Ryan and I attended the Annual Sacramento Association of Realtors Master’s Club Breakfast this morning. (Master’s Club members must sell at least $4 million in sales each year to maintain their membership. They are the 20%-ers of Real Estate) I have not attended one in probably 20 years. However, with Ryan now moving his real estate career forward as a licensed agent, I felt I should set a better example and attend. At first, I was lamenting the $50. I spent on tasteless scrambled eggs and a dry croissant, but at least the bacon was quite good. As the program started I went back to wishing I was back at my desk working – that was until the key note speaker came up and then things changed!
Sanjay Varshney, PhD, CFA and the Dean, College of Business Administration, CSUS spoke. He and his colleagues produce a business and financial forecast for the region that is widely heralded.
Mr. Varshney said that the past several years the forecasts have been pretty much doom and gloom; however, there is a glimmer of positive news in the coming year. To follow is what I was able to recount with Ryan’s help from the notes I feverishly took:
We lost 110,000 jobs here in the Sacramento area. Our Economy is a Retail based GDP vs. the more stable Manufacturing. The only thing he could say good about that was that we are not Stockton. Stockton continues to gain mention in the Wall Street Journal as one of the worst economies in the country.
We have 11.2% unemployment with the highest sectors being 1) Construction; 2) Manufacturing and 3) Financial. ( that includes Real Estate – Alan is a contractor and you all know what I do!) 96% of all employers in the region have 50 or less employees; 83% 20 or fewer employees and those small businesses are hold tight making everyone who remains work harder and do more. A lot of this is possible because of convenience and efficiency of I-phones and other technology.
1/3 of our jobs are Government jobs and with government cutting everything, the number of future jobs lost will continue to grow. It is not expected to grow the unemployment number, however, because our population continues to grow. There are only a few major employers like Intel, Raleys, Kaiser Permanente and Sutter Health to name a few.
The residential real estate market is close to the bottom, hasn’t hit it yet, but he feels it will bottom out in the next 6 to 9 months. The lower end is at the bottom, but the mid and upper markets still have some adjusting in their future. He expects more foreclosures. This is because of two things: 1) we are in another reset cycle of Variable Rate Loans. People who could afford their homes last year, may not be able to do so with the next adjustment. 2) Strategic foreclosures. Many who can afford their homes are walking away as prices continue downward. Many of them are purchasing new homes in their same neighborhoods at a far lower price and then walking from the one they are upside down in. Let me add my words of caution, we are learning of an increase of fraud investigations by the FBI in many such cases. I don't recommend it; I'm only reporting on it!
Last year we sold only 33,600 homes in California. That is about 50% of what was sold at the top of the market.
California, Arizona, Florida and Nevada were and are hardest hit in the country. Of course they were the states that had the biggest boom so they are experiencing the biggest bust.
He also said that contrary to what a lot of people say and think, real estate is not the strongest investment. Year on year, it produces only about a 7% return – long term. It barely keeps ahead of inflation. He feels we have 7 to 10 years before prices will return to their 2005-2006 levels and for the real estate market to rebound in total. I think I take some exception to this. The richest people in America have a majority of their wealth in real estate. I have watched countless people grow old very rich living off their “LAND!” And, in the Benbow household, a major portion of our retirement income will come from the rents on our rental properties.
He said that nationally, the recession is in a double dip. Not so here in California as we have not yet hit that bottom. He thinks we might be spared the double dip, but instead we have just had a longer period of agony without any relief.
Nationally, the credit market has made its u-turn. He predicts that you will find that borrowing money will become much easier in the next 6 months or so.
As I mentioned above with regards to unemployment, our population continues to grow, but sales in all sectors are down. That is an indicator that our growing population is comprised mostly of non-producers (WELFARE!!!)
Government is out of control, broke, bankrupt! And they continue to want more money and more spending.
Savings are up, but that hurts our economy. Remember we have a retail based GDP – 70% of our GDP is from retail.
The Bay Area has come back and prices have stabilized in the housing market. He confirmed what we in real estate have always experienced… it will take about 6 to 12 months for Sacramento to follow.
What can we do here in Sacramento?
• Market our area What are we good at? What is so great about living here? Etc….He said as he thumbs through the Wall Street Journal he sees ads for San Antonio and other small cities around the country. He never sees anything touting the virtues of living in Sacramento.
• Keep the Kings! Regardless of what you think, having a major sports franchise keeps us not only in the national view but the world view. It is critical if we want to do the next two items!
• Try and get a future Olympics in the region
• We need to attract more high end jobs.
• We need to encourage private sector investment – Kings, Olympics , New manufacturing businesses. Etc….
• We need new talent - In the Capital and in all sectors of government leadership.
To the last item, he received a standing ovation! It is not only the “Occupy Crowd” that is frustrated. The Master’s Club is comprised of top producing agents who know how to get the job done. They – we have no tolerance for what is going on at our Capital and Washington D.C. as well as at the local level. Look at what difficulty and road blocks Kevin Johnson has come up against trying to change business as usual in the City Counsel.
So in the end, despite the awful eggs it was worth the $50.00 and I guess I should put it on my calendar for next year. Hope you all got something from it as well!
Labels: Economy, Real Estate, Sacramento Region
# posted by
Viki Benbow @ 12:13 PM
