Group says housing crisis will improve

January 3, 2008 8:01:15 PM PST
You've heard almost nothing but gloom and doom from those tracking the California housing market, so you're probably thinking "here we go again." but an analyst predicts our housing market will come back sooner rather than later.

Bucking every other prediction of when the California housing market will turn around, economists for the state's home building industry said today it'll happen after June.

The projected up tick is based on the way certain indicators are growing.

"Population, of course, is one of the most important. But the overall California economy is strong. Job creation continues at a fairly good pace. Interest rates are projected to remain at roughly historical lows," said John Frith from the California Building Industry Association.

The CBIA also predicts new home prices will be more affordable in areas like San Bernadino, Riverside, San Joaquin and Sacramento counties where land is now cheaper and developers will build smaller dwellings.

Though building permits are still being counted for last year, it's estimated more than 116,000 were issued. The projection for 2008 is more than 128,000. But that's far below the height of the building boom of 2004 when nearly 213,000 units were built, employing half a million workers.

While some economists don't dismiss the prediction, they note the industry did not give much weight to the current foreclosure crisis which has flooded the market with existing homes for sale.

"If this report had taken into account some of the features of the sub-prime mortgage crisis and the resulting credit crunch that is likely to still persist in 2008, it probably wouldn't have been as optimistic," said Prof. Jessica Howell, Ph.D. from Sacramento State Economic Department.

Economists from the Los Angeles County Economic Development Corporation actually see a much gloomier picture for a turnaround.

"Some areas of the state could see a turnaround in 2009. Other parts of the state, it could take until 2010 before they start to turnaround," said Jack Kyser from LA Economic Development Corp.