Experts discuss extent of local real estate drop
By Stephanie Bertholdo bertholdo@theacorn.com

Dr. Terry Paulson

The residential real estate market in Ventura County continues to drag--so does the mood for homeowners-- but exactly how low the prices will go remains an open question, according to speakers at last week's Ventura County Real Estate and Economic Outlook Conference at the Hyatt Westlake Plaza.

The subprime mortgage debacle has pushed home loan defaults to a 15-year high said Mark Schniepp, director of the California Economic Forecast, a Goleta-based firm that co-sponsored the annual real estate symposium along with First American Title.

"The number of foreclosures is surging and will soon reach unprecedented levels," Schniepp said in the publication, "2007 Ventura County Real Estate and Economic Outlook." He predicts the downward real estate cycle will continue for a number of months.

Schniepp said the thousands of faulty subprime loans, along with declining home prices, rising mortgage rates and a "spate of foreclosures" have created the "perfect recession stew" for California real estate. But he said Ventura County is expected to fare better than the norm.

Schniepp predicts Ventura County real estate will experience a price drop of between 10 and 15 percent in the coming year. Not a bad showing compared to other California real estate markets that are expected to decline almost 20 percent.

While a record number of default notices have been sent to California homeowners, only 317 Ventura County homes have been foreclosed, Schniepp said. The website www.foreclosure.com keeps track of the home defaults.

The current real estate slowdown should not be compared to the 1990s recession, Schniepp said. During that time the downturn continued for 71 consecutive months and resulted in an almost 30 percent drop in prices. Schniepp said it seems "unreasonable and improbable" that history would repeat itself, especially since today's job market appears much stronger than it was in the early '90s.

Although home sales are at a 20-year low, Schniepp said income levels remain steady, widespread layoffs haven't occurred, and "homebuyers are not fleeing." Job growth, however, has slowed.

In commerical real estate, office vacancies in the county are among the lowest in the state. Apartment rentals remain tight, and rents continue to rise.

"I don't see any major fallout in this area," Schniepp said.

Two local business giants- Countrywide and Amgen- laid off thousands of employees, which contributed to the local woes.

Terry Paulson, a psychologist, columnist and author, offered a different spin. His talk, "Reclaiming the Optimism Advantage in Challenging Economic Times," demonstrated how the bad news about subprime loans, volatile stock markets, home foreclosures and corporate layoffs have had a psychological impact that serve to perpetuate the economic malaise.

"We're grossly over-informed about bad news," Paulson said. After monitoring the evening news for 100 nights, George Washington University counted 8,600 negative news reports versus 370 positive accounts, said Paulson, who sees a silver lining despite the spate of bad news. Young, first-time buyers have a better chance of purchasing a home if prices drop, and new investment or business opportunities often present themselves during stressful times.

"You have to position yourself for opportunity," Paulson said. "Difficult times force you to do things that are not in your comfort zone.

William Dallas of Dallas Capital Management, who also founded Oaks Christian High School, looked to the future in his discussion, titled "Rising from the Carnage in Real Estate- What's next?"

Dallas also sees opportunity in the wake of economic downturns. He said credit markets may be in a shambles, but a return to better lending practices will be a healthy move.

Regarding the subprime mortgage problem, "It's about people who are credit damaged," Dallas said. In geopolitical terms, the issue is "minute."

"We're about to enter a normal cyclical recession," Dallas said. The crisis may lead to major changes in how United States banking and mortgage industries operate, and a recovery should be underway toward the end of 2008.

"During the past 10 years, a comatose dog would have made money, but now you have to be a lot smarter,"  said Andrew Snelgrove, a personal investor who attended the event.