“Despite the Bay Area’s notoriously high home prices, the housing slump won’t be as acute as in the rest of the state because supply and demand are in better balance, especially in the inner counties of San Francisco and San Mateo. Combine that with expected solid performances in such key sectors as technology and tourism, and the region should weather a slowdown well, UCLA forecasters say.”
“Wells Fargo & Co. economist Scott Anderson agrees that the Bay Area is California’s strongest region, and he is optimistic about prospects for the region’s tech sector. But he stresses the risks of a statewide economic downturn more than UCLA forecasters do, pointing to how vital construction and other housing-related jobs have been to the state’s growth in recent years.”
“Statewide, home prices could fall as much as 10 percent from their peak, [Scott] Anderson expects. In the Bay Area, the drop should be less, no more than 6 or 7 percent, he said.
Both Anderson and UCLA forecasters stress that the biggest risk to California’s economy is that the housing slump will prove worse than they predict. It’s become harder for home buyers to get loans. And the high-water mark for rising rates of adjustable-rate mortgages is still several months away, which could mean more loan defaults, more foreclosures and more downward pressure on home prices.”
∙ Bay Area should escape worst of the state’s economic slump [SFGate]
∙ UCLA Anderson Forecast: California Will Avoid Recession [BusinessWire]
“Both Anderson and UCLA forecasters stress that the biggest risk to California’s economy is that the housing slump will prove worse than they predict.”
These are the same wizards who said there was no bubble to begin with, and then that subprime was contained. UCLA’s “economists” are shills – that cartel is funded by real estate interests, which is likely why Christopher Thornburg left. But at least they’re no longer denying the existence of a problem. Even the Berkeley folks are predicting a drop:
http://www.bloomberg.com/apps/news?pid=20601109&sid=aMG3vdK3Qt2k&refer=exclusive
“Home prices could fall as much as 10 percent from their peak”
For real? Wow. Tell that to people in the Central Valley, where prices have already fallen 20% in some areas.
Have to agree with you Dude, was thinking the same thing. I like this bit(below..) how could they be wrong? They have been soooo right thus far, right?
“Statewide, home prices could fall as much as 10 percent from their peak, Anderson expects. In the Bay Area, the drop should be less, no more than 6 or 7 percent, he said.
Both Anderson and UCLA forecasters stress that the biggest risk to California’s economy is that the housing slump will prove worse than they predict.”
“Home prices could fall as much as 10 percent from their peak
“For real? Wow. Tell that to people in the Central Valley, where prices have already fallen 20% in some areas.”
If you actually read the article you would realize they said prices could fall 10% in the Bay Area. Central Valley is not the Bay Area.
Once again, another doom & gloom guy with nothing useful to say
Actually they were referring to the state – bird_man has the full quote. But apologies for the gruff initial comment. It just amazes me that they can continue to predict only minor drops when many areas of the state are already down by 10% or more (wine country, central valley, San Diego, etc.)
folks, this isn’t rocket science. Areas inland, as well as the central valley, and the sacramento area, where the biggest majority of all the new construction was fueled by investors/flippers/speculators, have been and will continue to be the hardest hit. It was estimated that in excess of 40% of the people buying these new construction properties in these areas were investors, most of whom are walking away from their mortgages and contracts, therefore leaving those who actually live in these communities to suffer the worst of the downturn. A house in Sacramento that was worth $700,000 at the height of the frenzy, when people were actually camping out overnight for releases of new lots in a community, might now have a house whose true market value is closer to $400,000 or so. There are few to any buyers for these communities now that the investor frenzy is over. Same holds true for San Diego, Las Vegas, Phoenix, many parts of Florida, and many suburbs of Washington DC, where there was an huge new home construction boom over the past 5-6 years, fueled solely by people looking to cash in on the housing boom. It is a concept that few who live in San Francisco can understand or grasp, considering they only read about it in the paper. A $600,000 price reduction on a $3,000,0000 property in Pacific Heights is hardly a safe comparison.
“people were actually camping out overnight for releases” – remember all those people who lined up until 3am for a chance to buy at One Rincon?
“huge new home construction boom” – have you looked around San Francisco lately?
“people looking to cash in on the housing boom” – reminds me of everyone I know in San Francisco including myself.
Are you sure there weren’t any investors/flippers/speculators in the SF market?
The rocket science class I took taught otherwise.
I am not talking about condominium projects/developments — or high rises — I am talking about single family homes.
My point being, it was a gamble for many people — when gambling, there are winners and losers. Those that got in early did very well, and those that got in close to the turning point, or near the end of the frenzy, are hurting. There is nobody to blame but ourselves. Condo buyers in San Francisco included — if you waited in line for a new release, only to wait for the project to be finished so you could turn around and flip the property, best of luck to you now, it’s going to be tough.
It really wasn’t THAT much of a gamble near the peak of the mania. You bought a new construction condo, which limited your losses to 3% but did not limit your upside. Then you sat back and watched.
When they call to fund the loan, if Mr. Case and Mr Shiller say things are down by more than 3% from when you bought, you walk away. That just wasn’t that much of a risk during a mania when things were rising by 20% per year and with nothing down, your gains were infinite.
With those kinds of gains and losses seemingly impossible at the time, you can bet that an overwhelming portion of the buyers of those condos were planning on buying and getting out as soon as possible. It was just too big of a draw.
How many pre-construction condos were sold at the peak of the mania to people who wanted to roll the dice? Just in SF, you are probably looking at something between 500 and 1000. There are another 500+ units under construction or about to break ground. Worst case that’s 1000+ units that will be on the market at the same time. How many condos are sold in SoMa and Rincon Hill in a non bubble year, with prices faliing? 200? So we end up with a 5 year supply.