UCLA Anderson Forecast calls for flat home prices, “No bubble bursting”

 As reported in the Daily Breeze 6/21/06:

An economic forecast released by the UCLA Anderson School of Business today calls for a "soft landing, with flat home prices and a mild economic slowdown". "That slowdown is unlikely to lead to a recession". In addition, "California's real estate sector will not see a bubble bursting in the next two years". "The bottom line is when you look down the California history and the history of other states, you only see a significant decline in home price . . . in recessions. And it has to be a fairly big recession", says Ryan Ratcliff, an expert on California's economy at the Anderson Forecast. "So since I'm not looking for a 1990's style recession any time in the next two years, I'm not predicting that kind of decline in home prices." "There definitely is this contingent that secretly hopes that home prices are going to tank so they can afford to buy a home, and that's just not going to happen,", says Ratcliff.

Patrick Duffy, a managing director of consulting at Hanley Wood Market Intelligence, upon reviewing the report, stated that the Los Angeles area real estate market seems to be safe from a big dip because it doesn't have the conditions that existed in the early 1990's. Generally, the South Bay is better off than many other parts of Los Angeles. "The closer you are to the coast, the better off you'll be regardless because of scarcity."

Interest Rate Comments from HSH Associates

Excerpts from HSH Associates newsletter for week ending June 2, 2006:

Fixed mortgage rates seem to have found a plateau over the past few weeks (a trend, rather than a blip). Since the beginning of May, the average 30-year FRM has wandered in a range of just five basis points. If the latest employment report is the basis for a top for fixed interest rates, our expectation of another Fed move later this month increases the chances of gently lower rates for much of the summer, especially if the Fed pauses in August. Simply, slower growth and additional Fed-added economic drag may be enough to press inflation back toward comfort levels, and that in turn should help long-term rates to ease somewhat, and we may even see a more pronounced inversion in the yield curve before then. Still, we need to wait for data, and if inflation fails to show signs of easing even in the face of cooler growth, the Fed will continue to raise rates.

	LOAN TYPE		TODAY	+/-	LAST WEEK
	30 yr fixed mtg		6.20%		6.19%
	15 yr fixed mtg		5.89%		5.87%
	5/1 ARM		5.77%		5.76%
	30 yr fixed jumbo mtg		6.38%		6.37%
	5/1 jumbo ARM		5.94%		5.90%

Source: bankrate.com Rates include 1 point fee

Harvard releases State of the Nations Housing Report

RISMEDIA, June 15, 2006—With interest rates rising and speculative demand cooling, the housing boom is coming under pressure, finds this year’s State of the Nation’s Housing report.

As long as the economy continues to create jobs and builders trim production to match slowing demand, house prices will keep climbing and the housing sector will likely achieve a soft landing. Although house price growth will likely moderate in many areas, sharp drops in house prices are unlikely anytime soon. Major house price declines seldom occur in the absence of severe overbuilding, major job loss, or a combination of heavy overbuilding and modest job loss. Fortunately, these preconditions are nowhere in evidence across the nation’s metropolitan areas.

Even with higher interest rates and home prices crimping affordability, the lure of house price appreciation continues to draw homebuyers to the market. While the national homeownership rate edged down a tenth of a percent in 2005, it increased in the West and Northeast where house price growth was the strongest. In fact, about 1 million homeowners were added nationally last year. Mortgage innovations such as low-downpayment, hybrid-adjustable, and interest-only loans helped blunt the impact of higher home prices and interest rates.