Christopher Thornberg, economist and founder of Beacon Economics:
“Fundamentals are improved. Corporations are making money. Income is rising at a better pace. Real estate is starting to turn the corner,” he said. “The biggest problem we have are with our leaders in Washingotn, D.C., who seem disparate to upset the apple cart at some level.”
Referring to the recent federal government shutdown that froze FHA-insured lending activities, small business lending and IRS-document checks to close deals, Thornberg said having the debate has been deferred to 2014 is somewhat unsettling.
“It’s not over,” he said.
Pushing aside the budget debate, Thornberg said there still is no full set of regulations from the banking industry. No one can agree on what a conventional mortgage looks like. Yet, solid fundamentals should keep real estate prices appreciating at a rate of 20 percent in 2014.
Sean O’Toole, founder and chief executive of PropertyRadar:
“For those who are still underwater, I don’t think this feels like much of a recover,” O’Toole said.
O’Toole described 2012 as the year of the short sales. “There were huge incentives for banks to push them through,” he said. Even with all that movement, short sales and REOs today represent 25 percent of all home sales. “That’s a substantial percentage of the market.”
The very price appreciation that got the ball rolling now is starting have a different effect. Hedge fund investors are starting to make an exit. ”Prices have risen to a point the ROIs — return on investment — are no longer attractive.”
Mark Palim, vice president of Applied Economic and Housing Research with Fannie Mae:
Speaking to concerns mortgage rates will rise appreciably in 2014, Palim said the popular view that prices drop when lending rates rise isn’t the case, historically.
“Generally speaking, interest rates rise when the economy is doing better,” Palim said. When the economy is doing better, people have higher incomes and they can afford a larger payment. The exception is if there is a large increase in rates over a short period of time. ”In two instances, we saw a slow-down in sales and prices continued to appreciate, but not as fast as before.”
Debra Still, chair of Mortgage Bankers Association:
Calling attention to rules on the Ability to Pay and servicing, Still said the total page count stands at 1,800. The big concern is, If lenders aren’t ready on Jan. 10 to put the rules in motion, does all lending stop? There are a lot of provisions directed at small creditors.
“Get a good attorney to see if you can play in that space.”
Clearly, the pendulum has swung too far in one direction, Still said.
John Burns, president, John Burns Real Estate Consulting:
Builders, traditionally holding a big piece of the GDP, at the moment, are optimistic about where the real estate industry is headed.
“The problem is, they can’t grow business because zero dollars were devoted to land entitlement in the downturn,” Burns said.
One reason construction isn’t stronger here is because of the shortage of land, he said. In sub-markets, where builders wrote off 90 percent of what they paid when land was selling at premium rates, the deals brought back to corporate have to look smoking good. Land in Ontario and Rancho Cucamonga is closing at close to peak prices for lots in chief locations.
Leslie Appleton-Young, chief economist of California Association of Realtors:
Markets do turn on a dime, and 2013 has shown that the big changes that happen can be hard to forecast.
When I look backwards to February 2012, it changed dramatically from projections made in 2012 of 6 percent home price increases.
That said, Appleton-Young pointed out that sustained improvement will take stronger job growth than the region has now.
“It all circles back to where are the first-time home buyers going to come from? No where, if they can’t move out of the parents’ house and get a job with decent income.”
First-time home buyers, faced with challenges from a good paying job and lack funds to make a down payment to student loan debt, are also likely to be competing with investors, tight lending standards, higher FHA loan fees and lower loan limits.
“This issue of first-time buyers is absolutely critical,” she said. “We are gearing up for a huge affordability problem, and we need to reach out to first-time buyers to help them get into the ballpark.”