Realtors See Prices Up, Home Sales Down in ’89

The frenzied pace of California’s home-resale market will slow just 7% next year, while statewide prices will rise about 9%, according to one of the state’s top economists.

Joel Singer, chief economist of the California Assn. of Realtors, unveiled his forecast of the state’s 1989 housing market at the trade group’s annual convention last week at the Disneyland Hotel in Anaheim.

About 502,000 existing homes will be sold in 1989, Singer said, down from a projected 540,000 this year. The mild pullback will be caused by “a modest slowdown in the economy” and slightly higher interest rates.

By the end of this year, the typical California home will have appreciated about 17% from a year ago, the economist said in an interview. However, prices of homes in major metropolitan areas--particularly in Los Angeles, Orange County and other parts of the Southland--will likely be up more than 20% from last year’s levels, Singer said.

Home prices in the Los Angeles area will probably rise another 10% next year, he said, while prices in Orange County will go up 12%.

If the economist’s prediction that 1989 will bring higher home prices and rising interest rates proves correct, it will push California’s “housing affordability crisis” to the brink. Only one-fourth of all California households currently earn enough to buy a typical home, according to the trade group’s figures, and even fewer can afford to buy in most parts of the pricey Southern California market.

“We are facing the specter of a permanent loss of housing affordability,” Singer said. “If prices go up and interest rates do, too, our affordability problems will only get worse.”

The growing housing crunch could threaten the state’s robust economy by curbing expansion, Singer said. “That would ultimately cost jobs and could turn California into a state that lags the nation’s economy instead of leading it.”

Recession Not Likely

Although a recent survey by the National Assn. of Business Economists said 90% of the respondents feel a recession will hit in either 1989 or 1990, Singer feels there’s only a 25% chance of a recession next year and a 50% chance that there will be a downturn in ’90.

Singer, who also heads CAR’s planning and research operations, said next year’s Congress might also try to put lower limits on the amount of tax deductions a homeowner can take for mortgage-interest payments. The first-ever caps on such write-offs were enacted earlier this year, over objections from several real estate trade groups.

Expected efforts to reduce those write-offs even further will be fueled by lawmakers’ attempts to trim the nation’s hugh budget deficit, Singer said. However, Democratic vice presidential candidate Lloyd Bentsen, chairman of the powerful Senate Finance Committee, has pledged to fight any attempt to put further limits on a homeowner’s ability to deduct mortgage-interest payments.

Arbitration was a hot topic at the three-day realtor convention, with Los Angeles attorney Robert B. Shafton teaching two courses on the subject and CAR’s legal staff conducting a third.

With court costs rising and civil suits taking as long as five years to get before a judge, many realtors are saying that arbitration is often a better way for two parties to settle their differences. Realtor-backed legislation that takes effect next July could encourage many consumers to choose arbitration over litigation by allowing an unhappy buyer to prevent the sale of a home while the dispute is in arbitration proceedings.

Currently, many buyers who try to block a sale are forced to settle their dispute in court.

People who choose arbitration can often get their case heard within a month, according to Neil Kalin, a CAR attorney. The arbitrator has up to 30 days to issue an award after hearing all the evidence, although the decision is usually handed down much faster.

Arbitration not only offers consumers a chance to save thousands of dollars in attorneys fees; it also pays emotional benefits.

Not for Everyone

“Having a lawsuit hanging over your head impacts you in psychological terms,” said Steven Sokol, managing senior counsel of the trade group’s legal services plan. “You wake up every morning thinking about it.

“It’s better to worry three or four months than three or five years,” he said.

Still, said Sokol, arbitration isn’t for everyone. Disputes arising in transactions that involve probate, foreclosure, mechanics’ liens and the like are usually settled in the courts.

Kalin said it’s “too early to tell whether arbitration is catching on” with consumers. But undoubtedly, the public will be hearing more about it: When realtors buy those pre-printed contracts used for listing, buying and selling real estate, they can now request the versions that include an arbitration clause.

Until recently, such clauses usually had to be written in by the realtor or included as an addendum to the standard forms.

If the parties in the contract initial the clause, said Kalin, they’ll arbitrate rather than litigate if a dispute eventually arises.

Growth control measures--or, rather, fighting growth-control measures--was another popular topic at the convention.

Lynn Wessell of Los Angeles and Bud Porter of San Diego, two political consultants who have compiled impressive records when it comes to defeating growth-control proposals, conducted two standing-room-only workshops on how realtors can battle such measures in their own back yards.

Wessell, best known for leading the successful attack on Orange County’s growth-limiting Measure A last June, said that recent efforts to curb development are being lead by “elitists” who “want to draw the bridge up” and let no more people move into their communities.

But “outsiders,” Wessell said, aren’t causing all the traffic and other maladies often blamed on growth: In Orange County, “80% of the growth is coming from births” inside the county boundaries.

Both Wessell and Porter said homeowners who want to put strict curbs on growth are threatening their local economy and making it more difficult for their own children to eventually buy homes in their area.

Environmentalists and other slow-growth advocates, of course, weren’t invited to give their side of the story. But if they were, they may have gotten a chuckle: While Wessell and Porter spoke, four hotel maintenance workers could be seen through the windows behind them, hacking down a clump of loquat trees with axes.

By the time the consultants were done with their pro-growth panel, the trees were gone.