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.”