Graphics courtesy of the California Association of Realtors
Forecast predicts 'soft landing'
Growth in spending
By Jean Newton
When Leslie Appleton-Young, vice president and chief economist for the California Association of Realtors, stood at the podium recently, more than 200 Silicon Valley Association of Realtors members were tuned in for her economic forecast for 2001.
Armed with statistics and insight, Appleton-Young indicated that the California Association of Realtors' overall economic forecast is "somewhere in line with an optimistic soft landing." She stopped short of using the word "recession" to describe the current economic status, but acknowledged there has been a definite change in the economy in contrast to the boom of the last two years.
"There is a slowdown in the economy, but consumer spending is still significant and that is one of the reasons why we are not in a full recession. Although consumer confidence is dropping, there is still growth in consumer spending," said Appleton-Young.
Analyst Ian Cooper of E-Loan Inc. reported that both personal spending and personal income rose above expectations in March, bringing an improved outlook for the economy. Combined with strong gross domestic product numbers, healthy consumer spending could be a sign of economic recovery, though he said analysts will watch closely for additional signs in consumer behavior.
According to Appleton-Young, when the market softens, people usually wait it out. If unemployment rises, however, there could be an impact on the housing market. In the Bay Area, even though the headlines announce job layoffs daily, the numbers show a positive job growth for California, and projections indicate a net gain of 40,000 new jobs in the Bay Area, according to the Association of Bay Area Governments (ABAG).
"While job growth is critical, consumer confidence is a very important ingredient in the stew. The mood has changed. People are more cautious and more concerned about the future," said Appleton-Young as she reported the news of a nationwide drop in consumer confidence numbers earlier in the day.
Graphics courtesy of the California Association of Realtors
She said she believes the difference in the current downturn is how low inflation has gone. "That is one of the reasons why the Federal Reserve Board has been so active and extremely aggressive in lowering overall rates, making this a very good mortgage rate environment and a marvelous window for refi or purchase," she said.
Thirty-year mortgage interest rates averaged 6.95 percent during March 2001, down from 8.24 percent in March 2000, according to the Federal Loan Mortgage Corp. Adjustable mortgage interest rates averaged 6.28 percent in March 2001, compared to 6.70 percent in March 2000.
Figures released by the California Association of Realtors and Real Estate Solutions, a real estate information service, reported sales of existing homes in California in March fell 7.8 percent, while the median-home price rose 12.8 percent, compared to the same period a year ago.
"The median price of a home in California hit a new record last month, as demand for housing remained strong," said California Association of Realtors President Gary Thomas. "The median sales price of a home posted an increase in every region of the state, and in many areas appreciated by double digits."
Statewide home resale activity decreased 7.8 percent from March 2000, but resale activity showed an increase of 6.6 percent in March, compared to February. The median price of an existing, single-family detached home in California during March 2001 was $262,980--a 12.8 percent increase over the median price for March 2000. The March 2001 median price, however, increased 7.4 percent, compared to February 2001.
In Santa Clara County, the median price of a single family, existing home increased to $565,000 from $523,050, compared to one year ago. In Saratoga the median-priced home in February 2001, topped in at $1,350,000, compared to $850,000 one year ago. Los Gatos showed a gain from $625,000 a year ago to $700,000 for a median-priced home in February 2001. Monte Sereno showed the only downturn on the list with a median-home sale price of $1,799,000 in 2000, compared to $1,387,500 in 2001.
Graphics courtesy of the California Association of Realtors
"Time on the market hit a historic low of 26 days in March, further evidence of the underlying strength of the housing market in most areas of California," said Appleton-Young. "Customers remain concerned about the overall direction of the economy, but the demand for housing continues to outpace the supply of homes for sale," said Appleton-Young.
With the unemployment rate in Santa Clara County at 2.2 percent in March 2001, and Los Gatos and Saratoga each checking in at 1.3 percent, employment and job growth are key factors to watch. Job growth is projected at 2.0 percent for the year 2001.
"As long as the employment rate stays steady, the economy, by the end of the year, will be on track to a growth mode," said Appleton-Young. "No one really knows how it will play out. We've never seen this kind of environment before, with so many Americans involved in the stock market. The tech revolution and the transition in society is huge, requiring adjustments. It's the dawn of an incredible new century."
While Appleton-Young said she thinks the high-end million-dollar-home market will see a bit of a downturn, she believes this is a good opportunity for a whole new group of buyers, who couldn't compete with the dot-commers to enter the real estate market. "To be honest, it is healthy to get back to a realistic environment," she said.
Although no one knows what the economy will do in the long run, members of the Silicon Valley Association of Realtors came away well-informed about the statistics and status of the current market after listening to Appleton-Young.
"It's really important for Realtors to keep up to date on what's happening in the industry," said Penny Pompei, executive vice president of Silicon Valley Association of Realtors. "We are honored to have Leslie speak to our members. Her expertise in this area is invaluable and an excellent resource so our Realtor members can pass this important information on to their clients."
Saratoga, California Since 1955
