When will housing come back in California? Five experts offer their views
Foreclosures in the state are still high. Sales of new homes are at historic lows. And millions of homeowners are underwater on their mortgages. So what's the outlook for 2011 and beyond?
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In Mission Crest, 373 homes — nearly 40% of those in the housing development — had been lost at one point to foreclosure, the San Bernardino County assessor's office said. About 100 lots had been left graded and bare. (Katie Falkenberg, For The Times / May 18, 2010)
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By Alejandro Lazo, Los Angeles TimesJanuary 1, 2011, 3:22 p.m.
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As housing recoveries go, this one is in need of a cure.Homeownership — and the buying and selling of residences — is an economic keystone that carries overwhelming weight in Californians' personal sense of financial well-being.
But the momentum of the state's housing rebound has faltered, with sales falling and prices softening despite bargain-basement interest rates. Foreclosures in California are still high. Sales of new homes are at historic lows. The construction sector is in the doldrums. And millions of the state's homeowners owe more on their mortgages than their properties are worth.
Real estate historically has helped give a boost to economies exiting a recession, but the severity of this bust is nearly unprecedented: Californians have lost $1.73 trillion worth of equity in their homes since prices peaked in 2007, according to Moody's Economy.com.Although California's housing market free-fall ended in spring 2009, the weakness after the expiration of federal tax credits for buyers last year has called into question the sustainability of the recovery.
The Times asked five California experts for their take on the state of real estate and what they think is needed to get the housing market moving again. They range from the pessimism of a foreclosure specialist to the decidedly more upbeat view of a Realtor association economist.
• Richard Green, director of the USC Lusk Center for Real Estate, predicts home prices will remain flat in 2011.
California's recovery will hinge on location, said Green, who held professorships at several universities and worked as a principal economist at Freddie Mac before becoming director of the Lusk center.
"Draw a line from El Centro up to Sacramento and think of all the towns up and down that line. Unless we have hyperinflation in general in the economy — prices going up a lot — I would guess that in my lifetime we will not see a return to the prices that we had at the peak," Green said.
"Now, places like La Jolla, Malibu, Laguna, Huntington Beach, Atherton, Palo Alto, the city of San Francisco, Marin County, those are places where within the next five years I could easily imagine prices returning to their peak."
"The markets in the Central Valley were much more bubbly than the markets on the coast," he said. "You have very few people who make a lot of money in these places."
"Whereas a place like Silicon Valley, or a place like West Los Angeles, there is a critical mass of very high-income people.… That means you have a large number of people who can afford to spend in the neighborhood of $1 million on a house, and these are desirable places."
"The more a property is a commodity that you can easily substitute for something else, the less the chance it will ever come back to its peak. The rarer a property is, the more likely it's going to come back quickly."
• Leslie Appleton-Young, chief economist for the California Assn. of Realtors, predicts home prices will rise 2% in 2011.
There are few professionals who would like more to see the housing market bounce back to the heady days of old than Realtors. Real estate agents made a killing when the housing market soared and then took a pounding when it tanked.
During the boom years, Appleton-Young said, she espoused the theory that rising prices mattered more than making solid loans. That theory appeared correct as long as values kept rising.
"What happened this time was prices plummeted and everyone was in trouble," she said.
These days, the economist sees little chance of the market returning to its previous heights anytime soon.
"We are in a very slow-moving recovery with prices stabilized at the moderate and low end," Appleton-Young said. "We are still seeing price attrition and price softening at the upper ends of the market."
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Comments (166)
Add / View comments | Discussion FAQirishchannel1 at 11:17 PM January 03, 2011Housing will make a comeback when people can afford the mortgage payments.
edla67 at 11:03 PM January 03, 2011If we remove 1M illegal aliens in LA this would free a lot of housing and help the crisis, in Van Nuys for example homeowners probably paid their house 100K more than should be because all the illegals taking spots
affableman at 4:13 PM January 03, 2011"During the boom years, Appleton-Young said, she espoused the theory that rising prices mattered more than making solid loans. That theory appeared correct as long as values kept rising."
Spoken like a true realtor but coming from an economist who sold out to realtors. Her "theory" appears to be the same one the Bush Administration had. Who cares, we'll just past the buck to the taxpayer for our failure to regulate.
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