Housing market may improve in '08

January 8, 2008 10:23:40 PM PST
With all of the negative news about the state of home sales in the Bay Area and around the country, the National Association of Realtors predicts the market will improve this year; winding up being nearly 1-percent better than 2007.

Three homebuilding executives appeared on KGO radio's the Ronn Owens Show with an optimistic view on new home sales in the Bay Area.

"Palo Alto, I'm talking about a million-dollar condo, 1,200 square feet in Palo Alto and we are selling 5 a month," said Vickie Nyland from Taylor Morrison Homes.

The sub-prime mortgage fallout has been kinder to major Bay Area cities like San Francisco and San Jose where there is less new home construction -- compared to places like Antioch.

Nationwide, homes sales are expected to be down nearly 13-percent from 2006.

In the Bay Area, sales of new homes were slower in 2007, but so far this year for Taylor Morrison Homes, the market seems to be picking up.

"We've had good sales the last six weeks or so, could it be that it is winding down now? could it be midway through 2008 ? Different markets are going to come out of it at different times. Santa Clara County for example prices have been holding," said Cheryl O'Conner from Warmington Homes.

These builders agree now is the time to buy property, and new homes may be a better deal than a re-sale.

"We have to sell homes. We are building the homes, we need to sell them, we can't take them off the market as you may do in a re-sale situation so new homes are a bargain right now," said Nyland.

Cynthia Kroll is with the Fisher Center for Real Estate at UC Berkeley's Haas School of Business. She's less optimistic.

"It probably will get worse before it gets better. And here are the reasons, there is less money out there for people to borrow second people haven't decided how to respond to it yet," said Kroll.

Home buyers are waiting to see if prices go down further. In 2007 the buzz phrase was "sub-prime lending."

A type of loan with higher interest rates offered to people with poor credit history.

Here's something to think about: nearly two million sub-prime mortgages are scheduled to reset themselves to higher rates nationwide over he next two years. That will likely bring more foreclosures.

Robert Freed IS CEO Of Summerhill Homes.

"I think the Bay Area will fair better than the national real estate market, but it's still going to be a challenging '08," said Freed.