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A blog about the economy and the Sacramento-area real estate market.

November 13, 2008
The real estate creed: Always leave them smiling

This is the time of year in real estate circles when industry people gather with consultants and experts and hope that next year is better. I had a good ringside seat for one of these this week when the Sullivan Group Real Estate Advisors of San Diego offered its fall outlook.

 It proved that even a bad real estate market is still fascinating. Some highlights - slightly magnified by humor - about what's really going on in real estate: 

  • The next generation of home builders will probably not learn a lesson from today's housing meltdown. The Sullivan Group's Tim Sullivan and Dean Wehrli said builders next time must not go so crazy. They must focus on what people can afford in a market and be prudent. Go easy on the $500,000 homes. But Tom Jacobs,west region chief of Kimball Hill Homes (which filed for bankruptcy protection last April) said, "I think the next generation of home builders will make the same mistake."
  • More than half the nation's big publicly-traded home builders may yet fail. David Butler, vice president for JPMorgan Real Estate, repeated what he heard at a similar conference in Hawaii: "There of four believed that half the Wall Street home builders will not be around in  three or four years."
  • Maybe Barack Obama can save the day with that talk about "Hope." Said Sullivan, "A new year and a new president who ran on hope and change could be the beginnings of a confidence rebuilder. The fact that there's something new could be a positive for us."
  • If that doesn't work, trust in Generation Y. That's the many children of fertile Baby Boomers. The generation's forward edge is approaching its 30s - prime home buying years - and most of its members are renters. Sullivan said, "This generation is even bigger than the Baby Boom. The pig in the python is coming."
  • It's bad, sure, but you should have been around in the 1930s. In 1933, unemployment was 25 percent. It's 6.5 percent now. In the 1930s, 40 percent of mortgages were delinquent. It's less than 5 percent today. And in the 1930s, gross domestic product contracted by 25 percent. Officially, our recession is just starting. And lastly, the 1930s saw 9,000 bank failures. So far we've had fewer than 40... Always, leave them smiling.

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