State Economist Predicts Upswing in California Housing Market

The recent slowdown in home sales and home price appreciation across the Coachella Valley housing market and California should plateau over the next year, buoyed by a moderately growing economy, a leading state economist predicts.

Leslie Appleton-Young, chief economist for the California Association of Realtors, told more than 500 real estate agents, mortgage brokers and other business people at a real estate forecast symposium Thursday in Palm Desert that home sales and median prices statewide are likely to decline slightly from the once “red-hot market,” then level off over the next 18 months.

“The housing market is going through an adjustment after a four-year boom that was not sustainable, but the (economic) fundamentals are still very positive for this region,” Appleton-Young said to the Desert Sun. “We are still seeing a moderately growing economy.”

She pointed to steady job and income growth in the region, along with a “a great mortgage rate environment.”

Across California, Appleton-Young said:

• 447,500 homes are projected to sell in 2007, a 7 percent drop to 2006.

• The median home price is projected to decline 2 percent to $550,000 next year, compared with a median price of $561,000 estimated for this year.

• In Riverside County, home sales in 2006 dropped nearly 18 percent through August, compared to a year ago. The $416,000 median price was up about 3.2 percent from a year ago.

Appleton-Young also predicts mortgage rates could be slightly lower next year if the Federal Reserve looks to spark the housing market.

Her forecast that the drop in home sales and home price appreciation should level off left attendee Robert Dennis, a real estate broker with Windermere Real Estate Coachella Valley based in La Quinta, “feeling a lot more upbeat” than in recent months.

“I think it shows we’re turning the corner and making it back to more of an even plateau rather than dipping further,” Dennis said.

Like many real estate agents across the valley, Dennis is working with sellers to adjust their expectations after several years of double-digit appreciation.

Now, with more than 8,300 homes listed across the valley this week, competition has heated up and many sellers have begun ratcheting down asking prices. This gives an opportunity for home purchase loan applicants to swoop in with a low offer.

Several factors bode well for the Coachella Valley’s real estate market in the months ahead, the economist said.

It’s a “destination” market, drawing some of the 78 million baby boomer retirees looking for a change in lifestyle, as well as second-home buyers and young families from other more expensive areas of California and throughout the United States.

“But there’s no area of California that is immune to the adjustments,” she said.