Experts will be keeping an eye on these factors, so perhaps consumers should, too.
By JONATHAN LANSNER and JEFF COLLINS / ORANGE COUNTY REGISTER
Jan 21st 2013
We all know the obvious real estate benchmarks – and most have been moving in positive directions in recent months.
But to be smarter about the market in 2013, we asked some business leaders around Orange County for what not-so-obvious indicators they’ll be watching to see what’s next for the economy and real estate heading in 2013.
Here are 13 economic patterns that real estate fans should be keeping an eye on this year.
Kevin Baldridge, president of Irvine Co. Apartment Communities, is watching the pace of people switching from renter to owner.
“Historically, about 20 percent of our residents report leaving us with the intention of buying a home. During the economic downturn, the number dropped to 10 percent. During other economic recoveries, the number gradually progressed upward. This time, it jumped. My sense is there’s pent-up demand. People have been saving their money and are finally confident enough about the recovery to make the leap. We believe the drivers behind the burgeoning demand for single-family homes will also support apartment fundamentals. A recovering economy and optimistic consumer bode well for all sectors of housing.”
Daren Blomquist, vice president at foreclosure tracker RealtyTrac, is watching whether his neighbors start putting up for-sale signs.
“Most of my neighbors have been in the neighborhood for a long time, but there have been very few homes for sale in the last two years after a plethora of foreclosure and short sales in 2009 and 2010. I suspect several neighbors have held off selling because of the down market. Already I saw one of these neighbors go ahead and sell in the last month thanks to the recent rise in prices, and I think if I see more sale signs pop up, that will be a strong indicator that things are going well in the neighborhood. But if not – it probably indicates the market is not going as well as expected.”
Rand Sperry, CEO of the Sperry Van Ness commercial real estate franchisor in Irvine, is watching single-family housing.
“I look to single-family housing as a bellwether for the general economy. Here in Orange County, single-family supply has shrunk considerably, which has led to an increase in demand. This points to increased competition and positive growth for the local economy. Single-family housing has an important psychological impact on the rest of the economy. When it points to positive growth, we will see the same for the rest of the economy.”
Tricia Esser, CEO of architects KTGY Group in Irvine, is watching what apartment landlords are charging.
“We watch apartment rental rates; when those get to a certain level, buyers will come back to the for-sale market. We are also closely watching how city agencies can get back land that the state of California took over from redevelopment agencies. We think cities are going to get more creative!”
Nick Lieberman, president of Bona Fide Mortgage of Irvine and treasurer of the Apartment Association of Orange County, is watching what folks do with investments in this low-rate climate.
“I’ll be listening for the level of patience expressed by friends, colleagues and customers with respect to the returns they obtain on their cash and money market holdings. There will be a point when people become so fed up with what amounts to zero or negative return (after inflation is factored in) that they will feel compelled to act. The greater the public’s aggravation with miniscule yields on liquid assets, the greater the propensity to deploy funds into real estate.”
Len Herman, 2013 president of the Orange County Association of Realtors and agent with Keller Williams Realty in Mission Viejo, will watch employment trends.
“The unemployment numbers are grossly understated, as they only consider individuals currently collecting unemployment benefits. There are still a great number of people that are either still out of work or underemployed that have managed to retain their homes. But for how much longer?”
Chris Pollinger, First Team Real Estate’s senior vice president for sales, awaits the return of new mortgage makers with private financing.
“Right now, almost all of the loans for real estate are government-backed. Each up-cycle in real estate has been fueled by the private sector pouring money into mortgages. In the ’90s, it was the savings and loans. In the 2000s, it was hedge funds and the mortgage broker. There is too much money in potential returns for this area to be ignored forever.”
Dan Heinfeld, president of Irvine-based architectural design firm LPA Inc., looks at how many kids are in school.
“Growth in K-12 school and college enrollments have a direct impact on facility needs. This also indicates an upward trend in key areas of California’s economy, construction activity and employment.”
Donny Disbro, CEO of Professional Community Management, will be watching who’s buying locally.
“During the prolonged economic downturn, we saw an influx of foreign real estate investment. This helped mitigate the impact of the recession in many of our communities. I’d like to see if this was merely a temporary response to low housing prices or if we’ll see foreign investment continue to buoy the market and perhaps fuel the next boom.”
Jeff Ingham, senior managing director at Jones Lang LaSalle commercial brokerage in Irvine, is watching how office space is used.
“Given new technology providing workers the ability to work from home and the ‘Gen Y’ factor of open work space, we are seeing space utilization for the average Orange County office tenant move from north of 250 square feet per person to at, or below, 200 square feet per person. This trend is causing a reduction in demand for space, as well as a push for tenants to consider relocation as opposed to renewal.”
Alan Reay, president of tourism consultancy Atlas Hospitality Group in Irvine, is watching land sales.
“You are going to see more hotel owners looking for suitable sites to develop or even buying existing older hotels in in-fill locations to knock down and build new. When prices of hotels that are 30 to 50 years old are above $100,000 per room, it makes a lot more sense to start looking to build; this is the next wave in hotel real estate over the next three to five years.”
Gary Watts, broker for Impact Real Estate in Mission Viejo, will be reading, watching and listening for his key market indicator.
“The media’s opinion of the market. There is no way around it. They drive consumer demand. Should they get worried, they will not be hesitant to tell everyone that a ‘second bubble’ may be occurring.”
Jim Palmer, president of the Orange County Rescue Mission, is watching those without roofs over their heads each night.
“What we look for is the number of services provided and the number of new people or families new to homelessness. Since 2008, these numbers continue to rise, and we do not see any signs that these trends will change. Such indicators mean that we must continue to meet increased demand while we work to raise awareness of the issues surrounding homelessness. Unfortunately, these indicators mean that men, women and children continue to live in dire situations, often paycheck-to-paycheck, until, finally, they reach the end and they’re out on the streets.”