Home prices rise in Southern California; unemployment rate stabilizing
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KPCC business analyst Mark Lacter talks about last month's rise in home prices for Southern California; he also talks about the state's jobless rate.
Steve Julian: On Tuesdays we talk about the latest business stories with Mark Lacter. Mark, is there truly encouraging news on the housing front?
Mark Lacter: Well, maybe. How’s that for conviction? Home prices did rise in much of Southern California last month (L.A. County saw median prices increase $10,000 from just the previous month), and perhaps the more significant was a large drop in the amount of housing inventory throughout California.
As of December, the supply of homes was down to four months, which compares with almost 17 months in early 2008 (7 or 8 months is about normal – keeps the supply-demand pendulum about level). What's especially significant is that this drop was at all price levels (though homes in the $1 million-plus range are still tougher sells).
Julian: So, with lower inventory, you have more limited supply.
Lacter: And limited supply means that prices are likely to go up. All of which might explain why properties are receiving more multiple orders and staying on the market for less time.
Now, don't get too excited Steve – it's entirely possible that the inventory numbers are artificially low because there are lots of would-be sellers who have kept their homes off the market until prices climb back some more. Let's also remember that the housing market is very localized, which during a time like this, when the economy is in such transition, can mean inconsistent sales and price activity.
Julian: How does the foreclosure situation factor into this?
Lacter: Well, it's another reason to be cautious. There's a strong chance we'll see a big pickup in foreclosures over the next few months (those numbers had really slowed in the last few months of last year). That would bring more properties on the market. How many more is a big question.
Thing is Steve, there's just no way the housing market is going to really get better unless companies start hiring big-time and unless consumers feel more comfortable about taking out their checkbooks. And obviously, that's quite a ways off.
Julian: At least the unemployment rate is stabilizing.
Lacter: Yeah, for several months now, the state jobless rate has been hovering in the 12-12½ percent range, which economists generally expect to be the peak. But it’s likely to remain that high – or nearly that high – for at least another year, possibly two.
And that doesn't cover under-employment, which is when someone has a job but not in his or her desired field. Sometimes it’s just part time. But it's not just a matter of whether things are empirically bad. All it takes is the perception of badness and you've got problems.
Julian: I'm looking at the results of a recent Field Poll that show 95 percent of California's registered voters say that the state is still going through bad economic times.
Lacter: Yeah. Ninety-five percent – you couldn't get that many people to agree what day of the week this is! Not only do they all agree that the economy is in trouble, almost two out of three say that their own financial situation is worse than it was a year ago – and almost half of those surveyed don’t expect their finances to change in the next year.
Julian: Maybe we just tend to be pessimistic when we're surveyed.
Lacter: Could be. The truth is none of these folks know where the economy is headed in the next year or two. Nobody knows. And if you go back to the last bad recession in the early '90s, the Field Poll results were almost as negative as they are now.
In a way, that's comforting – we somehow survived and eventually more people thought things were good rather than bad. But that didn't happen for six more years, in 1998. So the overall message is, try to be patient. This is going to take a while.
Mark Lacter is a contributing writer for Los Angeles Magazine and writes a business blog at LAObserved.com.
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