Los Angeles Times: Drop in home sales is seen slowing in '07

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Drop in home sales is seen slowing in '07
Realtors report a steady pace of transactions in the state since July. More analysts are optimistic.
By Annette Haddad
Times Staff Writer

December 22, 2006

California's housing market may be nearing a bottom after months of plunging sales, the state's chief real estate brokers group said Thursday.

Since July, statewide sales of previously owned homes have held steady at an annual rate of about 450,000 units, data from the California Assn. of Realtors showed. Although that is a 25% drop from last year's record pace of 600,000, the fact that it has remained constant for nearly half a year bodes well for the market, analysts said.

"We are seeing some stability," said Robert Kleinhenz, one of the group's economists. "Whether it carries over into 2007 remains to be seen, but there's a good chance that the market could do better."

The real estate group is forecasting a 7% decline in home sales next year, a considerable improvement from this year's 23% drop.

Similar optimism was voiced Thursday by economists for three of the biggest industry lobbying groups. They see home sales bottoming in the current quarter and picking up in 2007.

However, after three years of record sales, the slowdown will continue to be a drag on the nation's economy until at least the middle of next year, they said.

"A lot happened in that boom and we have some paying back to do yet," said David Seiders, chief economist for the National Assn. of Home Builders. He sees housing starts declining for another year as supply evens out with demand.

Although it's not surprising that the Realtors and other real estate trade groups are optimistic, given their missions as industry boosters, a growing number of independent analysts have also suggested that the housing market is nearing a bottom.

Analysts have been cheered somewhat by positive developments in the current quarter. Inventories of unsold new and existing homes have ticked down slightly from the summer, and demand appears to have picked up as interest rates have stabilized.

In November, the statewide median price of an existing single-family home was $555,290, up 1.4% from a year earlier and 0.7% higher than in October, the California Assn. of Realtors said.

Kleinhenz predicts that home prices will increase 6.5% to 7% this year from 2005 and may drop 2% in 2007. Areas seeing a lot of new-home building — such as Sacramento, San Diego and parts of the Inland Empire as well as the high- and low-desert region — are expected to see more price declines over the next few months.

"While we are seeing some markets decline, it doesn't appear that we are seeing a free fall in pricing," Kleinhenz said.

The big wild card in 2007 will be how many homeowners decide to sell. If owners rush to market, inventories could balloon, creating more supply than demand and more downward pressure on prices.

But in another sign that the market is starting to stabilize, Kleinhenz said, over the last six months sellers "have become more attuned to the market" and are pricing their properties accordingly.

In April, the median sale price of an existing California home was 10% lower than the original list price. By November, that gap had closed to nearly zero, he said.

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annette.haddad@latimes.com



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