Cavanaugh Clips Nov_Dec 2011

California Association of  REALTORS® Vice President and Chief Economist Leslie Appleton-Young didn’t try to sugarcoat the state of the housing market. She told SILVAR members at Wednesday’s Los Gatos/Saratoga District tour meeting that the worst is over, but the market continues to struggle.

“The tide has turned for housing, but now it’s stuck,” said Appleton-Young.

C.A.R.’s chief economist explained that the economy started to gain a bit of traction and seemed to be moving forward at the beginning of this year, but things happened one thing after another – Japan’s earthquake and tsunami, oil price spikes, uprisings in the Middle East, stock market volatility, lawmakers wrestling with the debt limit ceiling and attempting to downgrade the U.S. debt. Then there’s the debt crisis in the euro zone and pending political change on Capitol Hill. As a result, the housing market that appeared to be recovering is now stalled.

The good news is Santa Clara County is doing better than most, with just a 9.6 unemployment rate. Here, in the Bay Area, Appleton-Young said we have the best economy in California, in terms of income and job growth.

“Companies in this valley are in the cutting edge, leading growth in the economy,” said Appleton-Young.

Appleton-Young said Fannie, Freddie and other federal programs now support roughly 90 percent of new mortgage loans because lenders cannot raise money for mortgages that do not carry government guarantees. There are no private investments in mortgage-backed securities. If the GSEs go away, financing for housing is going to look very expensive overnight. Fannie and Freddie, she noted, “are the lifeblood of our market.”

Appleton-Young said ultimately, everyone will have to answer for the deficit. Troubles are ahead because all levels of government will have to wrestle with issues of pensions and cost of health and other benefits for public employees.

“It’s hard to do when in some places, the coffers are empty. You can’t spend more than you take in, even if you are the U.S. government. Everyone is going to have to give up something in the end,” she said.