No ‘Glimmers of Hope’ in SoCal According to Economist

No ‘Glimmers of Hope’ in SoCal According to Economist

Seemingly contradictory housing market data is coming out of California these days. According to the state’s Realtors, conditions seem to be improving, as first-time homebuyers are coming out of the woodwork to take advantage of bargain prices and President Obama’s $8,000 tax credit.

“What’s selling is the outlying areas where all the distressed properties are,” said Dr. Michael Carney, executive director of the Real Estate Research Council of Southern California (RERCSC).

Based on the group’s re-appraisal of the same sample homes around the state every six months, Carney sees no good news around the corner in terms of a recovery for the market.

“Pretty much nothing has changed,” Carney said while reviewing the state’s Q1 2009 statistics during the group’s luncheon at Cal Poly Pomona last week. “There’s no signs of a slowdown I can tell.”

According to Carney, the state’s real estate market is continuing to deteriorate, as home prices continue to decline at the same rate with no sign of a bottom in sight.

Published in the RERCSC 1st Quarter 2009 Real Estate and Construction Report, results of its semi-annual home price survey conducted in April 2009 reveal that prices dropped 10 percent from six months ago in both Northern and Southern California. Prices were down 18 percent in Northern California and down 20 percent in Southern California from April 2008. The decline is more dramatic when compared to April 2006, with a 31 percent decline in the northern half of the state and a 34 percent decline in the south.

Despite these negative figures, home prices are still up compared to April 1996 — 125 percent in the north, and 120 percent in the southern part of the state.

On the foreclosure front, the RERC report shows Notices of Default up 24 percent for the quarter, while trustee’s deeds recorded (its measure for actual foreclosure activity) are down 4 percent during the period. The state’s inventory of unsold housing is slowly creeping down as well.

Other factors that concern Carney from Q1 were the continued decline in the number of residential and non-residential permits, as well as less residential and construction lending going on. The state’s apartment market is weak as rents were down and vacancies up. Employment took another large hit and inflation took a dive to the level of becoming deflation.

For the remainder of 2009 and into 2010 Carney sees little improvement in the situation, with the homeownership and apartment rental markets remaining weak, permits remaining at low levels, the recession continuing, and both inflation and long-term interest rates reversing their trend and turning upward.

Regarding when California’s housing market will truly turn the corner toward recovery, Carney answers with his own question. “Where’s the financing coming from?”