CA - Housing recovery expected 2 to 3 years
Housing recovery expected in 2 to 3 years
By Jeff Collins
The Orange County Register
A recovery in the housing market may start taking hold sometime in the coming two to three years, depending on whom you asked at the California Association of Realtors convention that ended Saturday.
An economist on a panel of experts discussing the slump predicted that the market won’t hit bottom until mid- to late 2008. "We’ve got a good six to 12 months before we hit that trough in the housing market stats," Frank Nothaft, chief economist for federal mortgage giant Freddie Mac, said on Thursday.
While some Realtors attending the gathering at the Anaheim Convention Center said they believed the worst was already over, others agreed with the panelists that the recovery will be a long, drawn-out process.
"I don’t think this thing’s going to go away in the next year or two, (or) that we’ll return to heavy appreciation," said Barry Brown, a Prudential California Realty agent from the Pismo Beach area.
Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., was the most optimistic panelist, foreseeing a recovery starting in early 2009, or just 14 or 15 months from now.
Richard Green, the Oliver T. Carr Jr. Chair of Real Estate & Finance at George Washington University, cautioned real estate agents that they may need to wait longer. "Just try to hang on for three years," he said.
"Realtors like good news," Green said. "For the short run, I don’t have a lot."
The discussion followed the release of CAR’s 2008 forecast, predicting that home sales in the state will fall to their lowest level in 23 years next year and that house prices will drop for the first time in 12 years.
"It’s going to get better, but very slowly," said Maria Natalia Lopez, an agent with First Nation Realty in Wilmington. "Everyone’s waiting for prices to drop further."
The panel blamed a binge of bad loans, a runup in home prices and a flood of foreclosures for creating a downturn unlike any seen before.
Easy financing, resulting in a runup in home prices, started the slump, Green said, and as a result, home sales are almost half the level of two years ago. Six of the 10 metro areas with the nation’s highest default rates are in California.
"There are no economic models," he said. "We’ve never seen anything exactly like this before."
Dave Emerson, an agent with Prudential California Realty in Los Alamitos, said he feels like he’s on the shore watching a "tsunami of foreclosures" coming.
"I’m just scared to death," Emerson said. "Maybe I’m a victim of the media."
Orange County’s housing market topped Kyser’s list of "problem areas" because the jobs picture is weaker here than in the state as a whole.
While California expects to see a 1 percent increase or better in non-farm jobs this year and next, Orange County’s projected growth is 0.4 percent this year and 0.5 percent in 2008, he said.
The county also lost thousands of jobs because of the meltdown in companies offering "subprime" mortgages, or loans to borrowers with low credit scores. In addition, construction jobs have fallen here because of the decline in new home building, he said.
"It worries me," said Realtor Marina Alvarado, an agent with Tu Casa Realty in Long Beach. "It would worry anybody. I guess we’ll have to look for different ways to make ends meet because it’s hard (to make a living)."
Nothaft said there’s "more bad news to come" on the subprime side.
While subprime financing makes up 15 percent of all loans in California, it accounts for 70 percent of foreclosures in the state. There are $300 billion in adjustable-rate, subprime loans that will have their first payment adjustment occur in 2008, causing monthly payments to rise, Nothaft said.
"A lot of families will have a challenge meeting those higher rates," he said.
Bill Plattos, a CAR board member and executive vice president at Costa Mesa-based First Team Real Estate, agreed it could take six to 12 months to hit bottom.
But he thinks the recovery may be less than three years away. The Federal Reserve’s decision to lower interest rates will help restore confidence, he said.
"The sentiment is going to come back in the not-too-distant future," Plattos predicted.