Home prices across the state will continue to drop next year even as sales, spurred by the low prices on properties in foreclosure, keep rising, according to a California Assn. of Realtors forecast released Wednesday.
Doubts about the stability of the nation’s financial markets are likely to linger through the middle of next year, compounded by worries about the difficulty of obtaining mortgages for homes in the state’s higher-priced areas, the forecast said.
“We’re not in a ‘happy days are here again’ scenario,” said Leslie Appleton-Young, the trade group’s chief economist.
The Realtors association, which wraps up its annual expo in Long Beach today, expects the economy to reach its weakest point during the next three quarters, then begin a turnaround in the second half of next year. The pace at which properties that have been foreclosed upon sell will be a key factor in the rebound.
The volume of home sales is expected to climb 12.5% to 445,000 units in 2009, an uptick from the 12% increase expected this year. Sales tumbled 26% in 2007 to their lowest level since the market slide began.
Home purchases in the Inland Empire -- which increased 143% in August from the year before -- are driving the improved sales picture. Much of that inventory was properties in some stage of foreclosure.
The group projects that the median price of an existing California home will decline 6% to $358,000 in 2009. That’s smaller than the 32% drop the association is anticipating for this year. The median price -- the point at which half the homes sell for more and half for less -- peaked in 2007 at about $558,000.
Realtors tend to be optimistic, and the association’s forecast last year of a 4% decline in the median price of a California home in 2008 proved to be off by a factor of eight. The group also foresaw a 9% drop in sales -- about a third of the actual decline.
With so much uncertainty rippling through the economy, this year’s forecast may be just as iffy, Appleton-Young said.
“There are so many wild cards, it’s a full deck,” she said.
Prices won’t start to head up, the association said, until inventory thins out. In January, there were so many homes for sale in California that it would have taken 16.9 months to deplete the supply at a normal sales rate -- and that’s not even counting the new homes that were likely to come on the market during that time, the association said. In August the supply fell to 6.7 months’ worth, aided in part by the spike in sales in Riverside and San Bernardino counties.
But additional notices of default and foreclosure are expected in 2009 when a new wave of adjustable mortgages will reset. That will continue to push down the median price of homes statewide, possibly into 2010, said Raphael Bostic, an associate professor at the USC Lusk Center for Real Estate.
“Prices could inch up month over month next year, but a lot of moving parts have to align in the economy for that to happen,” Bostic said. “And assuming mortgages are plentiful.”
That, economists agree, is the big “if” hanging over the real estate market.
Currently, conforming 30-year loans ($417,000 and less) are available to qualified buyers -- those with 10% to 20% down payments, proof of income and excellent credit scores. So-called jumbo conforming loans of $417,000 to $729,750 are more difficult to qualify for and have higher rates, so buyers in that range haven’t embraced them. Loans greater than $729,750 are practically nonexistent, putting purchases in California’s pricier areas in virtual lockdown. That situation could get worse when conforming loan limits drop to $625,000 in January.
“Rates will play a big role,” Appleton-Young said. “They always have.”