Realtors: Home prices to fall, sales to rise in 2009

<p>Sonoma County’s housing sector could begin to stabilize by the middle of next year, but home prices will continue to fall in 2009 even as sales rise for the second straight year, a real estate trade group forecast Wednesday.</p><p>Home prices will not hit bottom until the second quarter, at the earliest, according to the forecast by the California Association of Realtors. </p><p>Statewide, sales of existing single-family homes will increase 12.5 percent next year but the median price will decline 6 percent to $358,000, said Robert Kleinhenz, deputy chief economist for the California Association of Realtors.</p><p>While the trade group did not issue a precise forecast for Sonoma County, Kleinhenz said the local housing market should experience a similar dynamic in 2009: rising sales and falling prices.</p><p>“If we’re not at the bottom, we should be very close to it. The second quarter of next year is the earliest we could see prices stabilize,” he said.</p><p>The association’s outlook hinges on the health of the U.S. economy and the nation’s credit markets, which have been strained, making it tougher for would-be homebuyers to get financing.</p><p>The forecast assumes that economic growth in the first half of next year will be in recession territory — either flat or negative — then improve in the second half of the year. And that the credit markets will stabilize sometime this year or early next year.</p><p>But all bets are off if the state’s economy — already considered by some economists to be in recession — worsens.</p><p>“This forecast is not baking in a recession with huge job losses,” said Leslie Appleton-Young, the association’s chief economist.</p><p>California is in the third year of a housing slowdown that has been among the worst in the nation. Pricey coastal markets such as San Francisco have seen moderate price declines compared with inland regions, where foreclosures have helped drive down prices by double-digits.</p><p>Several of the state’s metro areas, including Stockton, Merced and Modesto, have among the highest foreclosure rates in the nation.</p><p>The median price of home sold in California is now on track to fall 32 percent this year, a steeper drop than the real estate industry forecast in June. But sales are expected to climb 12 percent this year, reversing a two-year decline in sales.</p><p>What’s changed is that more buyers are snapping up cheaper bank-owned homes and properties that homeowners are discounting to avoid foreclosure.</p><p>“It continues to be a sign that the housing market still has adjustments to go through. As long as there’s distressed sales there’s every expectation that prices will fall,” Kleinhenz said.</p><p>Prices also are falling because lending has continued to tighten, in particular for jumbo loans needed to buy homes above the half-million dollar mark, dragging down sales in that price range.</p><p>The gap between prices and sales should narrow as purchases of distressed properties taper off and no longer dominate the market. Foreclosure and short sales are expected to peak the first half of next year.</p><p>Another sign of stability would be an easing of the credit squeeze. While falling prices have made more homes affordable to buyers, stricter loan requirements can push up borrowing costs.</p><p>“Looking ahead, home prices and favorable interest rates in 2009 will contribute to gains in affordability,” said CAR President William E. Brown. “However, we need to move through the current financial crisis and restore the flow of credit so that qualified buyers are able to take advantage of improved affordability and successfully purchase homes.”</p><p>The Associated Press contributed to this story.</p>