The GOOD, the BAD and the UGLY
UCLA forecasters have seen the future of California's housing market, and it looks like this: more apartments near the coast, fewer Mansions in the desert.
That prediction is based on several factors, including expectations that rising fuel prices will encourage people to live closer to jobs along the Southland coast and in the San Francisco Bay Area.
I have always said stay west of the I-5.
The state's population is also skewing younger, meaning there will be more demand for urban rental units and less demand for suburban cul-de-sacs, according to the quarterly economic forecast released Wednesday by UCLA's Anderson School of Business.
"Many of the younger generation have been buffeted by the boom and bust in the housing market, and see value in living closer to work." From UCLA economist.
That's bad news for the state economy, however, for two reasons.
One is that construction of multifamily homes requires less labor than construction of single-family homes.
Second, areas such as the Inland Empire and Central Valley that were hit hardest by the housing bust won't get a construction boom to help pull them out of the economic doldrums.
California won't start adding a significant number of building permits until 2013, forecasters say.
Which is one of the reasons the state's unemployment rate will stay above 10% until the middle of that year (2013).
Nonfarm employment in the state won't return to pre-recession levels until 2014, and construction employment won't reach those levels until at least 2021.
It was published that in a typical recovery, you get a bounce-back in housing and hiring of a lot of construction workers, we're not seeing that this time, which definitely slows the recovery, and slows economic growth.
Changes in the state's demographics are driving some of these shifts, forecasters say.
Household formation has slowed in California as the unemployed have moved in with their family members to save money, leading to less demand for new homes.
In addition, California is one of the youngest states in the nation, according to census data, with a median age of 35.2, compared with 38.0 in New York.
Although there are many Gen Xers of home-buying age in the state, many bore the brunt of sub-prime mortgage and housing bubble crash, and now do not think a home is a safe investment.
The market is already responding to this trend, according to UCLA.
Building permits for single-family homes have continued to decline while permits for multifamily complexes are starting to regain strength.
Permits for multifamily homes are now at 40% of the peak number, comparatively stronger than permits for single-family homes, which are at 20% of their previous peak.
These housing issues, coupled with the financial pain experienced by state and local governments, will keep California's unemployment rate at an average of 11.7% this year and 10.9% next year.
This information compiled from UCLA economic report for 2011 and beyond.
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John Hacker
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