Lanser on the Orange County Register wrote a recap on a Chapman University prediction regarding home prices in Orange County rising in 2011. Here’s his article:
Chapman U. professors are out with their semiannual economic forecast for Orange County! Here’s what they said about home prices:
- After price losses for Orange County single-family homes — by their math that’s tied to resale medians — of 0.9% in 2007; 23.2% in 2008; and 12.3% in 2009 … O.C. prices will rise 6% in 2010 and 5.3% in 2011. (Or a combined 11.6% gain in 2 years!)
- “A pickup in job growth will clearly have a positive impact on housing demand.”
- Homebuyer earning the median family income and buying a median-priced single-family home in 2009 needed to spend 30.5% of income to pay for the interest, principal and property taxes vs. 51.3% in 2007.
- Future affordability will be lower as higher mortgage rates will overwhelm weak projected increases in median family income. (Still, Chapman notes” affordability remains extremely favorable when compared to historical standards.”)
- Builders’ slow ramp up construction activity is a positive. Still, modest increases in homebuilding will “place downward pressure on prices.”
- No significant declines in supply of homes for sale seen as troubled owners and banks with foreclosed properties unload their homes.
Overall, Register reporter Mary Ann Milbourn reports that Chapman economists reversed course in their new forecast and predict Orange County will lose 18,000 jobs this year — instead of creating 1,000 new ones. Next year, however, Chapman said the county should see job growth on an annual basis for the first time in five years with 21,000 new workers.
Chapman professors says weak real estate nationwide — notably construction — is a key reason for the feeble economic recovery to date. They write …
The major reason for the relatively weak recovery is the lethargic turnaround in the construction sector. Annualized housing starts, for example, are forecasted to rise steadily to roughly 712,000 units by yearend 2011, which coincides with the first ten quarters of our current recovery. This increase pales in comparison to housing starts during the first ten quarters of the ’71, ’75 and ’83 recoveries. In fact, the average annualized level of housing starts during the first 10 quarters of the current recovery is forecasted to be 653,000 versus a much higher average level of 1,700,000 during the’71, ’75 and ’83 recoveries. Assuming a value of $160,000 per residential unit, this difference of roughly one million fewer annualized units (1,700,000 less 653,000) represents a loss of $160 billion per year in direct spending. Given a multiplier of two, the drop in total spending in the current recovery resulting from the weak turnaround in housing construction represents a loss of roughly 2.5 percent in real GDP growth.
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