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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Mick Mørmøny who wrote (45452)	12/7/2005 8:42:01 AM
From: Mick Mørmøny	Read Replies (2) \| Respond to of 306849

Housing market to slow, not crash By George Avalos CONTRA COSTA TIMES Posted on Wed, Dec. 07, 2005 The California economy and its irrepressible housing market are headed for a slowdown rather than a meltdown. That mixed -- but far from dismal -- outlook for the Golden State comes from economists with the UCLA Anderson Forecast, which released its latest quarterly prognostications for the statewide and national economies today. This forecast appears less dire in tone and timing than Anderson's previous predictions for housing. The resilience of real state nationwide and throughout California has flummoxed some Anderson economists. Just when it appears housing might be headed for a slump, the sector revives, a la Christopher Lee in all those lurid "Dracula" movies. "Housing is like the thing that wouldn't die," said Michael Bazdarich, a senior economist with Anderson. "It looks like it's slowing down, and then it pops up." Previously, the Anderson economists had predicted a big slowdown would hammer real estate throughout California and nationwide in 2005. That has been pushed back to early 2006. Moreover, the economists believe the fallout from a slowdown can be confined to the housing sector. "If housing slows down, that will hurt construction," said Ryan Ratcliff, an economist with Anderson. "Is that enough to cause a full-blown recession in California? The answer is no." Still, Ratcliff believes a slowdown will jolt some places more than others. "There may be a glide path scenario, such as for San Diego, or you could have a starker price decline outcome, such as for San Francisco," Ratcliff said. What about the East Bay, site of a building boom? Construction jobs grew 6.9 percent in the year that ended in October. That was far faster than overall East Bay job gains of 1.9 percent over the year. "In 2005, the East Bay has been an above-average star in California, but much of that is due to construction," Ratcliff said. "But there are no other real sources of vulnerability for the East Bay. A construction jobs slowdown will hurt. But the East Bay is growing in other industries." Health care, for example, has a bigger share of the East Bay job market than construction. And health care jobs grew at a yearly rate of 5.1 percent in October. Still, it doesn't look as if the construction will fade soon, according to estimates from Bazdarich. East Bay is on a pace to add 7,300 new homes in 2005, Bazdarich calculated. That would be 2.8 percent higher than the 7,100 new homes built in the region in 2004. "The East Bay is unique, it can be its own economic micro-climate," said Christopher George, president of CMG Financial Services, a San Ramon-based firm that provides mortgages and other services. "You have what are essentially new towns that have sprouted in the East Bay, like Brentwood," George said. "You've got Mountain House. The East Bay will not see nearly as severe a downturn in housing as some areas, due to the diversity and strength of the job markets here." Yet some economists agree with the Anderson analysts that California is headed for sluggish times in 2006. Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy said the state will have to battle multiple head winds. "The housing sector will retreat and it will decline in activity," Levy said. "That will put a lot of pressure on construction jobs. You will also have rising interest rates and rising energy prices. Consumers will be more in debt as interest rates rise so they will spend less. Trade and tourism will be strong but those will not be enough to offset the slowing." But Michael Englund, chief economist with Action Economics in Colorado, said he believes California and the nation will enjoy economic growth in 2006 on par with the robust trends of 2005. And California and the Bay Area could be in good shape, given strong growth in the United States and the startling expansion of China and India. "California has an economy skewed toward the tech sector, a strong investment boom and a strong real estate market," Englund said. "And those all look good now and next year." contracostatimes.com -------------------------------------------------------------------------------- George Avalos covers the economy. You can reach him at 925-977-8477 or gavalos@cctimes.com.