Home sales could slow, expert says

But it could push median prices higher

By Jim Wasserman

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Sales of existing homes will fall slightly next year in California as people lose more jobs and cheap foreclosed homes become a smaller part of the market, California Association of Realtors economists predicted this week.

Also, fewer sales of foreclosed homes may push median prices a little higher than this year, the group said.

Watch, too, for trouble in the high-end home market, which has been spared the huge price drops seen at the less expensive end, said CAR chief economist Leslie Appleton-Young.

The California trade group for 172,000 real estate agents is predicting sales of 527,500 homes in 2010 — 2.3 percent less than this year. It also foresees a 2010 median price of $280,000. That's 3.3 percent higher than this year's estimate of $271,000.

But anything is possible in a still-volatile and sluggish economic and housing climate, CAR said. The group, releasing the estimates during a trade show in San Jose on Wednesday, cautioned that numerous wild cards could hurt the real estate market in 2010, including the state budget crisis, rising unemployment and possibly rising interest rates.

"As we get through this, there are a lot of unknowns," said Appleton-Young.

In California, the nation's largest struggling housing market, the wild cards include:

• The supply of foreclosed homes: Appleton-Young said prices could be pressed downward again if a heavier-than-expected wave of foreclosures floods the market next year. Foreclosures accounted for slightly more than half of the state's sales this year; the estimate for next year is one-third.

"I don't see a tsunami of foreclosures," said the CAR economist. "I see an elevated level of foreclosures over the next couple of years, and an acceleration of foreclosures at the upper end of the market." Analysts, including Irvine-based John Burns Real Estate Consulting, note that banks have been slow to foreclose and list existing repos, setting up the potential for a new wave of bank-owned properties going up for sale.

Burns contends that continued government intervention — including tax credits for buyers — is necessary to stimulate housing demand in a slow economy. CAR is among the real estate groups lobbying Congress to extend a first-time home buyer tax credit that expires Nov. 30.

• Sales of higher-end homes: Appleton-Young said many buyers are having trouble financing more expensive houses — and hesitating over fears they will lose value. Those factors, combined with rising joblessness among owners of higher-priced homes, have the potential to bring down prices in the upper segment.

• Loan resets: Projections suggest that thousands of risky adjustable-rate loans — including especially dangerous pay-option mortgages — will reset in 2010 across California, possibly triggering a new stream of loan defaults. Many of those, too, involve owners of more expensive homes.