The “free fall” phase of the California housing market bust could end soon, as bargain hunters begin buying homes in parts of the state hardest hit by foreclosures, according to a recent economic report. The quarterly UCLA Anderson Forecast said foreclosure rates will remain a significant problem in the state at least through the end of 2008 and into 2009, economist Ryan Ratcliff wrote in one of the sections of the overall economic forecast. But “we may be transitioning from the free fall” of widespread foreclosures that drive down home values and prompt more foreclosures. Ratcliff said the fact that home sales in some Bay Area and Southern California counties have increased from year-ago levels just recently is “an encouraging first sign of a market starting to find its new equilibrium.”
In the Bay Area, “you see it in Contra Costa and Solano counties. Those are the places where you’ve seen year-over-year increases in sales,” he said in a recent interview.Steep price declines in those areas plagued by the most foreclosures, fairly low mortgage interest rates and improving mortgage-market conditions are luring buyers back to the market, according toRatcliff. But in his report, titled ”The Three Phases of California’s Real Estate Bust,” he also warned that a glut of foreclosed, bank-owned properties in many areas means that “a ‘normal’ housing market is still a long way off.”
The first phase of the bust occurred when home sales began to fall in 2005 and new home builders began to cut prices and offer incentives, Ratcliff said. The second phase happened with the flood of foreclosures in 2007.. The third phase will take place when “prices are still weak but sales volumes start picking up.” Ratcliff said he thinks of today’s market as Phase 2.5, calling it a bit too early to celebrate a recovery. Foreclosures caused by resetting adjustable-rate mortgages may have peaked, he said, so foreclosure rates may begin to decline later this year or early in 2009.
The quarterly California economic forecast predicts the state will continue to add jobs in 2008, but just barely. Economist Jerry Nickelsburg of the Anderson Forecast said total state employment will probably increase by just 0.2 percent this year, with growth in the services sector making up for continued job losses in residential construction and financial services. The mortgage finance industry in particular, which is centered in California, will suffer a permanent loss of jobs,” he wrote.
Must as its March report indicated, the forecast predicted a continued weak economy. Housing market weaknesses will be tempered by strength in exports and in agriculture. Statewide unemployment is predicted to reach 6.1 percent by the end of the year, up from 6.0 percent in the first quarter. For more information visit http://uclaforecast.com
Monday, July 21, 2008
Signs of Life in Real Estate
Very interesting article…Enjoy!
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