Distress sales will continue to wreak havoc on home valuations for the rest of the year, the forecasters said.
In Lancaster, for instance, deeply discounted foreclosure-related sales account for about eight of 10 transactions, said real estate agent James Malanowski of Coldwell Banker. The upside is that the vast majority of sales are to first-time home buyers who previously had been priced out of the market.
"Buyers are out there buying again," he said. "We have a huge inventory."
Therein lies one of the silver linings to the precipitous drop in home prices, the report said. UCLA forecasters predict that distressed home sales will continue for an additional nine to 12 months. The remainder of 2009 will be devoted to picking up the pieces and watching to see how home prices level out when the market isn't dominated by foreclosures.
"The unprecedented speed of the price adjustment means that instead of several years of slow bleeding [like the 1990s] we have compressed the necessary adjustment into two years of intense housing pain," wrote UCLA economist Ryan Ratcliff. "Mom always said it's better just to rip the Band-Aid off."
The decline in house prices, however, has wiped out about $3 trillion in home equity nationally and helped crimp consumer spending.
Sales of durable goods, such as automobiles, will stay soft as $4-plus gasoline weighs heavily on household budgets and keeps sucker-punching the U.S. economy.
In years past, the cost of crude oil imports ate up about 1% of the nation's GDP, forecast director Leamer said. Now it's eating up 3%. "That's a heck of a lot of money leaking out of the borders of the U.S."
It's also a bracing slap to American consumers, who need to pay heed, Leamer said.
"The global economy is communicating to Americans that we are not as wealthy as we thought we were and we are racing global competition for scarce resources," he said.
"It's saying we need to save more as a society and the government needs to be more forward-looking. We are not having sensible debate about the long-term fate of the economy."
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roger.vincent@latimes.com
