Despite quickening home sales and rising prices in some parts of California, the state’s housing market won’t begin a full-fledged recovery until next year, economists at UCLA predict.
A dearth of residential construction remains a huge drag on the state’s economy, according to the quarterly UCLA Anderson Forecast, while sales of distressed properties still dominate the market.
“The data is just not telling me that the market has turned or is on the verge of turning,” said senior economist Jerry Nickelsburg. His report noted that “California real estate markets are either still in the trough or still declining towards it.”
It’s a big reason that UCLA predicts California’s unemployment rate, which stood at 10.8% in May, won’t hit single digits until the middle of next year.
The good news is that California’s housing market is expected to pick up steam in the next few years. UCLA forecasts a dramatic rise in building permits in 2014 to 130,000 — double the U.S. rate.
“Twelve more months of solid gains in California and working through excess inventory, and we should be ready” to declare a housing recovery, Nickelsburg said.
The state’s job outlook hasn’t changed much from previous forecasts, despite 10 straight months of employment growth and a surprisingly strong May in which California employers added nearly 34,000 jobs. UCLA predicts continued slow and steady gains through the remainder of 2012, with faster growth beginning in 2013.
The unemployment rate is expected to average 9.7% next year, falling to an average of 8.3% in 2014.
The forecast also cast doubt on the possible economic impact of the proposed high-speed rail project that would run from San Francisco to Los Angeles.
The California High-Speed Rail Authority has contended the project would create 100,000 construction jobs and an additional 450,000 jobs in the broader state economy over the next 25 years.
To substantiate that, the UCLA economists looked to Japan, where high-speed rail has been in place for decades. They concluded that although development sprang up around new rail lines, much of the activity simply moved from other places.
“There may be good reasons to invest in [high-speed rail] but the economic argument, the jobs argument, does not seem to stand on very solid ground,” the report said.
Nationally, the U.S recovery will continue its slow plod, according to the forecast. The U.S. will not regain all jobs lost during the Great Recession until the end of 2014, in part because so many workers have been permanently displaced, said Edward Leamer, director of the Anderson Forecast, in the report.
He said many jobs have gone overseas or have been automated, creating millions of excess workers in sectors including manufacturing, construction and retail.
Leamer said the solution is workforce development.
“Good jobs in the United States in the 21st century will require humans to do things that are not suited to the capabilities of faraway foreigners, robots or microprocessors. We need a workforce that can think creatively and solve the new problems, not merely recall the solutions to old problems,” Leamer wrote.
UCLA projects GDP growth this year to be a sluggish 2.2%, and slightly higher next year, at 2.4%. They project the nation’s unemployment rate will average 8.2% this year and 7.9% in 2013.