An economic report by the respected UCLA Anderson Forcast predicts that the struggling housing market will slow growth in the state next year, with construction employment dropping by as much as 5%. While real estate, especially the new home sector, has been in a recession for the past 2 years, so far it has not had a huge impact on the economy state wide, although that does not mean we are out of the woods yet.

“We’ve been expecting to see housing weakness take a toll on California and the fact that it hasn’t has been a surprise to us,” said Ryan Ratcliff, economist at the UCLA Anderson Forecast, which releases its forecast on the California economy today. “But based on the historical record, it wouldn’t be wise to say we’ll dodge the bullet.”

Ratcliff does not foresee a recession for the state or nation but said the economy will remain lethargic until the real estate market begins to pick up around 2009.

Strong growth in the manufacturing sector, including the high tech and computer industries, has helped offset weakness in the real estate sector, which has minimized the impact of the real estate slowdown so far. Indeed, in the South Bay & Peninsula, the real estate market remains much healthier than other parts of the bay area, especially the central valley. Here’s hoping we can continue to see strong growth in other sectors to mitigate the impact of the real estate slump. (sfgate.com)

Technorati Tags: Economy, 2008, California

New home construction dropped 3.4% in May, showing continued weakness in the new home market nationally. In the Western region, new home construction was off over 19% in May. Locally, new home developments in the Tri-Valley continue to offer incentives to spur sales activity as market conditions are generally sluggish. In a positive sign, permits for new homes rose 3% nationally, suggesting some optimism that we may be near the bottom of the cycle. (Yahoo news)

The Pleasanton rea estate market showed good sales activity in May, but inventory is trending up as we head into summer. Overall sales activity remained steady, registering 61 pending sales for single family homes in the month of May, which is certainly good activity. Inventory ended the month at 191 homes, and it looks like we may break the 200 mark in the next week or two. This is up from 170 at the end of April. (click on graph to enlarge)

The under $1 million market in May showed an increase in inventory, ending the month at 89 homes for sale, up from 73 last month. Sales were solid again in this price bracket, with 45 pending sales, which is up 1 from the month of April. (click on graph to enlarge)

In the midrange market in Pleasanton between $1 million and $2 million, inventory increased to 63 available homes at the end of the month, up slightly from April and up substantially from the beginning of the year. Sales were moderate with 12 pending sales, but this bracket is soft and market times are generally 60 days or more with few exceptions. (click on the graph to enlarge)

The luxury home bracket over $2 million continued to struggle in May, with inventory ending the month at 39 homes, which is up from January which ended at 31. Sales were sporatic again in May, with 4 pending sales. Essentially, there is a 10 month supply of homes in this market, so there continues to be downward pressure on prices in this segment. (Click on graph to enlarge)

Overall, the upward trend in inventory and the negative national news about real estate will continue to impact buyers perceptions of value, and keep prices flat to eroding in most price brackets and neighborhoods, although there are some exceptions. Prime properties in excellent location and condition will still get strong interest from buyers, with occaisional multiple offers. I have 2 recent listings with multiple offers, and they both sold over asking price. But this is the exception rather than the norm. For the rest of the market, it is typically a struggle, with long market times and price reductions the rule of the day. Hopefully, the generally steady sales activity in most price ranges will help burn off some of the new inventory and keep some balance in the market. Stay tuned….