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US housing boom gone, but prices still out of reach in California
The current slump in the housing market has done little to make Californian cities affordable.
from the March 12, 2007 edition
Page 2 of 4
Rapid price gains are over
California's affordability crunch doesn't ensure that house prices will fall. But clearly a period of rapid gains has ended. Prices last year fell 4.2 percent in San Diego, sagged 1.4 percent in San Francisco, and rose 2 percent in Los Angeles, according to Standard & Poor's Case-Shiller indexes.
Many analysts say the market here, and nationally, will stabilize this year. The economy remains generally healthy, they say, and builders have slowed down to avoid a pileup of unsold homes.
"There is reason to believe that [price] appreciation will be coming back soon," says Luke Tilley, a Philadelphia economist at Global Insight, who follows the California market.
Another camp of forecasters says California prices probably have further to fall. They note that housing downturns often take several years to hit bottom, and that high prices have sidelined many would-be buyers.
"We're expecting ... a sharper and deeper contraction," says Celia Chen, a housing economist at Moody's Economy.com in West Chester, Pa. She says the state's price run-up went beyond what could be justified by income or population growth.
The firm has predicted that several California cities will see prices drop further – some by 10 percent or more – and won't hit bottom until sometime next year.
In one measure of how high prices have soared, the California Building Industry Association recently found that 18 of America's 20 least affordable metro areas are in California.
Affordability has long been a challenge for the state, thanks to its sunny beaches and relative scarcity of buildable lots.
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