Analysts are predicting another soft year in real estate.
Among them is Jeff Meyers, a Southern California principal of Meyers Builder Advisors, who anticipates challenges ahead in the residential market. The real estate consultancy has analysts in Encinitas, Corona Del Mar, San Ramon and Scottsdale, Ariz.
“Unfortunately, I would predict it will be down again,” said Meyers about new home sales. “I will estimate sales will be off, and I hate to say this, but by another 20 percent.”
Meyers estimates that 6,000 new homes were sold in San Diego County this year but expects that number to dip to 4,500 next year.
Median home prices were down this year, according to Meyers, and will be off again next year.
“The bad news is prices will go down more,” he said. “The good news is that they are going down at a very decelerated rate. I don’t see prices going down by more than 5 percent.”
He said the housing market will hit bottom in 2009 and sales volume will begin to pick up due to lower sales prices.
Foreclosure Properties Selling
Existing home sales have recently increased, according to the San Diego Association of Realtors.
In SDAR’s most recent report for the month of October, resales of existing attached homes were up 25 percent from the same month in 2007, and resales of detached homes were up 43 percent.
“Year-over-year resales are up significantly,” Meyers said. “That being said, 40 percent to 50 percent are foreclosures. But it is still a good sign. A sign there are still buyers out there.”
Murky Office Market
Jolanta Campion, research director at Grubb & Ellis|BRE Commercial, forecasts lower rents in the office market and an increase in the countywide vacancy rates in 2009.
The national brokerage firm’s Economic Outlook Report for 2009 said the office market entered a murky environment and it will take more than 12 months before the sky begins to clear.
“Tenant activity will be very slow next year,” said Campion. “Simply put, everyone is taking a wait and see attitude. Hopefully, by the end of 2009, we will see capital coming back into the market. But the first two quarters will be very slow.”
Grubb & Ellis also anticipates an increase in the flexibility on lease terms and an increase in concessions made during the lease negotiations.
She said lower-priced submarkets may see increased leasing velocity as demand from tenants who are downsizing and relocating from higher-priced submarkets is expected to increase.
And investors will take longer to scrutinize the underwriting of each transaction and will pull back from deals quicker next year, according to Campion.
Trends in 2009 include interest in U.S. Green Building Council LEED-certified office space and the remodel of existing office and lab space, because it is difficult to justify new construction, according to Campion.
Despite the softness of the industrial, investment, office and retail submarkets, multifamily housing will be strong. Countywide, apartment vacancy rates are low and finding an apartment that rents for less than $900 a month is difficult, she said.
She estimates that San Diego will remain one of the strongest multifamily markets in the country with vacancy rates hovering in the 2 percent range. The national vacancy average is 12 percent.
The rental market is strong due to rising foreclosures and layoffs locally.
“Multifamily will have the best year compared to all property types,” said Campion. “Retail is entirely tied to consumer spending and store closures and the general economy. Office is tied to job growth.”