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Wednesday, Jun 7, 2023

County Outlook is Grim until 2010, Residential Real Estate is a Drag

It was all about the residential real estate market at the 24th Ventura County Real Estate and Economic Outlook presentation. The capacity crowd at the Hyatt Westlake Village grew restive as one economic prognosticator after the next heaped one gloomy statistic atop another. Bottom line: the pain is going to continue well into 2010. Although the economy has showed “surprising resilience,” according to Wells Fargo senior economist Scott Anderson, which has kept most of his compatriots from declaring a full-blown recession, much of that has been driven by the improved trade balance and exports. National unemployment of 5.7 percent may not sound all that bad, but it’s up 1.5 points over the past 12 months. By way of comparison, in the 1990-91 recession, unemployment rose only 2 percent. There have been eight consecutive months of private payroll declines and that will continue until the end of the year. The U.S. economy, said Anderson, “is on thin ice, and it will get worse before it gets better.” Southern California-based real estate consultant, John Burns, stated that regardless of the national economy, “there is definitely a recession in California.” Of course some submarkets are doing better than others, and the more desirable areas of Ventura County, primarily on the eastern end, are projected to recover more quickly. Lower-priced areas have been the hardest hit and will take the longest to return to full health. Fillmore, Santa Paula and Oxnard all saw home prices drop more than 30 percent in the year, while Newbury Park, Westlake Village and Thousand Oaks saw declines of 10 percent or less. The median home price in Ventura County overall dropped from $630,000 to $455,000 in 13 months, a 49 percent correction. Homebuilders have put on the brakes. Across Ventura County, said Burns, “new home inventory needs to fall 27 percent, to get back to historic norms.” Translation: Prices from 2005 to 2007 were not in any way normal; they were an anomaly driven by a very unusual credit market that combined very low interest rates with very poor underwriting, driving prices and demand higher than was sustainable. “New housing production is at its lowest rate since 1958,” said economist Mark Schniepp. Even multi-family projects are stalled at 46 percent of their normal pace, despite vacancy rates that still hover below 5 percent. Ventura County lost 7,200 jobs over the past year, primarily from Amgen, Countrywide and the Navy, but economist Mark Schniepp doesn’t foresee anymore large layoffs. The county’s jobless rate is about a percent higher than the national average. There’s a caveat to that, though. Countrywide, as a unit of Bank of America, is still quite vulnerable as B of A is not legally obligated to pay Countrywide’s debt. Should their mortgage losses continue to rack up, there is a possibility that the parent company will prune back operations in the region. Retail was predicted to be soft for another nine months, with stimulus checks spent, energy prices still at record highs, and consumers clamping down on their pocketbooks. There is little retail space available, however, with retail vacancy still below 5 percent in most of the county. One ray of sunshine: commercial markets are softer, but still sound. Unlike the residential market, said Schniepp, speculation in this sector was minimal and vacancy rates remain reasonable. The industrial vacancy rate, while rising over the past eight quarters, has just now reached its historical average of 10.9 percent. Office vacancy rates have also increased steadily over the past four quarters and are now at their highest point since the fourth quarter of 2002.

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