Housing Prices Will Keep Falling: Chapman Econ Forecast

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<a href="http://www.chapman.edu/argyros/asbecenters/acer/press.asp">The Anderson Center at Chapman Univ. has released its usual mid-year update. They are predicting that, "Housing Prices [are] Likely to Continue Falling at a Double-Digit Rate</a>." They also note that consumer confidence in CA has "collapsed."



Just clicky above, and you can get some .pdf files with more details and some lovely chart pr0n.
 
and for 2007 they predicted a whole 6% drop. I think that was the biggest drop predicted. I believe Fullerton only predicted 2% drops. Either way, both were off.



<a href="http://www1.chapman.edu/argyros/acer/IE2007_PressRelease.pdf">2007 Forecast</a>





I read the 2008 one yesterday. Only thing that confused me was where it says "Orange County Median single-family resale housing prices is forecasted to decline to 524,500 by third quarter of 2009." I know it was month to month (and not quarterly) and May 2008 was below 500k. So how can they decline to 524k if we are already below it? If so, why didn't Chapman adjust this?



Also some funny things that jumped out at me from the 2008 update:



Ratio of home prices to median family income increased from 4.0 to as high as 9.4 in OC by late 2005.



And with current estimated family income of 80,100 in Q1 2008. This still means families need 38.4% of their income to pay for a median priced SFR. Current underwriting and lending would reject it now if it was 38.4% right?
 
[quote author="24inIrvine" date=1214446356]and for 2007 they predicted a whole 6% drop. I think that was the biggest drop predicted. I believe Fullerton only predicted 2% drops. Either way, both were off.</blockquote>


Actually, I was at the forecast, and they showed a chart of their predictions vs. actual. Which hopefully I can get my hands on. Maybe Miss Moneypenney can pull through for graphrix007 on this one. You might be shocked at how close they have been. BTW, those that always like to criticize them for missing the run up, they have also underestimated the down turn. Hopefully they are right this time, otherwise it will be a lot worse. Doh!



<blockquote>I read the 2008 one yesterday. Only thing that confused me was where it says "Orange County Median single-family resale housing prices is forecasted to decline to 524,500 by third quarter of 2009." I know it was month to month (and not quarterly) and May 2008 was below 500k. So how can they decline to 524k if we are already below it? If so, why didn't Chapman adjust this?</blockquote>


You are probably confusing DataQuick's numbers, and what Chapman uses, the CAR numbers for SFRs. So they don't need to adjust, and it would be on an annual basis for their predictions. Kinda like how they predict that this year will be down 16.1%, when it is already down over 20% according to CAR.



<blockquote>Also some funny things that jumped out at me from the 2008 update:



Ratio of home prices to median family income increased from 4.0 to as high as 9.4 in OC by late 2005.</blockquote>


Yup, and all the bulls would sh*t on them for saying that they are nuts and prices won't drop. Crazy huh?



<blockquote>And with current estimated family income of 80,100 in Q1 2008. This still means families need 38.4% of their income to pay for a median priced SFR. Current underwriting and lending would reject it now if it was 38.4% right?</blockquote>


Yup, and that is why they stated prices will come down to what will make sense with rational lending.



I will have more about the forecast later, once I get over this bug I have, and highlight some other great parts. Like the guy who saw the decline charts for OC and said OMG!. Also, I could have sworn the dude who worked for the city of Costa Mesa was talking about IHB.
 
Have any of the forecast started factoring in what happens when we start the troop drawdown in Iraq next year? SoCal still has large defense industry and frankly spending has been rampant and while focused on replenishment, new systems continue too.
 
[quote author="No_Such_Reality" date=1214518204]Have any of the forecast started factoring in what happens when we start the troop drawdown in Iraq next year? SoCal still has large defense industry and frankly spending has been rampant and while focused on replenishment, new systems continue too.</blockquote>


I seriously doubt the forecast includes estimating any effects on changes in defense spending or troop deployments.



I doubt that the majority of troops make $80k/+ yr so will join the pool of available knife-catchers (oops, I mean home-buyers).



Finally, defense spending is cyclical, and after years of being up it is due to go down. Especially with a democrat poised to enter the White House. The reports predicts, with a high degree of accuracy (17 out of 19 previous presdential elections correct - probably missed on Truman, everyone else did too) Obama next presdent winning close election by small margin.



Wow, they beat CNN, Wolf Blitzer must be pissed.
 
<blockquote>

Actually, I was at the forecast, and they showed a chart of their predictions vs. actual. Which hopefully I can get my hands on. Maybe Miss Moneypenney can pull through for graphrix007 on this one. You might be shocked at how close they have been. BTW, those that always like to criticize them for missing the run up, they have also underestimated the down turn. Hopefully they are right this time, otherwise it will be a lot worse. Doh!

</blockquote>


Were you saying they were close last year as well (in regards to the median home price drop) or just all year in general? Thanks, I would like to see those actual vs. prediction numbers. I have been looking for them online ever since I was handed this update but haven't had much luck. I know the usual quote is we are down 20% or whatever. But, that isn't January to December 2007, so I have been trying to find the number to match against that -6%. Either way, if memory serves me right that sounds much better than the -2% from Fullerton. Hope you feel better!
 
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