What is in Store for the Real Estate Market in 2008?

Jerome Sierra

Certified Mortgage Planner

Are we heading into a Recession?

• Definition: “A decline in the Gross Domestic Product (GDP) for two or more consecutive quarters.”

What do you think?

Economic Growth

We are here

A Soft Landing?

Real GDP growth will slow sharply in 2008 to 1.2% from an estimated 1.8% in 2007.

Growth will recover to 2.8% in 2009 as the worst of the housing downturn passes and

recent monetary policy loosening takes effect.

Weak $ is An Opportunity

The US dollar will remain weak during 2008, averaging US$1.45:€1. A recovery will set in from 2009, reflecting the narrowing of interest rate differentials and a revival of

confidence in the US economy.

How did we get here?

• Greed from: – Consumers:

• Over extended beyond their financial means• Purchased speculative investment properties

– Wall Street and Investors: • Create highly risky Hedge Funds with Mortgage

Back Securities (MBS) to sell to investors

– Brokers and Banks: • Sold risky financial products package in MBS to

consumers with questionable advice

We are here

2008

Home Sales

New Homes

Local Market

All Homes Number

SoldDec-06

Number Sold

Dec-07

PercentChange

MedianDecember

2006

MedianDecember

2007

PercentChange

Alameda 1,589 983 -38.1% $589,000 $540,000 -8.3%

Contra Costa 1,788 971 -45.7% $569,500 $505,000 -11.3%

Marin 268 193 -28.0% $804,750 $760,500 -5.5%

Napa 127 72 -43.3% $590,000 $590,000 0.0%

Santa Clara 2,106 1,265 -39.9% $656,000 $655,000 -0.2%

San Francisco

589 445 -24.4% $745,000 $731,000 -1.9%

San Mateo 685 468 -31.7% $735,000 $733,500 -0.2%

Solano 622 360 -42.1% $439,500 $370,000 -15.8%

Sonoma 598 308 -48.5% $525,000 $410,000 -21.9%

Bay Area 8,372 5,065 -39.5% $618,000 $587,500 -4.9%

Mortgage Rates

The Good News!

• Fed Fund Rate lowered by .75%

• New law to temporary increase liquidity that will increase conforming limit up to $730,000

My humble forecast

• This is a bump and it is not time to panic!• Real Estate will pick up in 2009• 2008 is a great year to buy because

– low interest rates– discounted purchase price– $ and € exchange favorable rate

• Savvy and well qualified borrowers will take advantage of it whereas over extended borrowers will suffer.