Home Front

A blog about the economy and the Sacramento-area real estate market.

October 7, 2009
California housing in 2010: key trade group makes forecast
Thursday update: Here is the full story published today. JW.

What's next year bringing to California's housing market?
The California Association of Realtors just released its 2010 forecast in front of several hundred real estate agents gathered in San Jose - but don't be surprised if it changes.
 Given all the "wild cards" that may - or may not happen - who knows for sure.

But first a couple foundations:

  • 2010 sales will likely fall below this year, when they were fueled by an explosion of relatively cheap bank repos attractive to first-time buyers and investors. CAR, the trade group for  172,000 real estate agents, predicts sales of 527,500 homes in 2010 - 2.3 percent fewer than this year. 
  • Median prices will rise slightly. CAR  estimates a 2010 median price of $280,000. That's 3.3 percent higher than this year's current estimate of $271,000.


     Beyond that we get to the wild cards: the state budget crisis that has cut hundreds of thousands of salaries across California, whether a new round of expected loan resets among Option ARMS and Alt-A loans will drive a new stream of foreclosures and whether rising joblessness will do the same. What will the federal government do? Will it extend, or even expand, its $8,000 tax credit for first-time buyers?
 
 Like other baffled analysts, CAR isn't sure what the banks are doing, either, as they continue to drag out foreclosure schedules and remain slow to put their thousands of repo listings on the market. A heavier-than-expected wave of foreclosures, if it happens, would drive prices back down, said CAR's Chief Economist Leslie Appleton-Young.

 Yet, in a phone conversation this morning with Home Front, she said, " I don't see a tsunami of foreclosures. I see an elevated level of foreclosures over the next couple of years, and an acceleration in the rate of foreclosures at the upper end of the market."

 Problems in the upper end of the market are also part of the reason for expectations of fewer sales next year. Buyers are still finding it harder to get loans for those houses, and are especially skittish about buying in that segment for fear that prices are going to fall. Much of the joblessness now is hitting in the higher end of the market, and a stream of foreclosures there could cause the same deflation that first struck the lower end,said Appleton-Young.

Bottom line: "distress sale" properties that have this year accounted for slightly over half of existing homes sales across the Golden State are likely to be close to one-third of sales next year, said Appleton-Young. We'll have a full print version of all this in Thursday's Bee

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