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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: CalculatedRisk who wrote (15310)	11/9/2004 10:32:04 PM
From: CalculatedRisk	Respond to of 116555

Home-price 'correction' forecast CSUF foresees up to a 20% dip by 2006 but no need to panic. By JAMES B. KELLEHER The Orange County Register ocregister.com House prices in Orange County could drop by as much as 20 percent in the next two years, according to researchers at Cal State Fullerton. In an otherwise cautiously upbeat forecast for the region, Anil Puri, the co-director of CSUF's Institute for Economic and Environmental Studies, insisted that property price declines - which could rival those that convulsed the region in the early 1990s - represented a correction after years of double-digit gains, not a market collapse. Although the median price of a detached house in the county has more than doubled in four years, thanks in part to record-low mortgage rates, Puri said, "I don't think we have a bubble." Still he said: "There's no question (prices are) going to come down" by 10 percent to 20 percent. Puri characterized his forecast as "reassuring." Even if the median price for resale homes in Orange County falls by 20 percent - from $575,000 to $460,000 - that would only take homeowners and buyers back to where they were in spring 2003. But that may be cold comfort to more-recent homebuyers and any longer-term homeowners with a memory. That's because, if Puri is right, Orange County could be about to experience a warp- speed version of the 1990s real-estate crisis - a déjà vu that some localhomeowners would rather skip. After peaking in 1990 at $240,000, according to market tracker Data Quick, the median price of a resale home in the county fell to a low of $193,000 in 1996 - a 20 percent drop over six years. Now, Puri says a similar decline in one-third of the time is "highly likely." Among the other key predictions contained in CSUF's forecast, which was released Tuesday at a breakfast event in Irvine that drew 700 business leaders: Job growth in the county will be anemic in 2004, with local payrolls growing by 4,500 jobs, or 0.3 percent. But that will pick up in 2005, with local payrolls growing by 1.9 percent, or 27,000 jobs, and by 2.1 percent, or 30,000 jobs, in 2006. That's an improvement over the net gain of 16,000 jobs seen in the past three years and close to the average gain of 31,000 seen in the past 10 years. The local unemployment rate will stabilize near the current level as the improving economy draws more workers into the labor market. CSUF forecasts that this year's 3.4 percent unemployment rate will slip to 3.2 percent next year before inching back up to 3.4 percent in 2006. Personal income will rise 5.1 percent in 2004, 5.9 percent in 2005 and 6.2 percent in 2006. Per capita income - a slightly different measure of local prosperity - is forecast to rise 5.0 percent this year, 3.7 percent in 2005 and 4.6 percent in 2006. Nationally, CSUF says it believes that the recent spike in energy prices - crude oil prices touched $55 a barrel for the first time last week - has been driven by short-term factors. But while the researchers predict prices will moderate in the coming months, the rise of China and lingering refinery constraints in the United States mean that prices will remain high - somewhere above $40 a barrel – for the next year at least. Puri acknowledged those prices were high but predicted that "the economy can grow without significant consequences" with prices at that level. Although high energy prices, higher interest rates and continueddevaluation of the dollar will create more price pressure than we've seen in recent years, the CSUF researchers aren't worried about inflation getting out of control. Indeed, their overall assessment of the economy is positive. The gross domestic product – the sum of all goods and services produced within the United States –is expected to grow 4.5 percent in 2004, 3.6 percent in 2005 and 3.4 percent in 2006, and payroll employment is forecast to grow for three consecutive years for the first time in three years.

To: CalculatedRisk who wrote (15310)	11/9/2004 10:40:39 PM
From: mishedlo	Respond to of 116555

According to California Association of Realtors measurements, the number of O.C. households that could afford to buy a home is at a 16-year low, while the supply of homes for sale is almost six times larger than a year ago. Cagan doesn't expect a dramatic drop in home prices for 2005. He predicts that a healthy economy and higher – but not extremely expensive – mortgage rates will motivate buyers. [higher mortgage rates will motivate buyers. LOL yeah right mish]