Economists didn't want to say it, mortgage bankers were hoping against it, real estate agents were trying to ignore it. But 1995 turned out to be a horrible year in housing for the Golden State. Home sales declined 13% during the year in California, the worst decline since 1991, according to TRW Redi Data of Anaheim, Calif.
The sales drop represents a real kick in the pants for the mortgage industry there, which had been optimistically eying 1994's increase in home sales as a sign that the state's housing market was firming up.
But any advance was thwarted by the shoddy condition of the state's business activity. "There are some fundamental problems with the California economy," said Nima Nattagh, TRW Redi's market analyst. The state has not seen any real growth in income in the last few years, he said, while the value of homes there continues to drop.
Existing home prices fell almost 8% in some counties, for an average decline of 6% statewide, TRW reported.
This drop is really hurting the move-up market, Mr. Nattagh said, because people are reluctant to purchase a new home that's declining in value.
The continued aging of the population, a nationwide phenomenon, is also hurting the state's suburban markets, Mr. Nattagh said, predicting that the so-called dormitory' markets, where individuals with entry-level jobs often live while working in a neighboring city, will also continue to suffer.
When it comes to predictions for 1996, industry observers are divided between boldness and unshakeable pessimism.
The California Association of Realtors is forecasting a 7.4% increase in home sales for the year, based on a stabilization of home prices and an improving economy.
Leslie Appleton-Young, the trade group's vice president of research and economics, predicted that "economic growth will lead to an improvement in consumer confidence, amid extremely favorable mortgage interest rates and signs that foreclosure activity is declining."
Riverside, Ventura and San Bernardino counties, long touted as areas with high-growth potential, may actually see some results this year, said Paul Horovitz, president of Los Angeles-based Dominion Mortgage. The inventory of raw land in those counties is now back on the development board, he said, because of anticipated demand for new homes.
Reports released by the University of California at Los Angeles say home prices in Southern California are expected to increase more than 3% in 1996.
But these figures may be overly optimistic, Mr. Nattagh says. The most that the region can hope for is a leveling off after 1995's decline of 1 to 2% in home values, he suggested.
Nationally, existing home sales prices increased about 6%, according to studies by both Fannie Mae and Freddie Mac, and consulting firm Case, Schiller & Weiss Inc. of Cambridge, Mass.
However, economic relief is not likely to come to California anytime in the near future, Mr. Nattagh said. The lack of personal-income growth and an aging population are permanent factors, he asserted.
