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UCLA Sees 16% Home-Price Gain In 2010

As seen in the Orange County Register:

Double-digit housing appreciation will return to Orange County next year, with the median home price rising somewhere from 15.9% to 16.6%, UCLA economists forecast in a report released today.

That compares to a projected 8.8% gain in California next year and a 2.4% increase nationwide.

It also differs sharply from Cal State Fullerton’s outlook. An economist there said Tuesday that Orange County home prices will rise 2% to 3% next year – at most.

But Mark Schniepp, author of UCLA Anderson Forecast for Orange County, said he’s not predicting the return of the housing bubble.

Even after six years of appreciation, UCLA economists still don’t expect home prices to reach the 2006 peak. In fact, home prices likely won’t get back to that level again until 2016 or 2017, Schniepp said.

“We’re already at 16% (appreciation) from March. That’s just six months, and I’m talking about a year-over-year (change),” said Schniepp, chief economist with the California Economic Forecast. “When you have a cycle where you’ve over-corrected, you can go up 16%. It doesn’t really mean much.”

The gist of the forecast, Schniepp said, is that the Orange County housing market is in recovery.

“The train has left the station. It’s going down the track. This isn’t a head fake,” he said.

He added: “Now is the time to buy. (Actually), the time to buy was the spring and early summer.”

The UCLA housing forecast is part of an outlook that projects a jobs turnaround in O.C. in 2011.

In addition, the Orange County housing forecast states:

• That from 2011 to 2015, O.C. home prices will increase by 2.5% to 8.7% a year. The median home price, at $406,481 this year, is projected to top $500,000 by 2011 and to be above $600,000 in 2015.
• That foreclosures are expected to rise again early next year, but won’t derail the recovery.
• That homebuilding this year will fall to 1,912 units, the lowest number in records dating back to 1946.
• That homebuilding will pick up by 2012, rising above 11,000 units a year — levels not seen since 2002. In 2013, UCLA projects that housing starts will total 12,537.
• That mortgage interest rates will remain low. Southern California rates likely will be below 6% through 2015, the forecast said.
• That commercial real estate will be hampered by high unemployment through 2010, with recovery not expected until around 2011.
• Office vacancies — currently at 18% to 20% — will start to drop in 2010, but lease rates won’t resume going up until 2011.
• Retail sales are expected to start picking up in late 2010, aided by the recovery in the housing market.

“We do look for a much more robust recovery, certainly by 2011 and for homebuilding by 2012,” Schniepp said.

Recovery More Rapid Than Expected

As seen in the Orange County Register:

Another economist has said that he thinks the economy is bottoming out.

“Institutions are coming back. Things are starting to flow again,” Kerry Vandell, head of UC Irvine’s Center for Real Estate, told an industry group Monday. “The economy is recovering more rapidly than I would have guessed.”

The gross domestic product will be positive again either by winter or spring, he said.

When will the residential market begin to recover?

“In my opinion, it already has,” Vandell told local members of Lambda Alpha International, a society devoted to land economics.

But lest you think that happy days are here again, note that Vandell’s outlook comes with a lot of gloomy caveats. Among the hairy obstacles still in recovery’s path:

• A massive wave of foreclosures is yet to come.
• Banks are delaying “taking the hit” on those devalued properties.
• Credit still very tight.
• Unemployment is still increasing.
• State spending cuts will offset federal stimulus in California.
• Prices and rents are still high.

Vandell told Lambda Alpha members that there are a number of myths about the cause of the economic meltdown.

The usual suspects – subprime loans, credit rating agencies, Freddie Mac, Fannie Mae, the housing market and real estate — were not the main culprits, he said . The subprime meltdown and bursting housing bubble were just the first canaries in the coal mine, just the first symptoms of an economic catastrophe.

The primary villains, he said, included the Federal Reserve under Chairman Alan Greenspan (for keeping interest rates too low), the Securities and Exchange Commission (for being asleep at the switch), and past U.S. presidents, in particular Bill Clinton and George W. Bush, (for their pro-homeownership policy bias).

What are the prospects for O.C. real estate?

“It depends on the market,” he said. “There’s an active market under $400,000-$450,000. … (But) in terms of the upper end, (activity) is pretty thin up there.”

California House Prices Projected To Jump 7.9%

As seen in the Orange County Register:

U.S. house prices will stop falling in March and are projected to be up 4.6% by August 2010, Santa Ana-based data cruncher First American CoreLogic predicted.

State	Aug. ‘10 gain
Maine	12.1%
New Hampshire	11.6%
California	7.9%
Florida	7.3%
New Jersey	6.8%
Idaho	5.8%
Connecticut	5.7%
Rhode Island	5.3%
Hawaii	5.2%
North Dakota	4.9%
U.S.	4.6%

In California, the rate of appreciation will be even higher: up 7.9% from this past August.

If true, California will have the nation’s third-highest appreciation rate, trailing Maine (projected to be up 12.1%) and New Hampshire (up 11.6%).

Florida’s appreciation rate is projected to be number four in the nation at 7.3% next August.

In addition, First American reported:

• U.S. house prices dropped 10.1% in August from a year earlier.
• California ranked fourth in price drops with a year-over-year decline of 12.9% in August.
• The biggest drops occurred in Nevada (-24.4%), Arizona (-19.5%) and Florida (-16.8%).
• Excluding the sale of bank-owned homes and short sales (homes selling for less than their debt), price drops were less severe. U.S. prices for non-distressed homes were down just 6.2%.
• In California non-distressed home prices were down 7.9% from August 2008.

CSUF sees tiny O.C. home-price gain in 2010

As seen in the Orange County Register:

Cal State Fullerton’s dean of business forecasts that Orange County home prices will continue dropping until mid-2010, then will climb no more than 2% to 3% by the end of the year.

Appreciation likely will remain in the 3% to 5% range for several years after that, added Anil Puri, dean of the CSUF Mihaylo College of Business and Economics.

The rapid, double-digit gains of the recent past are just that: a thing of the past, he said.

“We don’t expect much of an increase in housing prices, but the decline in housing prices will end in 2010,” Puri said. “We don’t expect housing prices to start increasing until the second part of the year, and (it will be) very little in the second half.”

Demand for housing is tied to employment growth, and the CSUF economic forecast for Orange County, released Tuesday, doesn’t foresee any increases in payroll until the latter half of next year.

A bump in mortgage payment resets in early 2010 also is expected to unleash a new wave of foreclosures that could impact local housing.

“We don’t know how big that will be, but we will see (an increase) in foreclosures,” he said.

In a sense, that’s the good news — or as good as it gets. CSUF’s real estate forecast adds:

“The commercial real estate market, on the other hand, presents a gloomier picture and will be the next troubled spot. According to FDIC, one-sixth of all construction loans were in trouble in the second quarter of this year, placing additional strains on regional and local banks which are the major lenders to small businesses. All indicators suggest that this market is a particular danger zone.”

The forecast predicts that office vacancies will hit 20% in mid-2010; industrial vacancies, 16%; and as much as 13% of retail space will be empty.