Local house prices have further to fall, though sales should rise next year, Frank Nothaft, chief economist for government lending giant Freddie Mac, said Tuesday.
Speaking at a charity event in La Jolla, Nothaft said high unemployment and consumer worries would push prices down between 2 and 3 percent next year. But he also said low interest rates and prices would push overall sales totals up in 2012.
"U.S. house prices are likely to bottom in early 2012," he said. "Our forecast is for home sales to be up 5 percent compared to 2011."
This year has been slow for house sales, with each month lower than its corresponding month in 2010, according to records from the county assessor offices. Government tax credits prodded sales in spring and summer 2010, making 2011 look worse by comparison.
With prices low and mortgage interest rates at or below 4 percent for a 30-year fixed rate loan, the market is primed for buying that never materialized.
"Home buyer affordability is through the roof," he said. "But consumers are feeling economically insecure. When consumers are feeling economically insecure, they'll shy away from buying really expensive things."
Unemployment in San Diego County reached 10.2 percent in August and it hit 14.1 percent in Riverside County, according to the California Employment Development Department. Both figures are well above the national unemployment rate of 9.1 percent, reported by the Labor Department.
High unemployment also increases foreclosures, which in turn pushes down prices when they hit the market at clearance prices.
In a survey of homeowners with loans guaranteed by Freddie Mac who were foreclosed on in 2010, 55 percent said they lost their homes because of unemployment or loss of income, the No. 1 cause, Nothaft said. "The number two cause for foreclosure in the survey was "excessive obligation," meaning debts larger than the value of the house, 21.4 percent, and 7.9 percent of respondents cited marital difficulties.
Nothaft said prices would recover very slowly, in part because unemployment will fall slowly as the national economic recovery lags.
He said he put the odds of a second national economic contraction, or a "double dip," at 1 in 3, which makes him more pessimistic than he had been last month, when he told a Minneapolis audience the odds were 1 in 4.
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