UCLA Anderson Forecast on Orange County Housing
The UCLA Anderson Forecast was released last week, projecting the economy in Orange County, California, and the Nation. Here are some of the Orange County housing highlights with my comments on the numbers:
UCLA forecasts a 34.6% increase in Orange County home prices over the next 6 years.
Another way to look at this is a 34% increase in 6 years is about the same as 5% appreciation per year. Michael Bluejay has a great post on the relationship of appreciation to inflation and all of the caveats to consider in looking at housing appreciation. Suffice it to say that 5% doesn't look good if you were hoping for the kind of short term large gains we saw in the early 2000s, but it looks great when you consider what it has looked like in the past few years.
UCLA forecasts new construction, which recently had risen 60%, will continue to rise through 2015 when it will be about 5 times its low in 2009. There will be a shift to condos and apartments versus houses.
I have shown a lot of new construction homes this year and anecdotally it seems like they are selling. Especially developments in highly desirable areas of Irvine (Woodbury, Laguna Altura, etc.). It also does seem like condos/townhomes, and everyone's favorite, detached condos, form the majority of homes in the new construction market.
UCLA does not think there will be a flood of foreclosures, continuing the recent trend of slowly declining foreclosures.
"Foreclosures" can mean a lot of different things. From my perspective, "short sales", which are not necessarily "foreclosures" are holding down prices right now. Homes that have actually been "foreclosed" on and are now owned by the bank not only don't make up a significant part of the market, but they sell for more than short sales. Right now, about 30% of the Orange County market is made up of short sales and about 5% is bank owned. UCLA is probably right that there won't be a flood of foreclosures, but what will really make a significant difference in the Orange County market is a faster short sale process. Once short sales are off the books, the path will be clearer to higher prices and more sales.
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