Battered by an economy in crisis, unemployment ranging as high as 30% and rising bankruptcies California housing markets are teetering on the brink of a turn around in some areas of the state.
California illustrates just how bad things can get when unethical mortgage lending practices are combined with Wall Street manipulation. The economy is sliding as unemployment and foreclosures rise, and real estate is suffering through record financial losses. Government efforts are being made to right the wrongs as California faces the worst economic downturn since at least the Great Depression.
In Los Angeles, pushed by the federal government's first time home buyers' tax credit, home prices inched up as sales rose. The free-fall in housing prices leveled out, but a glut of properties in the foreclosure pipeline are adding to problems that threaten stabilization.
The Obama administration is putting pressure on bankers to work with homeowners to modify troubled loans, but foreclosures are still rising, which will impede any hopes of a full-fledged recovery for the time being. The expansion of the tax incentive should increase home sales in Greater Los Angeles, but if efforts don't increase to halt the epidemic of foreclosures the market will continue its long painful recovery. As a consequence of the record of failures on government's part, Housing Predictor forecasts average housing prices in Los Angles to deflate an additional 8.9% in 2010.
In the Inland Empire, composed of Riverside, Ontario and San Bernardino the housing crash has been particularly painful as one of the hardest hit areas in the country. Fewer foreclosed properties make up sales, but the volume isn't yet to the level where they were even a year ago. The market is predicted to remain fairly sluggish through the year on lesser deflation forecast at 7.5% in 2010.
The devastating collapse of the market in San Diego is triggering more foreclosures as homeowners flee as a result of mortgage payments that are too high to afford. Growing job losses will have a severe impact on the local economy and threatens to thwart any sort of real recovery for the year. San Diego housing prices are forecast to sustain average deflation of 7.1% in 2010.
| City |
Forecast |
| Los Angeles |
− 8.9% |
| Inland Empire |
− 7.5% |
| San Diego |
− 7.1% |
| San Jose |
− 8.9% |
| San Francisco |
− 6.8% |
| Oakland |
− 9.6% |
| Orange County |
− 7.8% |
| Fresno |
− 9.8% |
| Bakersfield |
− 8.9% |
| Sacramento |
− 8.4% |
An increase in sales has slashed the supply of homes listed for sale in San Francisco, reducing the inventory in some neighborhoods to pre-bubble levels. But the bump in home prices should lessen as the market turns more sluggish in terms of sales. Home prices will have to drop more in the City by The Bay before activity rises to equal demand. San Francisco is forecast to sustain slighter 6.8% deflation for the year. Down in the Silicon Valley, San Jose neighborhoods won't due as well forecast to experience average housing deflation of 8.9% in 2010.
The turn around is likely to be a long process in Oakland, where high numbers of adjustable rate and subprime mortgages were sold. Foreclosures will account for the majority of sales as the East Bay endures the downturn until the excess inventory of homes are sold. Oakland is forecast to see average housing deflation of 9.6% in 2010.
The Central Valley of California will recover from its downturn as more residents leave the area to find jobs. More homes sold in Fresno due to lower priced foreclosures, near record low mortgage rates and government incentives. A standstill in new home construction also pressures the re-sale market. However, the housing bust is anything but over as bankers pick up the volume of foreclosures to get them sold. Fresno is forecast to sustain average housing deflation of 9.8% in 2010.
Bankers will have to loosen lending standards before more home buyers are able to make purchases in Bakersfield, severely damaged by the foreclosure crisis. A slower volume of home sales should be boosted by the government's expansion of the tax credit to move-up buyers, but the recovery will take years to reach. Bakersfield is forecast to experience housing deflation of 8.9% for the year.
In the state capitol, homeowners hoped a spike in sales signaled a rebound, but Sacramento is suffering through one of the longest downturns in the nation in terms of home prices even as sales improve. Government intervention by lawmakers in Washington, D.C. will have to work in concert with state legislators to overcome the crisis to produce a full turn around. Average Sacramento home prices are forecast to lose 8.4% in 2010.
