Housing starts and prices in California should recover slightly next year, but remain lackluster, economists at the University of California at Los Angeles are forecasting.
The quarterly projection sees home prices, adjusted for inflation, rising 1.5% next year, 1.8% in 1997, and 2.6% in 1998.
Housing starts will also be up next year to an estimated 125,000 units, from about 90,000 this year. "It's a large percentage (increase), but it's still very low output for California," said Tom Lieser, associate director of the forecast.
According to the forecast, California would still lag behind the nation in housing starts. If housing starts were in proportion to its population, the state would have twice as many starts next year as projected, Mr. Lieser said.
But builders are staying on the sidelines as they wait for the resale market to pick up, he said.
A key factor in the resale equation is home prices. Though they have fallen dramatically from their peak in the late 80s, California home prices remain considerably higher than national levels, Mr. Lieser said.
Potential homebuyers have been discouraged by the fact that California home prices, though declining, remain well above the national average, he said.
California homebuyers may get some relief next year if the UCLA forecast comes to pass. But Mr. Lieser acknowledged that the prediction rests on a key assumption: that home prices in Southern California have bottomed out this year.
Overall, "prices are below where they were a year ago. But they haven't declined much during the year," Mr. Lieser said. "They seem to be holding steady, on average."
The report also said California unemployment will remain "stubbornly high," averaging 7.9% and declining only to 7.6% in 1997 and 7.5% in 1998.
