Home Prices to Slide in 2009 with Increasing Sales as Affordability Improves
Oct. 16, 2008: Synopsis of the speech delivered by Leslie Appleton-Young at the California Assn of Realtors Convention, taken from the Long Beach Press-Telegram
Statewide home prices will continue to slide in 2009, but sales should inch up as affordability improves.
” The current uncertainty about the financial system and economy is likely to persist over the next several weeks and could extend into next year,” according to C.A.R. President Bill Brown. ” Our forecast assumes that the financial system will begin to show signs of stabilization late in 2008 and into early 2009.”
“Single-family home prices should dip about 6% next year, while sales will rise about 12%,” said Leslie Appleton-Young.
Sales for 2009 are projected to increase 12.5% to 445,000 single-family homes, compared with 395,600 projected in 2008.
” Having observed the way the housing cycle has behaved in the past, in both the ’80s and ’90s, this is not surprising,” said Robert Kleinhenz, CAR’s deputy chief economist.
” The nice thing is that we’ve already turned the corner in terms of sales activity.”
” The real question is… when will prices turn around?”
Appleton-Young did not forecast an immediate upswing in prices, which dipped a stunning 32% this year.C.A.R. predicts median home prices will dip to $358,000 from the current $381,000.
Still, Appleton-Young said, a sales recovery has already been seen in some of the hardest hit regions in the state because prices and foreclosures allowed some first time buyers to enter the market.
” It is really a mistake to paint home sales in California with a broad brush,” she said. ” It’s really inaccurate.”
Unlike 2005 and 2006, when about 40% of first time buyers put nothing down on their homes, the newest buyers are making down payments.
” That world is over,” said Appleton-Young of the zero down era,” and I think we would all agree that’s a very positive thing.”
This has led to a spike in the sales of lower priced homes-those less than $500,000.
The percentage of lower end sales has increased dramatically from 45% a year ago to 72%, Kleinhenz said, adding that sales of everything above $500,000 has gone from 55% of the market to 22%.
” It’s more severe than has actually ocurred in many parts of the state,”Kleinhenz said.” The number of distressed sales has increased the most dramatically in areas where sales have increased the most.”
Appleton-Young cited the Inland Empire and sections of Northern California that took big price hits, only to rebound with strong sales.
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