From the San Francisco Chronicle Economist has weak outlook for state, U.S.
In the most likely scenario, U.S. gross domestic product will decrease by 4 percent in 2009, the U.S. unemployment rate will climb from 8.5 percent to 10.1 percent at least by year end and home ownership will fall from a peak of 69.2 percent to 66.5 percent at the end of 2010, predicted Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, in his Tuesday morning presentation at the organization's 14th annual conference.
"The world is structurally changed and it's going to take a long time to get back to a system that is sustainable," Rosen told a noticeably smaller-than-usual audience of real estate professionals at the Westin St. Francis Hotel in San Francisco. "The underlying assets are still going down at accelerating rates."
Specifically, he said millions of looming job losses will continue to increase residential and commercial property delinquencies and foreclosures, dragging down values further. Meanwhile, consumers who had come to think of home equity loans as ATMs learned a hard lesson and won't spend at the same levels they had in recent years.
Rosen said there is about a 20 percent chance that the myriad government stimulus efforts will upgrade the recession from "deep" to "moderate" by the second half of this year, but also a 10 percent likelihood the economy could slip into outright depression. That would mean an unemployment rate of 15 percent or more and another 20 percent drop in home prices.
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The residential real estate market has begun to exhibit some signs of improvement, with sales picking up as price declines create bargains. Yet job losses, or the perceived risk of them, are tempering the demand. He said home prices are bottoming out this year, but allowed in a subsequent interview that the process could extend into 2010.
Still, the market woes are presenting opportunities for some.
For instance, Rosen said now is a good time to buy a home for those with long-term plans to live there and a solid job, thanks to a combination of low prices, favorable interest rates and various government incentives. He also advised anyone thinking of refinancing to do so immediately.
"I would not wait two or three years," he said. "Interest rates are going to be much higher with all the money we're printing."
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"I'm very worried this is a bear market rally, sucking people back into thinking things are OK," he said. "The fact is: Things are not OK."
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