Will OC Home Prices Increase in 2008?

Mission Viejo broker/economist Gary Watts says the real estate market will benefit from the Federal Reserve cutting interest rates, Congress passing bills to aid housing, and more money becoming available for home lending.
   He says the financial markets will begin calming down. The current down cycle will come to an end, just as other down cycles have done since 1970, and an excellent buying opportunity may lie ahead.
   Watts, whose home-price insights are widely watched in the local real estate community, conceded last week that his 2007 housing forecast was wrong, but he's upbeat about 2008.
   "The numbers for September and October may be our darkest hour, and then things are going to improve," he said.
   Watts didn't issue a price forecast, saying there's too much uncertainty. But if they follow historical trends, single-family house prices should go up from 3 percent to 5 percent next year while condo prices should drop slightly.
   A year ago, Watts forecast a 7 percent gain in home prices this year. Prices actually were flat through August and are down 2.2 percent in the latest weekly figures from DataQuick Information Systems. He said he had expected inventory to fall this year and higher summer sales. He did not expect the Federal Reserve to lower interest rates earlier in the year. And he didn't foresee the subprime mortgage meltdown. Other notes from his forecast: The media, knowing that they are losing viewers and subscribers, are well aware that fear helps to keep people tuned in or continuing to read. So they throw the big number of mortgage delinquencies in the headlines but fail to tell their audience how few actually go through the entire foreclosure process.
   In the 1990s, home values dropped more than 19 percent in Orange County; in this housing downturn it has been minimal. So what makes this cycle different? The truth lies in the fact that today's homeowners have more income, more equity and more wealth than in previous cycles.

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