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Only slight improvement predicted for 2012 housing market


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Wednesday, September 28, 2011

C.A.R. Vice President and Chief Economist Leslie Appleton-Young (far left) presented the "2012 Housing Market Forecast" at the CALIFORNIA REALTOR® EXPO 2011 luncheon on Wednesday. Pictured with Appleton-Young are (left to right) C.A.R. Deputy Chief Economist Robert Kleinhenz, C.A.R. President-elect LeFrancis Arnold, SILVAR member and C.A.R. Director Jeff Barnett, and C.A.R. Treasurer Don Faught.

California home sales and median price are predicted to improve only slightly next year, according to the California Association of REALTORS®. A tepid economic recovery, uncertainty about the future, and funding challenges for mortgages are expected to keep the market moving sideways, with little foreseeable momentum in either direction.

C.A.R. vice president and chief economist Leslie Appleton-Young delivered the 2012 housing market forecast to hundreds of REALTORS® from around the state at the California Realtors® Expo 2011 held at the San Jose McEnery Convention Center last week. Despite "signs of healing," Appleton-Young said, "We are living in an environment rife with fear and uncertainty mired by a big, big deficit."

Appleton-Young said consumer spending, which was almost flat during the first two quarters of this year, is the primary culprit to economic growth. Consumer confidence has eroded due to the U.S. debt, a volatile stock market, a stubbornly high unemployment rate, not enough job growth, and uncertain government policies. Unforeseen global events like Japan's earthquake and tsunami, the Greek debt crisis threat to Europe's economy, oil price spikes have also contributed to slowing the overall economy. A big unknown for next year is what's to happen to the number of people who are underwater. In California, that's about 30 percent of households.

Sales of existing single-family homes next year are expected to increase just 1 percent to 496,200 units, following projected flat sales of 491,100 homes this year, compared to the 491,500 homes sold in 2010. Appleton-Young said following a double-digit increase in the median price in 2010, the 2011 median home price is expected to decrease 4 percent to $291,000, and then only expected to increase 1.7 percent to $296,000 in 2012. 

The C.A.R. chief economist stressed a strong housing recovery depends on consumer confidence, job creation, and the availability and cost of home loans. Of major concerns are high-cost loans as a result of high conforming loan limits not being extended; the uncertain future of GSEs Fannie Mae and Freddie Mac; a likely drop in the market share of FHA loans; proposed tax reform policies that threaten to eliminate or cut the mortgage interest deduction (MID); and proposed QRM (Quantitative Requirement Mortgage) rules calling for a 20 percent down payment requirement for home loans.

"The wild cards for 2012 are many, including federal, fiscal, monetary, and housing policies; the contentious political climate during an election year; and the strength of the U.S. economic recovery," said Appleton-Young.

She noted of all places in the state, the Bay Area, particularly Silicon Valley, stands out as having the strongest economy and housing market.
Acknowledging the lackluster forecast, Appleton-Young said especially in California, it is the best time to buy a home, given the historic low interest rates and reasonable prices. "Housing affordability in the state is amazing. It's at historic highs and the smart money knows where it should be going," said Appleton-Young.


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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