Economist Kirk Lesh had no good news for attendees of the UCSB Economic Forecast Project lecture on Jan. 15.
In fact, most of the UCSB-EFP findings proved worse than attendees had anticipated.
Lesh said during the presentation that the real estate market will be flat until at least the second or third quarter of 2010 and maybe even longer.
“By that time, we will no longer see home prices declining,” he clarified, adding that it will take much longer to actually see any sort of rise in the market. “It will take a while to repopulate empty spaces, and I predict that it will be the third quarter of 2010 before there is a general impact. For some communities the markets will take longer, maybe into 2011.”
As 2009 begins, the outlook for California real estate looks bleak. A deteriorating economy will put downward pressure on all markets, and Lesh said the housing market won’t stabilize until the labor market does.
A lack of consumer spending, more business failures and less international trade will keep the commercial markets subdued throughout the year.
“Normally when you go into a recession, jobs are lost and then houses are foreclosed upon because residents can’t afford to pay their mortgages, and the real estate market goes into a tailspin, but that didn’t happen this time,” Lesh said.
He noted that the credit market’s collapse actually hit before foreclosure rates went up. Lesh said this was a result of high market demand, access to easy money and what he called “innovative lending,” a term encompassing new loan products, lower standards, credit default swaps and securitization.
“The deteriorating California economy certainly will not help the housing market,” Lesh said. “In fact, we can expect things to get worse. Prices will continue to fall as more distressed homes are purchased. As job losses increase, so will foreclosures. As foreclosures increase, homeownership rates will decrease. The homes currently on the market will curtail new development. The coming year will not be kind to the California housing market.”