Since 1990, most of California has been sliding economically. The housing market in Southern California has been hit particularly hard, and mortgage lenders in the area have been forced to downsize or close up shop.

But 1996 is going to be the year that ends all this, according to many industry observers. Some are predicting a rapid recovery, some foresee far less dramatic changes - but almost all say 1996 will mark the end of adverse economic conditions.

What follows is a sampling of views on the state's prospects:

Tom O'Donnell, senior analyst, Smith Barney: We have long held that California's six-year-long economic downturn is likely to ease in 1996. Although upcoming Wells Fargo-First Interstate acquisition layoffs will slow the rebound, the economy is improving. Most of the excesses have been wrung out of the real estate market, job growth is surging, emigration is slowing, and population is increasing. Also, the business climate is now friendlier in the state, and the quality of life there remains high.

David Seiders, chief economist, National Association of Home Builders: Believe it or not, the Pacific region will be showing some of the strongest growth in 1996. We have California turning corners, and posting growth numbers.

John Pfister, vice president of marketing research, Chicago Title and Trust: It's strange. There were other time periods where California, given current unemployment figures and economy, would have started to turn around. But, look at Southern California home prices - they keep dropping. If interest rates get low enough any market will turn ... if we get two more declines by the Federal Reserve, California will recover this year.

The state is backed up in terms of new residential units that should be built, people are doubled up in houses. What you can say is, once Southern California does start to recover, there will be a huge explosion in demand.

Nima Nattagh, market analyst, TRW Redi Property Data: Things might improve only marginally, relative to what we had in '95, but what we had in '95 was not a good year, so that's not really optimistic. Rates keep coming down, but there a number of factors like soft housing prices that will counter that. The San Francisco Bay area appears to be one of the firmest.

Overall, growth and income levels are still lagging, and demographic shifts are negative. I would be very surprised if origination volumes or sales volume increased significantly.

John Tuccillo, chief economist, National Association of Realtors: Southern California's housing economy may have bottomed out. ... It's not going to progress like a V, but like an L, and crawl along the bottom for a bit.

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