What will be the forecast for this 2006 Calendar Year? Will prices continue to escalate? Will this be the end of the boom? Will we see a repeat of the 1990's? The predictions continue to speculate with lots of economic forecasts but the crystal ball still holds no definitive answer.

The Federal Reserve is voicing concern about the volume of loans out there to unqualified borrowers made on properties where the loans may end up exceeding the value of the asset. The Fed is waiving a red flag to the “straw borrowers” who are obtaining loans for borrowers who normally would not qualify for the amounts being financed. Lots of attention is being drawn to “Mortgage Scams” while the market for new loans and refinancing continues to be hotter than ever. Current rates have been raised again currently averaging around 6.32%.

The overpriced inventory still sits on the market and never really demonstrated any trend because it was never realistic to begin with. The market is still flooded with investors competing for very little real inventory which has resulted in too much money chasing too few good deals (if any). The volume of investors, many who are amateurs caught up in the frenzy of having to buy, continues to overcrowd the marketplace with such density that inevitably somebody is going to get hurt. To play it safe, the sophisticated investors are sniffing out the deals which exist in areas where there is a shortage of buyers and those areas are not in Santa Monica or on the Westside and the defining areas of the Westside are expanding in all directions. Throughout Southern California we are continuing to see rehabilitation and regentrification of previously depressed areas which is changing the entire landscape of communities; we are even developing a real “Down Town” Los Angeles! The current trend of condo conversions and development continues to stir local opposition from neighborhood groups opposing density, traffic congestions and the preservation of open space (what is the quality of this open space?) Responsible development takes time and very deep pockets.

The housing market despite all the economic indicators is still strong while the pace of activity is slowing down prices having not yet plummeted. We are experiencing signs of cooling; however, the demand for housing is still very high. Economic forecasts continue to suggest a slow down over the next two years but the shift will probably not be as drastic as what we experienced in the early 1990s and a sudden crash on prices is unlikely. Now is probably a good time to sell and move out to other affordable areas. Arizona and Nevada continue to be popular growth and still affordable areas attracting buyers from Southern California.

Reviewing the history of the 2001 Recession, the prices of California real estate were not viable because while the values of property soared, individual income levels did not.
Real estate is still appreciating but at a slower pace and the market is not stagnant. The market will stay strong as long as the economy stays strong and the housing industry is still a strong leader in the job market. Manufacturing, which is another leading industry, has continued to sustain itself and not experience massive layoffs that were previously predicted. So we enter yet another year of speculation with the same question “how long is this run going to last?” It still depends on which crystal ball you’re currently looking at, which forecast you’re following and ultimately what motivation if any is moving you.

In viewing the year 2005, we continued to experience strong sales, increased values, less marketable inventory and more consumer pessimism.

On a personal level, I am missing my friend Gordon Gitlen and I know that I am not alone in this loss. Our annual ACTION holiday party which had been previously hosted by Gordon was graciously hosted by Wes Wellman with a change of location and a festive fun gambling theme, reminding us that we all need to have fun and cherish what we have.

While looking around at the familiar and new faces at the party, I was reminiscing about when I first joined ACTION as a young broker in 1979 and now experiencing the realization that Lambert Investments is truly part of the Santa Monica landscape, history and we are now becoming the “old timers!”

May the New Calendar Year fill you personally with warmth, good health, joy and happiness? We also wish you lots of success and “Mazel” (Luck) in your real estate ventures.