You may be asking yourself who Janet Yellen is? Well she is the President of the Federal Reserve Bank of San Francisco and she just happened to be in San Diego today to give a speech at the Burnham Moores Center for Real Estate University of San Diego 14th Annual Real Estate Conference. 
I try to make it out to this event as often as possible. It’s usually a nice breakfast and for $30-40 bucks you get to hear from some of the financial big wigs we have in this county! Some of the talk can get a bit long and dry but I try to post a few of the points that stick out. Here are a few things from Janet Yellen as well as Real estate mogul billionaire Sam Zell who also gave his outlook on the future of real estate. He was fun and brought a bit of energy to the conference!
First, some of the questions that Janet Yellen commented on during her visit to San Diego. After her speech, she spent a few minutes answering some questions. Here was her take on several questions asked.
What is her take on the economy and what direction are wee headed in?
The finalcial system will, “take a long time to fully heal.” She expects economic growth of about 3.5% this year and 4.5% in 2011. “I’m afraid that the economy will continue to operate well below its potential throughout this year and next, even though the recession appears to be over, it does not mean that we are where we want to be.” She referred to the the economic growth being fairly postive but said it’s overshadowed by a poor unemployment rate of 9.7% which she felt would continue through the year and be reduced to 8% by 2011.
How does she feel about the future of interest rates and the possibility of raising rates?
“When the day comes to start raising rates again, we have tools at the ready, for the time being, the economy still needs the support of extraordinarily low rates.” Later she went on to state, “This is not the time to be tightening monetary policy, but eventually the economy will gain enough momentum and won’t need today’s extraordinarily low interest rates.”
The other interesting speech came from Sam Zell.
Some of this speech was a bit over the top but he made some interesting points especially if your an investor in commercial real estate. His opinion on commercial real estate currently underwater in mortgage balances is that, “If there are opportunities in distressed real estate, it’s in buying the debt in return for equity.” What he said makes a lot of sense. Commercial real estate allows you to be much more creative in a bad economy. You don’t have to wait around for a modification or short sale. Investors will go out and seek investments and search for property they can take a equity position in and work out their own deal.
As for the residential market? He noted that San Diego may be an area that would see a slower recovery. One interesting thing he noted is that whenever single family home owners exceeded 62%, we got into trouble. He noted that this time because of sub-prime loans that number rose to 69%. We are currently at 66% and he felt that we needed to get down to 63-64% before we have a sustainable, affordable single family market.
As much as you would like to see the tax credit extended and hope it helps stimulkate the housing market I beleive it’s done what it was meant to do and it’s time to move on. The housing market is only going to improve when the cancer is removed from the market and that cancer is foreclosures and short sales which a tax credit can’t cure.
It’s a bit frustrating when your comments are spammed on your own blog! 🙁 Some times it seems like Akismet catches a bit of the good comments and marks it as spam.
All right, the economy still needs the support of extraordinarily low rates. Nice report.
@ Alex Akismet tends to do that, anyways I agree with this economy it will really take a long time for financial institutions to recover.
@ Julie, your comment was also spammed. I cleared that so hopefully you are good to go on future comments. I have to say that Akismet does more good than harm but it’s a bit frustrating sometimes when your quality comments are spammed. 🙂
Great summary of the event, Alex. I guess the question on everybody’s minds are, would it be a smart idea to invest in San Diego real estate right now? What I get from your notes is that if you’re able to wait for a longer period of time before the market recovers then yes, it would be. Good stuff =)
Yes it’s definitely a great time to invest in San Diego real estate but as long as you can hold the property for a few years. It’s unrealistic to think you would be able to flip the property. What some people seem to think is that you can buy and flip. That is only being done by a few people and when they buy, flip and turn a profit they are bringing a lot of new value to the property likely due to a remodel.