No Quick Fix for Calif. Housing, Economists Predict (Short sale foreclosure)
Three prominent California economists painted a rocky road ahead for the California housing market. Speaking at the California Association of Realtors convention in Long Beach, Calif., Nancy Dayton Sidhu, Stuart Gabriel and Richard K. Green said the nation and California are in a recession that could last until the end of 2009.
We have a very severe credit crunch going on, said Sidhu, vice president and senior economist at the Kyser Center for Economic Research. About 85 percent of banks have tightened their lending standards. This is an issue. That s where the problems are in the economy.
Sidhu forecasted that the recession would last through 2009, followed by a moderate recovery thereafter and economic expansion by 2010 or 2011.
Gabriel, a professor of finance and director of the Richard S. Ziman Center for Real Estate at UCLA, predicted that we re not going to have a Great Depression, but we are going to have a recession. The labor market will contract, causing consumer spending to contract.
Gabriel predicted that California will be the first to emerge from the economic downturn. California will see the up turn in housing before any other state, Gabriel said.
The federal government s rescue efforts could ease the financial markets, making it easier for borrowers to find loans, according to Richard K. Green, director of the Lusk Center for Real Estate Development at the University of Southern California.
Banks don t trust each other right now, said Green. They just don t know what s on their balance sheets. But I m still very bullish on California. I m far more optimistic this week than last week.
Will the housing sector lead the nation and California out of the recession? What are your thoughts?
Foreclosure activity was up 5 percent from the previous month and 25 percent from a year ago in October, but it might have been up much more if not for recent state legislation that has at least temporarily lowered the number of new initial foreclosure notices in some states.
The RealtyTrac U.S. Foreclosure Market Report released Thursday shows that Notices of Default in California sunk 44 percent from a year ago in October. A new California law that took effect in early September requires lenders to provide homeowners an extra 30-day notice before filing a Notice of Default. While California has had the most impact on the national numbers because of its size, other state foreclosure trends that were headed upward have taken a sharp turn down after legislation designed to extend or forestall the foreclosure process was passed.
Below are three graphs using a 90-day rolling average of RealtyTrac numbers. Each month’s average is based on the total for that month and the totals for the month before and the month after. So the most recent rolling average available is for September.
The foreclosure trend in California abruptly stopped its upward climb after the new law took effect in September while the upward foreclosure trend in Florida has continued.
Foreclosure trends in Maryland and Massachusetts both switched directions after new legislation forestalling foreclosure took effect, although the trend recently started heading back up.
Colorado foreclosure activity began a steady downward decline in January, after a new law extending the foreclosure process took effect. A similar trend began more recently in New York.
Tags: Association Of Realtors, Balance Sheets, California Association Of Realtors, California Banks, Consumer Spending, Credit Crunch, Economic Downturn, Economic Expansion, Economic Research, Financial Markets, Great Depression, Housing Market, Lusk Center, Recession, Rescue Efforts, Rocky Road, Sidhu, State Legislation, University Of Southern California, Ziman Center