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REALTOR®: San Mateo County Real Estate Market in Enviable Position, according to C.A.R. Economist

Monday, November 5, 2007

Pictured above are C.A.R. Deputy Chief Economist Robert Kleinhenz and SAMCAR President Geoffrey Craighead.

Expect statewide home sales to decline and home prices to fall in 2008, but it is unlikely these developments will signal a recession because the economy is healthy – there is job growth, unemployment is up just slightly, and inflation is in check. And compared to the rest of the state, the real estate market in San Mateo County will continue to do well. This was the message C.A.R. Deputy Chief Economist Robert Kleinhenz gave members of the San Mateo County Association of REALTORS® (SAMCAR) at a recent SAMCAR Broker/Manager meeting.

“There is lots of uncertainty about the economy due to the credit crunch, but we are still heading forward – not backwards,” said Kleinhenz.

As he poured through data and statistics on the housing market, Kleinhenz explained
much of the uncertainty is being blamed on the credit crunch resulting from fallout from the subprime market and rise in foreclosures. He said, “It’s not clear what the impact of the credit crunch will be; we still have a long way to go, but compared with the rest of the state, the Bay Area and San Mateo County, in particular, is in an enviable position.”

He said the real estate market is better in places like San Mateo County and San Francisco because these places are built out areas, with limited opportunities for additional home building. “Their median prices have held out pretty well. There’s virtually been no erosion in sales in the over $1 million market,” he said.

Kleinhenz indicated despite negative news constantly being portrayed by the media, the current real estate market is closer to normal today than the past few years. “People have forgotten what a normal situation is like,” he said.

He said 11.8 months of unsold inventory is a far cry from 19 months of unsold inventory in the 1980s and 1990s, when the economy was actually in trouble. Kleinhenz told SAMCAR members, “This market is driven by a different set of factors.”

In the past, a weak economy created distress in the housing market. This time, the market just could not keep up with the fast pace of the past few years and prices have increased so much that affordability has been negatively impacted.

“Affordability is the key to a healthy market,” Kleinhenz said. “If you can’t get an entry- level buyer into the market, you are not going to get others to step up. We need to see affordability numbers improve.”

The C.A.R. economist said affordability numbers in California have dropped from 25 percent to about 17 percent for first-time homebuyers. “The affordability level needs to be set closer to 30 percent,” he noted.

Looking ahead into 2008 and 2009, Kleinhenz said he anticipates California will experience steady population gains, little housing gains, “but you certainly won’t see home prices plummet. The market will continue to move forward, but at a sluggish pace. Longtime prospects continue to be good.”

He expects the adverse news about the subprime fallout to reach a peak in the spring and into the fall of 2008. “2008 will be tough,” he predicted. “We could use all the help we can get on mortgage rates in order to improve affordability.”

And even though the housing market has seen a decline in sales, “there are lots of opportunities that present itself. We just need to get through the credit crunch,” said Kleinhenz.

He added, “There are still lots of opportunities in the market for investment; you just need to do your homework. On the average, real estate here has had an average gain of 12 percent year over year. The trick is to hold on to it.”

The San Mateo County Association of REALTORS® (SAMCAR) is a professional trade organization representing over 3,800 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula. SAMCAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in San Mateo County.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Julie Ziemelis, Director of Public Affairs, e-mail , or phone (650) 696-8214.

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