KPCC's business analyst Mark Lacter talks about the housing market.
Steve Julian: On Tuesdays we talk about the latest business stories with Mark Lacter. Mark, home sales in Southern California jumped in June. Is the big turnaround approaching?
Mark Lacter: Well, sooner or later the housing market will snap out of its funk Steve - credit will loosen up and foreclosures are going to be less of a factor in home sales. And as you point out, we did see a little taste of that in June - sales in L.A. County were up almost 14 percent from the previous month. Maybe it's the turnaround, maybe not. But putting aside the month-to-month numbers, there are longer-term problems that haven't been getting much attention - problems that really don't have much to do with the recession.
Julian: What kind of problems?
Lacter: It’s a kind of generational changing of the guard that involves the first wave of baby boomers who are also homeowners –and who at some point over the next few years will want to or be forced to give up their homes. They might decide to downsize by trading their house for a smaller condo. (Just look at Candy Spelling, who just sold her estate in Holmby Hills for $85 million in favor of a condo in Century City for $35 million. That's downsizing, right?). Or they might want to rent, or they might move into an assisted living property - or, in some cases, sadly, they might simply pass on.
Julian: Isn't this kind of attrition normal?
Lacter: Perfectly normal - what's not normal are the numbers involved. Back in the 1980s, there were almost 400,000 Californians over the age of 75 who gave up their homes for one reason or another. In the last decade it was over 600,000 - and that’s the baby boomers. With so many people putting so many properties on the market it's doubtful you'll have enough buyers to offset all the sellers - and that's even assuming the market improves.
Julian: That doesn’t sound good…
Lacter: What it means, potentially is an increase in inventory, a drop-off in prices, and a substantial decline in the homeownership. The USC researchers suggest dealing with this in two basic ways: The easier of the two is just making residential communities more elder-friendly so older homeowners will want to stay where they are. And on the demand side, the researchers suggest those younger people have to be in a better position to buy a home. The best way to do that, of course, is a better economy.
Julian: Mark, who are those potential homebuyers?
Lacter: Many of them are likely to be the children of Hispanic parents who immigrated to this country. The Pew Hispanic Center has a new report out - it shows that births, rather than immigration, are the main driver behind the growth of the Hispanic population. Actually, there's been a drop in the number of immigrants working in the U.S. for a while and then returning to Mexico for a while, and then returning to the U.S. That’s been the typical pattern, but it’s tough to keep doing that in a weak economy. And you can see it in the Census figures: From 2000 to 2010, the Mexican-American population increased by 7.2 million as a result of births, but only 4.2 million as a result of new immigrants.
Lacter: Suggesting, at least according to the experts, a more stable population that encourages marriage, family, education, and career development - and presumably that will mean an increase in the number of homeowners. Actually, this has already been happening - housing demand among white families has been on the decline in California over the last 10 years - that's even during the real estate bubble years - but home ownership among Latino buyers has increased, and various studies project more of the same over the next 10 or 15 years. But that will really depend on the economy; without growth you can’t generate enough jobs and without jobs you can’t sell nearly enough homes.
Julian: Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.