March Conversations - with Local Experts

Recently I took an opportunity to go to the NSDCAR sponsored Conversations 2011 that was held at the Escondido Performing Arts Center. George Chamberlin was the moderator and there were a series of featured panelists who were experts in Economics, Planning, Development, Energy, and Water resources. That may sound boring right off the bat, but the day turned out to quite interesting and very informative. I thought I would share a few of the highlights with you! Skip through what catches your eye!

Let me know if you have questions on any of these comments. I hope you find them useful! Crista :)

Debra Reed, Executive Vice President, Sempra Energy
Speaks on energy!

- In the next 15 years, we will have smarter energy, use less energy, and use cleaner energy
- NOW, we get 60% of our energy from natural gas, 20% from San Onofre, 13% from renewable sources such as solar, wind, and geothermal
- By 2020 30% of our energy will be from clean energy sources
- Our bills are about 25% lower than those who live out of state. Rates are high, but bills are lower due to energy efficiency
- Gas use has gone down by 50%
- The future will hold more control over how we use energy.
- San Diego ranks 7th in US in clean-tech jobs
- The Smart Meter will have a web-based program to help you evaluate energy usage so you can plan accordingly

Ken Weinberg, Director of Water Resources, San Diego County Water Authority
Speaks on Water

- We are not in a drought perior this year!
- The future holds better water efficiency
- New homes will have to adhere to landscaping efficiencies
- We'll need to invest in infrastructure
- SANDAG forecasts 20% increase in population by 2015, 5% increase in single family homes
- Legistation mandates 20% reduction in water use by 2020

Peter MacLaggan, Senior Vice President of Project Development, Poseidon Resources Corporation
Speaks on desalination Plant!
- By 2014 the Carlsbad desalination plant will be in full production, taking 32 months of construction
- For every 2 gallons of sea water, you get 1 gal of drinking water
- The 1 gallon of residual water has high concentrations of salt, so they will add other water to it before releasing it back into the sea.
- The goal of the plant is to be Carbon Neutral
- This plant will provide enough water for 300,000 residents
- Since a small amount of fish will be killed during this process, they have plans to mitigate this by improving wetlands in other area
- Check out their web site http://www.poseidonresources.com/desal_101.html

Lynn Reaser, Ph.D., Chief Economist, Fermanian Business & Economic Institute, Point Loma Nazarene University
Speaks on the Financial Market!- By end of the year she predicts interest rates will be 1/4% higher
- Long term rates have already ticked up. Will be 3 1/2% - 4 1/4% by end of year (3/4% increase), 2nd half of the year she expects 30 year fixed rates to be 5 1/2% or higher
- 20% down on homes loans will be the norm, with 30 year fixed rate
- Long term forecasts are that banks will be making more loans, rates will be higher, more real estate investors, regulators will be active in the market
- Need to reduce federal long term treasuries from 3 trillion to 1 trillion
- Debt is currently 70% of GDP, we want it to be 60% of GDP
- If there is no political solution to the debt issue, the debt/gdp ratio could be 100% in 10 years
- Future rates are projected to be 6-7% range
- Future holds more banks lending money

Regarding the real estate market
- To get to a Normal Market we need to reduce distressed inventory. we are moving in the right direction, but still have 8k in No. County
- There is about a 25% difference in price/sf between traditional sale and distressed sale properties
- Need to sell distressed homes to ultimate homeowner versus investor
- Active listings are down from 2008
- Unsold inventory index is 5-7 months (it will take 5-7 months to sell all active listings).- San Diego and DC are the only to cities that had price increases last year.
 
Regarding the Economy- 10% unemployment rate locally
- Need to get under 10% unemployment rate to get to normalcy (4-5 years)
- Business are more profitable
- Banks are well capitalized
- There is uncertainty about tax rates
- The 800lb gorilla is the federal deficit
- 2-3 years before return to normalcy
 
 

Gary London, President, The London Group Realty Advisors
Speaks on Real Estate Market
 
- Small business CEO's are as confident now as they were in 2006
- Capital goods orders are up 21% from 1 year ago
- Home affordability is the best in 50 years based on income and interest rates
- Personal savings are up, debt is moving down
- Multi-family sector is going crazy!
- There is going to be more density building
- Curveballs we may be thrown by DC
      - GSE reform
      - credit availability
      - loan delinquencies
      - mortgage interest deductions
- There 48,000 homes in shadow inventory.
- There are 3 times the number of distressed homes than are listed on the market
- Estimated 14 months of shadow supply. This is the lowest number of shadow inventory supply than other markets. We'd like to see 6-7 months supply.
- 5 months of listed supply of regular homes
- New home market is 9% of the total real estate market
 
Regarding a 2011 survey of people in the market for a home, here are the top findings
- Personalization is the new buzz word
- Retirees will move
- Consumers need a reason to buy
- Home design beats price
- Bigger is better
- Generation Y (25-34) isn't much different
- Community amenities are very important
- Green technologiy is in demand
- Buyers use realtor and real estate web sites
- Conclusions vary by geography
- 88% think now is a good time to buy but can't find what they are looking for
- Young adult population is booming
- Gen Y population is decreasing in San Diego
- Rentals are likely to be a much larger component of demand going forward