Some Forecasters Predict Financial Improvement in 2008
By RACHEL RASKIN-ZRIHEN/Times-Herald staff writer
Article Launched: 12/28/2007 08:09:40 AM PST
Despite 2007 having been one of the worst real estate years in recent memory, some economic forecasters predict improvement in the local financial landscape in 2008.
"Over the next couple of years, the Vallejo area will have one of the largest rates of income growth in Northern California, second only to San Jose," said University of the Pacific's business school's dean, Chuck Williams. "We're predicting a 5.7 percent income growth rate for your area."
Most of the income growth will be among business professionals in the education and health sectors, and in transportation and utilities, he said.
The Vallejo area's wage level ranks seventh of Northern California's 11 Metropolitan Statistical Areas, and eighth in terms of income level, but is "growing very fast," Williams said.
The Solano area ranks fourth for employment growth and eighth in population growth, he added.
"It's a good sign," Williams said.
Though new home construction continued to fall in Solano County and statewide in 2007, the drop locally was less steep than in some other areas, according to California Building Industry Association data. And Williams said he predicts increased housing starts in the next two years which could be good news if exiting inventory decreases, he said.
"We predict the Vallejo area will have the third biggest growth in housing starts, with a 25.8 percent increase between 2008 and 2010," he said. "We will eventually dig ourselves out of this housing mess."
Even if these predictions materialize, they don't address falling real estate values, but even these can be positive, Williams said.
"It's an opportunity for developers to buy land at lower costs, and the savings passed on to buyers," he said.
Though severely impacted by the national subprime mortgage crisis, the Vallejo area's real estate market may begin to turn around next year, said Solano Association of Realtors president Jeff Dennis.
"Economists are sending mixed messages, but I expect continued high inventory for the first part of the year, keeping prices from going up," Dennis said. "But I expect a moderate increase in transactions by the middle of '08."
Dennis said he doesn't see a full recovery until 2009 and not without federal help. The kind of federal help Alan Schwartzman of Benicia's Advanced Mortgage Services says has already begun.
Congress extended the mortgage insurance deductibility and eliminated the taxability of proceeds from the sale of homes that sold for less than what's owed," eliminating the double or triple whammy," such transactions had meant to sellers, he said.
"If Congress can make FHA reforms to stem foreclosures and help more Californians qualify for federally insured mortgages, this will slow the downturn," Schwartzman said.
There likely will be fewer real estate and mortgage lending businesses in Solano County next year, but those that survive will be stronger, Schwartzman said. And if history is any indication, those in real estate for the long term should be OK, Dennis said.
"In the past, whenever prices have done down, they eventually come back up," Dennis said.
E-mail Rachel Raskin-Zrihen at RachelZ@thnewsnet.com or call 553-6824.
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