The flailing stock market, uncertainty in the global economy and the Federal Reserve’s recent statement that it could hold lending rates steady for two years are adding to the protracted string of question marks behind the housing market.
Ask an expert what’s going to happen with housing market and you’ll get myriad differing opinions about how and if recent news will affect housing nationally and locally in Orange County.
Robert Kleinhenz, deputy chief economist for the California Assn. of Realtors, offered a chicken-egg philosophy on the housing market: How people feel about the market will dictate when things will things will turn up, but people will likely remain reluctant to feel good again until things turn up.
“Fundamental improvement in economic conditions must come before the housing market shows any significant gains, and that improvement must come from the consumer sector,” Kleinhenz said. “There is not a lot the Fed can do directly to improve things for the consumer sector. It can maintain its current monetary policies, but their impact ultimately goes through the financial system and indirectly reaches the consumers. So consumers must see genuine and sustained improvement in jobs and other economic fundamentals before they will become convinced that the economy is truly in a recovery mode. Keep in mind, the economy is in recovery, but the pace is so slow that no one senses that things are getting better.”
And for better news, Kleinhenz has a cheery outlook for the Orange County housing market.
“The O.C. economy will lead the region through the economic recovery,” he said. “Its unemployment rate has already come down more than in other neighboring counties. I think the O.C. housing market has also been ahead of the statewide and Southern California curve.”
But just when will housing start to improve? The only definitive answer may be a riddle — literally.
“Going forward, we have a chicken and egg problem,” Kleinhenz said. “Businesses are in a position to produce more, sell more, and hire more people, but they need to see consumers buy what they are producing before they will increase hiring. We’re seeing improvement, but it’s painfully slow. Therefore, like the national and state housing markets, improvement in the O.C. market will depend on improvement in the local economy.”
According to the latest figures, there have already been some signs of improvement in the housing in terms of price. The median price for a home in California bottomed out in early 2009 at $245,000, and it now stands
See JERGLER, page C36
