California home prices will continue falling this year and into next, but there's an upside in that it will allow more people to buy homes, according to the latest economic forecast from Chapman University's A. Gary Anderson Center for Economic Research.
Home prices in California will drop 4.4% this year and 0.7% next year, according to the Chapman forecast, released Thursday.
Construction spending has hit bottom and will rebound 6% next year, the forecast says, which suggests "that the construction sector will no longer be a drag on overall growth and job creation."
Payroll employment in the state will increase 1.6% this year and 2.1% next year, forecasters say, with job strength in professional and business services, education and health services and leisure and hospitality.
They also forecast that gas prices will stay at current levels, freeing up some spending money for newly employed consumers. That will drive taxable sales in California up 5.9% this year and 6.3% next year.
With more money in their pockets, Californians will also be motivated to buy homes as prices continue to fall — unless tight lending standards make it too tough for them to get loans.
Housing prices in the nation will continue to drop as well, in part because more than 2 million homes are in foreclosure. Forecasters say prices will drop 2.7% this year and a further 1.4% in 2012. But there are positive signs as well. New families will absorb some of the vacant units. Rental vacancies are also falling — but as prices rise, renters may choose to buy homes instead.
Although people's homes are worth less, many consumers had gains in the stock market over the last year that made up for those losses, forecasters say. Household net worth declined by $680 billion because of housing prices dropping but increased by $3 trillion because of stock market gains.
Nationally, as the dollar continues to slip in value, exports will increase. That will lead to gains in the gross domestic product of 2.7% this year and 3.6% next year. Job growth will also stay positive, adding 3.4 million jobs between now and the end of 2012, pushing the unemployment rate to 7.5%.
Forecasters say that although temporary shocks to the economy — such as the earthquake in Japan and spiking gasoline prices — may have led to slow growth this quarter, the recovery will still continue, and even accelerate.
"Going into 2012, there are a number of positive fundamentals that point to strengthening economic forces," the forecast concludes.