South Bay Residential Markets to see Price Appreciation in 2006

On Friday, January 13, 2006, California Association of Realtors Vice President and Chief Economist Leslie Appleton-Young spoke at the Trump National Golf Club, as reported by the South Bay Daily Breeze, and predicted that the Southern California coastal cities should experience price appreciation in their residential real estate markets of from 6 to 12 percent. She characterized the current real estate market as being in the process of a “soft landing” which means that the supply for homes declines at the same time that a downturn in demand occurs. During this soft landing, consumers will take a more cautious approach to the housing market than in years past. She stated “one of the most important things to remember is that we are in an economy that is growing. GDP (Gross Domestic Product) growth last year (went up) about 3.4 percent.” She predicts an increase of 3.6 percent this year. ” Secondly, employment growth is good”. Appleton-Young explained that home prices are on the rise because of strong demand due to low mortgage rates and the consumers shunning alternative investments, and a restricted supply, due to constraints on construction, the recent rapid increase in construction costs, and the low number of homes for sale. Sales in the state of California are up 4.8 percent for 2005, but Appleton-Young predicts a 2 percent decline for the state’s 2006 housing unit sales. The National Association of Realtors is predicting a 3.7 percent decrease in the U.S. Housing Market for 2006. “Higher interest rates and consumer spending are the two greatest risks to watch out for (this year)” she said.