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The worst is over absolutely, but 2011 will be ‘lackluster' year, according to state Realtor official

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Tuesday, November 16, 2010

Whether or not the recession is over would depend on your technical definition of the word, according to California Association of REALTORS® vice president and chief economist Leslie Appleton-Young, but like other real estate experts, Appleton-Young believes the worst is over. She also believes it will take some time before the housing market fully recovers.

"Absolutely the worst is over, but we will have a slow recovery," Appleton-Young told Realtors at a Silicon Valley Association of REALTORS® meeting early this month.

Signs of recovery are definitely present. GDP (Gross Domestic Product), which showed a drop of 2.6 percent in 2009 - the largest drop since 1938 – is slowly rising. GDP increased at an annual rate of 2 percent in the third quarter of this year. In fact, there has been positive growth in the economy for the last five quarters; it shows the federal government's economic stimulus program has worked, Appleton-Young said.

The Consumer Confidence Index in October was 50.2 percent, up from 48.6 in September. Consumer spending increased by 1.2 percent also in October, but this news is not positive enough to convince businesses to expand. Appleton-Young explained consumers are downsizing and maintaining the attitude that "less is more." They are shopping at discount stores like Walmart, so luxury goods are struggling.

"We can't look to consumers to drive this recovery," Appleton-Young surmised. "There's nothing positive on the horizon for consumers right now, and there won't be until this whole labor market starts to turn around."

The national unemployment rate stands at 9.7 percent; it's 12.4 percent in California. Appleton-Young remarked California is seeing more challenges than the rest of the nation because Sacramento and the regional and local governments "are working to make things worse" with cutbacks and layoffs. Big losers are construction, manufacturing, trade and transportation and financial activities. The winners continue to be education, health services, leisure and hospitality.

Appleton-Young said inflation is 18 months to two years away, but she believes a dose of inflation and a rise in interest rates would actually be positive signs that the economy is moving forward.

She does not expect any meaningful reforms next year. "The government has done all it can to make funds available," she said. "As John Maynard Keynes put it, 'You can't push on a string,' you make money available but if the banks don't want to spend…"

The chief economist predicts 2011 will be "a lackluster year," with no significant job growth till late in the year and a GDP growth of 2.4 percent. For California, she anticipates a job growth of 1.6 percent; unemployment at 11.4 percent; re-sales up by about 2 percent and a change in the median price of 2 percent.

"We are still seeing limited inventory of good distressed properties and still very nostalgic upper end sellers who are not appreciating the market we have today. They are going through a very painful situation," Appleton-Young said.

Distressed sales will continue to factor in the marketplace for four to five more years because there is still a large pool of homeowners underwater. Make sure your clients understand the local market, she stressed to Realtors. More importantly, understand if they are in a distressed dominated market or a non-distressed market. "They are two different stories," she noted.

According to the state Realtor group's 2009-2010 housing market survey, the median price in distressed markets was $256,000, with a net cash loss of $143,000; in non-distressed markets, the median price was $440,000 and net cash gain was $125,000. Net cash to the sellers once was at $220,000, is now at $35,000; 30 percent of sellers indicated they sold at a loss. Over 50 percent of transactions had multiple offers, with an average of four offers per transaction.


The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.

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