of Commerce’s 2010 Real Estate Outlook breakfast panel discussion on April 22nd. This event provided valuable information and discussed the indicators of the health and direction of the economy…and in effect- the real estate market. The panel included an appraiser, a construction company owner, a mortgage broker, realtor, commercial property manager.
The panel was split on their feelings about the direction of 2010. It was about a 50-50 positive- negative outlook. I’m “the glass is half full” kind of guy so the positive notes inspired me and were really appreciated. Everyone was in agreement that slow growth in the real estate market would be equally healthy and almost inevitable. The big boom from a few years ago isn’t happening again any time soon and for several good reasons. A bubble will always burst. Here’s what I learned from the Wenatchee Valley experts:
The real estate services professional, commented on the slow commercial leasing market. Rents have reduced from $22 per square foot to $12-14 per square foot. Down payments have increased from 25-40%. East Wenatchee is becoming a popular location with several vacancies showing up downtown.
The appraiser indicated that there is a 2-year supply of 500k+ homes and a healthier 1-year supply of 100-200k homes. He agreed that rents are being lowered in order to keep filled. It appears that an occupied space is better than a vacant one, even if it’s not getting its full value.
The contractor remained positive and boasted profits even though he performed below “boom time.” His company modified their target consumer. Now they get more contracts for folks moving into town or retiring and downsizing. They see far less First Time Home Buyers and have yet to sell a home to anyone taking advantage of the 8k home buyer’s credit. I was really surprised to hear this because so many of my realtor friends have been able to help their clients with this credit. This contractor is seeing more buyers paying with cash or financing with great credit and their company offers financing. A true concern for their company is supply costs. With plants closing there is (as Jay explains) an “artificial shortage” that increase the supply costs dramatically, but he also says that if you “provide custom quality at spec house prices, they’ll buy!”
The mortgage expert provided some cold, hard facts to keep us on our toes. Yes, Fannie Mae and Freddie Mac are pulling the purse strings with tighter requirements. There was a small increase in foreclosures in Chelan County this year but we’ve remained above the state or country average. He suspected that the government policing will decrease growth and concluded that the market is 15% above the long term trend. I asked him for clarification on this. The long term trend is calculated by taking housing appreciation and adding 3% per year. After keying the calculator, in his opinion the market will still decline 15%. Food for thought…Approach with caution or take advantage while you can?
The realtor added more positive spin on the morning. Her introduction: “realtors look forward and appraisers look backward.” With 21 counties in the Northwest Multiple Listings she has seen a 51% increase in pending sales. The March 2010 pending sales were up 35% from March 2009. This is great news! The hottest price range in Chelan County is $250-300k which is also comforting because the Appraiser said there is a 2-year supply of these homes. We need to put them to work! The realtor concluded that she has worked harder than she ever has since her start in 1993. Consumers are making responsible decisions but require a lot of education, hands-on attention, negotiating, meetings and counseling. It’s not coming easy anymore but it is comforting to know that our consumers are making wiser choices.
Well, this was a well-rounded discussion of where the real estate market has come from and where 2010 may take us. I think it’s safe to say that we’ll all approach with caution. We’ve got to get creative in this industry and maybe change tactics a bit, but our consumers are strong and aware. As a home inspector we want our clients to be very active in the services that we provide. Being present on inspections and asking questions is strongly encouraged. It appears that consumers are taking their time to make wise decisions and planning quality investments. That’s good news to me.