CA Bubble Needs a Hail Mary...
The housing slowdown "definitely will have an impact on the health of the economy," said Christopher Thornberg, senior economist at UCLA Anderson. He predicts a soft landing, in which housing "takes some of the 'oomph' out of the economy but doesn't collapse it."
You know, they keep using this "soft landing" so often that it is now cliche. Which is a bit silly if you think about it, market crashes don't get called crashes because they land softly. This is a market in the midst of a crash, and if this crash lands softly it will be the first time. So there is nothing cliche about it other than the tired, worn out, phrase itself.
"California's softening housing market will undermine the state's economy in the coming two years, but other industry sectors are strong enough to help cushion the impact, according to a report to be released today. But if there are other negative factors -- a surge in interest rates, for instance -- the downside could be more substantial. "Let's put it this way: We will be in a fragile economy," Thornberg said."
"Economists at the UCLA Anderson Forecast laid out a scenario of domino effects as the once-torrid market for residential real estate continues to cool."
"The labor market is likely to take a significant hit."
"California's unemployment rate, which was 5.4 percent last year, will inch up to 5.5 percent this year and then rise to 6 percent in 2007 and 6.3 percent in 2008, the report forecast. The pace of payroll job growth will slow from 1.8 percent in 2005 to 1.5 percent this year, then get even more sluggish, falling to 1 percent in 2007 and 1.1 percent in 2008, the report said."
"Job growth in both 2004 and 2005 was strongest in construction, retail trade, finance, professional and technical services, and administrative support positions, while manufacturing and company management lost jobs."
"Financial activities have helped fuel a fast-growing sector UCLA Anderson calls "informal jobs" -- people who work for themselves, such as real estate agents and mortgage brokers. California now has 1.6 million informal workers, up 500,000 since 2000, the report said."
"As residential building and remodeling slow markedly, about 200,000 construction jobs will disappear, the forecast said. Construction has contributed almost a quarter of all new payroll jobs in California in the past two years."
"Jobs in real estate and mortgage banking also will start to dry up. Like construction, this sector has boomed in sync with the housing market. Financial jobs, particularly those in the mortgage industry, have been a strong source of job growth in recent years."
"Consumer spending is also likely to slow as the housing market cools. Taxable sales have grown 7.5 percent a year for the past two fiscal years, even though salaries have been essentially flat. The reason is simple, Thornberg said: "People are feeling wealthy because their house is worth so much."'
"But now, between the slowdown in home appreciation and the continuing rise in interest rates, consumers are expected to rein in spending. Taxable sales growth is likely to slow to 4 percent, the report said."
"The fallout for state government coffers will be serious as both sales tax and income tax receipts fall, the report said."
'"The government budget for '06-'07, already tight, looks to go under water by the early part of next year, and with it, much of the infrastructure dreams of the current administration," the report said."
"California's general fund "will start feeling the pinch toward the end of this year when the numbers aren't coming in at what they expect. It will really feel it next year. The 2006-07 fiscal year will not be pretty."' (Thornberg)
"Rather than popping, the housing bubble will simply sag."
Name one thing that sags and is pretty...is a sag supposed to be better than a pop? Besides popcorn, can you name anything that pops that is a good thing? Either way, if it pops or sags... it won't be pretty. Pick your verb they both have the same meaning... whatever is inside of the dang thing is emptying out.
"UCLA predicted that appreciation will slow to 6 percent by year-end and will be flat next year, and that sales of existing homes will fall 26 percent, from 530,000 units now to 390,000 in 2007 -- and even lower in 2008."