Real Estate Leaders Look Ahead

Keith Myers

As homeowners and homebuyers across America, especially those who live in Southern California, continue to feel the effects of a struggling market, The Acorn continues its multipart series about the future of the real estate industry and what might be expected from the economic forces ahead.

Our discussion this week welcomes Keith Myers, president and coowner of Remax Olson & Associates. Myers has been a licensed broker since 1984, and his company now comprises six offices and 285 agents in Simi Valley and the Conejo and San Fernando valleys.

Q: Let's begin by distinguishing between residential and commercial real estate. Is the shopping center and industrial market, for example, feeling the same effects as the housing market?

A: No. Different than the 1990s' real estate slowdown, this downturn is not economic driven. Our local (and national) economy is chugging along, albeit at a slower rate. Jobs are still plentiful, and consumers are still spending. (Check out your local mall). For that reason, and the fact that not enough new industrial space is being built, the commercial markets are solid.

Q: How is the current slump different than the downturn experienced by Southern Californians in the early to mid-'90s?

A: In the '90s, we had a national recession yet higher interest rates and huge job losses. L.A. County lost 200,000 net jobs in 1993 alone, according to the L.A County Economic Development Corporation and Jack Kyser, economist. The aerospace industry virtually vanished from Southern California. Sellers fled southern California for places like Las Vegas, Phoenix, Oregon and Washington. This time the cause for the downturn is due to affordability and the rapid run-up in prices over the last seven or so years, plus the loss of "exotic" loans, like 100 percent financing without really qualifying and/or with bad credit.

Q: One of the hottest growth markets has been in the Conejo Valley, including Calabasas, Westlake Village, Oak Park and Thousand Oaks. Are these communities feeing the correction more than others?

A: Yes and no. They are less susceptible to foreclosures caused by loan resets, but the higher average sale price versus neighboring areas and slowdowns in some key local employers such as Amgen has had a cooling effect. At the end of the day, we have possibly the best place in the world to live here in the Conejo Valley- good schools, safety, great weather, fine restaurants and so much more. I admit that I may be a little biased.

Q: Are sellers learning to be more realistic in their expectations?

A: Yes. Most sellers are sophisticated enough to realize now that things have changed. If they are not truly serious about selling, they should stay put. If they are, they should select a top real estate professional and have an aggressive strategy that includes marketing, preparing the home for showing and pricing it properly.

Q: The building industry often complains about "barriers to entry," or government policies that make new home construction difficult. Even if construction policies were relaxed, don't the market forces make the building of new homes risky?

A: In the short term, yes. But even today we are falling behind the housing needs locally as demand continues to grow. Housing starts and permits have fallen dramatically this year and probably will again next year. It's all about timing and meeting need with the right product, at the right price, at the right place, at the right time. Some smart companies are going to do just that.

Q: Is our local area insulated somewhat due to the lack of new construction in the pipeline, or does that even matter at this point?

A: Supply and demand forces are the most powerful factors in our free market economy. The fact that there will be no new development of housing of significant size in the greater Conejo Valley will keep prices going up over the long run (and may keep it from falling as much in the short term) compared to, say, the Antelope Valley, where land is plentiful and relatively cheap.

Q: We've heard that while existing homes are sitting on the market longer, the median sales prices are still trying to hold firm. How much longer before prices stabilize, perhaps even increase again, or is this just wishful thinking?

A: You mean my wild guess? Because so many things can change, as you know. Based on what I know now and see happening ahead, the price pain will be deep and short, as we absorb foreclosures, when compared to the 1990s. Depending upon the micro market, which could vary even neighborhood to neighborhood, I see prices falling 5 percent or 6 percent to maybe 20 percent over the next year. The number of sales will fall 510 percent from 2007. Late in 2008, prices and transactions will level out for another year or more, with both increasing late in 2009 into 2010. It still is a great time to buy a house. There are lots to choose from and interest rates are good, not to mention that homeownership has many benefits besides pure economics.

Q: What do you think it will take to create a turnaround?

A: Perceived value. When that happens, and it will happen at different points for different buyers, people will buy. That means that prices need to come down some.

Q: What are you telling your agents to keep them encouraged?

A: Work harder, work smarter, polish your skills to provide more value to your clients. Only the best will survive and thrive, which is actually a good thing. I lead a weekly coaching program to train and inspire them, plus we have fun events like potluck lunches and happy hours. It helps to have the best agent mix in the world. Again, I may be slightly biased, but they are great!