LOS ANGELES (CBSLA) — California’s red-hot housing market appears to be cooling down, according to a UCLA economic forecast released Wednesday.
The anticipated increase in demand for housing in the Golden State has failed to materialize, in spite of low unemployment levels and a generally strong economy, according to UCLA Anderson Forecast director Jerry Nickelsburg.
“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,” 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.”
Nickelsburg believes the state’s average unemployment should tick down to 4.5 percent this year, and again in 2020 and 2021 to 4.3 percent, while real personal income growth should maintain a steady rise over the next three years.
“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.”
Nationally, the Anderson Forecast predicts the economy will slow to 1.7 percent this year and drop “to a near-recession pace of 1.1 percent in 2020” before increasing again in mid-2021.
“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,” senior economist David Shulman wrote. “Meantime, the unemployment rate will continue to decline to 3.6 percent, before gradually returning to 4 percent.”
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