California DRE commissioner addresses market problems
Real Estate News from the We Buy Houses Team
While continuing to be positive about the real estate industry in the state of California, Department of Real Estate Commissioner Jeff Davi acknowledges the industry is facing severe problems and says his department remains dedicated to helping consumers and licensees.
Davi was a guest speaker at the monthly Filipino American Real Estate Professionals Association luncheon meeting held at the Summitpointe Golf Club in Milpitas this month. The California DRE commissioner addressed current problems facing the industry.
As market conditions across the state slide, Davi says, there is a lag with regard to the number of real estate license applicants, but that number is slowly declining. There were 548,000 licensed real estate agents in California in 2007, up from 269,000 in 1991, but today that number has dropped to 541,000.
“It still means one out of 53 adults is a real estate agent, outnumbering attorneys 2 to 1, but I expect the number to drop even more by next year,” Davi says.
One of Davi’s goals when he took on the job was to speed up the licensing process. “I’m happy to report the time frame for the processing of license applications has decreased and enforcement has stepped up, but this is because the number of licensee applicants is down and now staff can concentrate on enforcement,” he reports.
Davi says it takes only 41 days to process a license application today, as opposed to more than six months in 2004.
With the tenuous market conditions, the department has seen an increase in enforcement cases from 2003, when it had had about 6,500 cases to 9,000 cases in 2007. Davi expects enforcement cases to climb to 9,500 this year.
“We have stepped up enforcement by 20 percent since license applications and transactions are down,” he notes.
In audits, the department finds the big issues regarding violations concern trust fund and record keeping, 46 percent; license and employment, 21 percent; and disclosure, 19 percent.
Davi says affordable housing continues to be a critical issue in the state, since “like it or not, California will grow by 500,000 to 600,000 people a year.”
According to a recent report by the California Association of Realtors, the percentage of households that could afford to buy an entry-level home in California increased to 44 percent in the first quarter of 2008, compared with 26 percent for the same period a year ago. Davi says while this is good news, the state is in for problems.
“The affordability index has gone up, but they are not building new housing. We’re going to have another housing shortage when demand increases,” he warns.
The DRE commissioner indicates foreclosures in the state are still at a record high, jumping from over 12,000 in 2006 to over 84,000 in 2007. This year has already seen 80,000, with 20,000 foreclosures occurring just in the month of May.
“The next issue we’re going to face will be how to educate people about [Real Estate Owned], since you are selling more of these houses,” Davi tells real estate agents. An REO status indicates the property is now owned by the lender or bank as a result of a foreclosure.
Addressing the plight of troubled homeowners, Davi says, “The government cannot bail people out for their mistakes. We have found that 50 percent of cases involve a situation in which the borrower was complicit with the mortgage broker. In these cases, borrowers were asking for it.”
What can the government do? “We react as government and seek to help borrowers that need help through consumer outreach,” Davi replies. “We can’t stop foreclosures, but we can at least provide consumers with the resources from which to seek help.”
The DRE has increased its participation in consumer workshops, town hall meetings and mortgage workouts between lenders and borrowers throughout the state. The DRE is also conducting an aggressive mortgage advertising review campaign and appointed a new consumer/real estate industry liaison. The DRE website (www.dre.ca.gov/) now contains new tabs on consumer information, home buying, mortgage and links to financial counseling services.
Davi also tells agents to visit the website for their needs, including license renewal, new requirements, or to file a complaint. He repeatedly stresses the DRE is very much complaint-driven.
“I am urging all of you to report any violation to our department. We are intent on catching these violators,” Davi promises.