The California Association of Realtors (CAR) is not looking for sunny weather in the real estate market out west any time soon: the group recently released a forecast for the state predicting a 10 percent overall drop in home sales in 2010, with a nominal increase of 2 percent in 2011[1]. However, the silver lining, such as it may be, in this dark forecast is that median home prices are expected to rise about 11.5 percent in 2010 and another 2 percent in 2011.
Steve Goddard, CAR president, credits multiple facets for the abnormally bleak housing report from an association of people known for optimism about markets – after all, their success depends on the buyer’s belief that they are getting a deal or making a good investment. Goddard calls the California housing market situation a “tale of two housing markets.” He explains that properties under $500,000 are being governed and “driven” largely by distressed sales. This depresses property values and home prices as well as creating a surplus of distressed homes – the “foreclosure tsunami” so many experts refer to. The higher-priced areas and homes, however, have also been impacted and their sales slowed by restricted financing options that only allow for conventional financing if a huge down payment is made, credit scores are outstanding, or a combination of the two. As a result of this limitation, “higher priced areas of the state…increasingly have experienced an increase in the number of distressed properties,” he said.
CAR also targets a “weaker than expected economic recovery” as a main source of trouble for the state’s housing market in its report[2]. The group, like many other pools of experts, predicts that the housing market status will follow jobs. “As the U.S. economy continues its tepid recovery, we’ll see some improvement in California’s economy,” explained CAR vice president and chief economist Leslie Appleton-Young. She went on to say that as the number of jobs in California climb by a predicted 1.4 million in 2010, the numbers for the housing market should also climb, though slowly since “a lean supply of available homes for sale will drive prices up at the low end” will be countered by limited and less attractive financing as well as lender-initiated foreclosure acceleration.
The report ended on a positive note, though, with Appleton-Young declaring that “favorable home prices and historically low interest rates will continue to make owning a home in California attractive to those who are in a position to buy.”
[1] http://www.mydesert.com/article/20101004/BUSINESS/101004024/State-real-estate-association-forecasts-10-percent-sales-decline
[2] http://www.car.org/newsstand/newsreleases/2011forecast/
