Wells Fargo forecasts a 6% decline in Southern California real estate prices through 2008.
Scott Anderson, senior economist at Wells Fargo Bank, sees SoCal median home sales prices falling 2.3% this year and 4.1% in ’08. Some of his thoughts:
While always volatile, California’s housing statistics are proving harder then ever to interpret. There are tentative signs of stability returning to parts of California’s housing market.
Some regions like Los Angles County, Santa Cruz, Santa Barbara, and San Francisco are experiencing only modest year-on-year declines in sales, and median existing home prices are still rising year-on-year. Moreover, California residential building activity may be about to bottom.
Housing starts have plunged across the board throughout much of the state over the past year, but housing permits are rising again in places like Ventura County, Orange County, Los Angeles County, San Diego, Fresno, Salinas, Santa Rosa, and Vallejo.
Looking at these statistics alone, one would conclude things are likely to get better not, worse.
That is until one looks at the existing inventory stats.
Unsold inventories were well over 10 months worth in the Central Valley, Orange County, San Diego, and Los Angeles in February. The option ARM and sub-prime debacle is clearly evident when one looks at inventories across housing values.
Months of inventory has skyrocketed for housing valued below $300,000 over the past 12 months, while months of inventory fell for housing valued above $750,000.
While residential building and sales may soon bottom, high existing inventories ensure greater pressure on California home values over the forecast horizon, and that remains a significant risk to California retail sales and employment growth.