Chapman University's biannual Economic and Business Review gathered 700 of southern California's business leaders to examine the current economic climate and outline their prediction for the near future. Chapman University's economic review has gained credibility due to the accuracy of its forecasts starting with the prediction of an economic downturn in 2007.
Chapman correctly predicted negative GDP growth, a precursor to a stalling economy. In 2008, Chapman called for positive growth in 2009 and a mild recovery in 2010 — both of which were counterintuitive yet ultimately correct. Chapman's Economic Forecast is an unbiased economic outlook.
Esmael Adibi, the director of the Anderson Center for Economic Research, lead the discussion. Buyers and sellers can gain a fresh insight into the near future of real estate to help make better decisions in today's uncertain real estate market.
Should your eyes glaze over when reading about GDP, unemployment rate or supply and demand relationships, then the basic summary of Chapman's report is a tepid economic recovery without a double-dip recession.
According to Chapman's Economic Report, the major reason for the current weak recovery is a lethargic construction sector. Housing starts are low. The average annualized level of housing starts during the first 10 quarters of the housing recovery has been 653,000 nationally versus 1,700,000 during the '71, '75 and '83 recoveries. The low construction starts result in significantly lower direct and indirect spending, ultimately a 2.5 percent lower real GDP.
Chapman describes the current real estate market as having a high housing affordability level. A homebuyer earning the median family income and buying a median-priced single family home needs to currently spend 30.5 percent of income to pay for the interest, principle and property taxes. This is substantially lower than the 51.3 percent needed when home prices peaked.
Chapman's projection of future housing affordability points to lower affordability levels, i.e., more expensive housing. The report attributes the change to higher than expected mortgage rates, not higher housing prices. Chapman University forecasts average 30-year fixed mortgage rates of 5 percent throughout 2010 and 5.9 percent in 2011.
There has been upward movement in the median home price in California. But much of that change can be attributed to the new mix of housing; more higher-priced homes selling more frequently, thus increasing the median price average. Relative housing values are expected to remain flat, and at best increase a few percentage points.
Potential homebuyers should understand that a short-term home purchase, in many cases, will be costly. Chapman's report reiterates the reality of many homeowners who will need to refinance adjustable-rate mortgages over the next few years, and unsold foreclosed homes on bank's balance sheets.
North County San Diego bank-owned and short-sale homes will remain a significant part of the real estate market over the next 18 months. This supply of distressed property can be pushed onto the market in a short period of time, helping sate demand. This will keep real estate appreciation flat. Today's homebuyers should not purchase with the expectation of short-term future appreciation.
Locally, single-family sales in Carlsbad have increased by more than 20 percent in both the first and second quarter of 2010 versus 2009.
Although sales have noticeably increased, home prices have stayed relatively stable since 2009.
Carlsbad has eight new construction projects giving homebuyers more selection than in 2009. The projects will help keep prices flat as they push more supply onto the market over the next two or three years. Today's conservative lending environment and strict appraisal standards are not supportive of runaway real estate prices.
Chapman's report projects national growth in average income and employment. Consumer confidence in the first quarter of 2010 was 81.1, up from 58.2 in first quarter of 2009.
For more information contact Tyson Lund at (760) 438-0800.
Chapman correctly predicted negative GDP growth, a precursor to a stalling economy. In 2008, Chapman called for positive growth in 2009 and a mild recovery in 2010 — both of which were counterintuitive yet ultimately correct. Chapman's Economic Forecast is an unbiased economic outlook.
Esmael Adibi, the director of the Anderson Center for Economic Research, lead the discussion. Buyers and sellers can gain a fresh insight into the near future of real estate to help make better decisions in today's uncertain real estate market.
Should your eyes glaze over when reading about GDP, unemployment rate or supply and demand relationships, then the basic summary of Chapman's report is a tepid economic recovery without a double-dip recession.
According to Chapman's Economic Report, the major reason for the current weak recovery is a lethargic construction sector. Housing starts are low. The average annualized level of housing starts during the first 10 quarters of the housing recovery has been 653,000 nationally versus 1,700,000 during the '71, '75 and '83 recoveries. The low construction starts result in significantly lower direct and indirect spending, ultimately a 2.5 percent lower real GDP.
Chapman describes the current real estate market as having a high housing affordability level. A homebuyer earning the median family income and buying a median-priced single family home needs to currently spend 30.5 percent of income to pay for the interest, principle and property taxes. This is substantially lower than the 51.3 percent needed when home prices peaked.
Chapman's projection of future housing affordability points to lower affordability levels, i.e., more expensive housing. The report attributes the change to higher than expected mortgage rates, not higher housing prices. Chapman University forecasts average 30-year fixed mortgage rates of 5 percent throughout 2010 and 5.9 percent in 2011.
There has been upward movement in the median home price in California. But much of that change can be attributed to the new mix of housing; more higher-priced homes selling more frequently, thus increasing the median price average. Relative housing values are expected to remain flat, and at best increase a few percentage points.
Potential homebuyers should understand that a short-term home purchase, in many cases, will be costly. Chapman's report reiterates the reality of many homeowners who will need to refinance adjustable-rate mortgages over the next few years, and unsold foreclosed homes on bank's balance sheets.
North County San Diego bank-owned and short-sale homes will remain a significant part of the real estate market over the next 18 months. This supply of distressed property can be pushed onto the market in a short period of time, helping sate demand. This will keep real estate appreciation flat. Today's homebuyers should not purchase with the expectation of short-term future appreciation.
Locally, single-family sales in Carlsbad have increased by more than 20 percent in both the first and second quarter of 2010 versus 2009.
Although sales have noticeably increased, home prices have stayed relatively stable since 2009.
Carlsbad has eight new construction projects giving homebuyers more selection than in 2009. The projects will help keep prices flat as they push more supply onto the market over the next two or three years. Today's conservative lending environment and strict appraisal standards are not supportive of runaway real estate prices.
Chapman's report projects national growth in average income and employment. Consumer confidence in the first quarter of 2010 was 81.1, up from 58.2 in first quarter of 2009.
For more information contact Tyson Lund at (760) 438-0800.