Home Sales Likely To Weaken Further, UCLA Economists Warn

LOS ANGELES, CA — UCLA economists revised and downgraded their forecast for California's housing market Wednesday, warning that the market will likely weaken next year. At the same time, the nation could face a near-recession in the 2020 presidential election year, they warned.

The slowdown home-sellers have been seeing over the past six months hasn't leveled off. And the increase in demand for California housing that economists anticipated has failed to materialize, according to a UCLA economic forecast released Wednesday. As a result, he market will likely weaken heading into next year, the forecast concludes.

"With our national forecast for slowing economic growth, continued discussion on when the next recession will be -- we don't have one in our forecast -- and the Fed indicating that the peak of the interest rate cycle could be near, we now expect weaker housing markets into 2020," UCLA Anderson Forecast director Jerry Nickelsburg wrote. "As a consequence, our forecast for housing starts in 2019 and 2020 has been revised downward, with a recovery in building beginning in 2021."

In his essay on the California economy, Nickelsburg examined various theories for that lack of housing demand, such as a perceived exodus of people out of the state, increasing mortgage rates and uncertainty about the future. Regardless of the reason, the result is a likely weakening of the housing market.

In January, home sales plummeted across Southern California, bringing totals down to levels last seen at the start of the housing crisis in 2007. Los Angeles County home sales dropped by 20 percent in December, according to CoreLogic, the real estate information firm. At the same time, home prices barely budged, climbing by just 2 percent,

Nickelsburg predicted the state's average unemployment rate will increase slightly to 4.5 percent this year, sinking slightly to 4.3 percent in 2020 and 2021.

"Homebuilding will be lower by 4,000 to 5,000 units per year than previously forecast for the next two years, but then will accelerate to about 148,000 units per year by the end of the forecast horizon 2021," he wrote. "This will be a response to easing zoning and regulatory requirements for developers and an expected reduction in interest rates by 2021."

He predicted real personal income growth of 3.2 percent, 1.8 percent and 1.6 percent over the next three years.

On the national front, Anderson Forecast senior economist David Shulman wrote in his forecast that the U.S. economy, which had been growing at a rate of about 3.1 percent last year, will slow to 1.7 percent this year and then drop "to a near-recession pace of 1.1 percent in 2020."

By mid-2021, however, growth is likely to increase to about 2 percent.

"The jolt from the very expansionary fiscal policies of the Trump administration will soon exhaust itself and there is a very real risk of a recession in late 2020," Shulman wrote. "Meantime, the unemployment rate will continue to decline to 3.6 percent, before gradually returning to 4 percent."

City News Service and Patch Staffer Paige Austin contributed to this report.