January 2011

2011 forecast shows employment and housing increases!

As reported by the Joint Center for Housing Studies of Harvard University in its annual “State of the Nation’s Housing” study and the A. Gary Anderson Center for Economic Research at Chapman University which released the results of its 33^rd annual economic for the U.S. and California late in 2010. Both these studies have served as essential resources for both public policy makers and private decision makers in the housing industry.

Even as the worst housing market correction in more than 60 years appeared to turn the corner in 2009, the fallout from sharply lower home prices and high unemployment continued. We need four factors to converge before the market completely turns around: low interest rates, home price stabilization/appreciation, consumer trust in the asset class and jobs. The strength of job growth is now key to how quickly loan distress subsides and how fully housing markets recover.

According to the forecasts, the economic recovery will continue at a relatively slow pace in 2011, but will be enough to generate 1.7 million net new jobs nationwide, which will lower the national unemployment rate by about one percent, to 8.6 percent, by year-end 2011. While the forecasts find there will be no sharp rebound in housing this year, several positive trends were observed: the demand for housing will increase 7.2 percent and we will experience a continuing improvement in resale housing prices in 2011, with overall national housing prices increasing by 3.3 percent.

In California employment is forecasted to increase by 1.4 percent—167,000 net new payroll jobs, with the job recovery positively affecting housing demand. And the expected rebound in income, low mortgage rates, and lower home prices are helping to keep housing affordability at historical highs, leading to increased housing demand, particularly for first-time home buyers. Overall California home sales are projected to increase 2 percent to 502,000 units. And even after two consecutive years of record-setting price declines, the median home price in California will increase 2% to $312,500. Our local markets median price is much higher!

The National Association of Realtors recently published that even with several years of price declines, the typical seller who purchased a home 8 years ago experienced a median equity gain of 24% and sellers who were in their homes for 11 to 15 years saw a median gain of 40%.

Finally, California Association of Realtors Chief Economist Leslie Appleteon-Young adds “The wild cards for 2011 include federal housing policies, actions of underwater homeowners, and the strength of the economic recovery. What is certain is that favorable home prices and historically low interest rates will continue to make owning a home in California attractive for those who are in a position to buy.”

We wish you all a prosperous 2011 and don’t hesitate to call us with any questions or referrals!