By Emmet Pierce
SAN DIEGO UNION-TRIBUNE STAFF WRITER
May 27, 2004

While many San Diegans struggle to cope with the soaring cost of shelter, the national outlook for homeownership remains bright, a panel of real estate industry economists said yesterday.

A forecast session hosted by the Homeownership Alliance featured predictions of improved housing opportunities for the nation as a whole. People who hope to buy homes in pricey markets like San Diego, where demand far exceeds home production, were given little to cheer about, however.

A team of economists from lending, construction and sales groups said the current housing boom will remain "a pillar of strength" for the U.S. economy throughout the next decade. Citing continued demand for houses and condominiums, panelists downplayed the likelihood of a sudden price decline or real estate "bubble."

The group predicted that the national homeownership rate would rise from 68 percent to more than 70 percent by 2013. With the nation's unemployment rate below 6 percent, low mortgage rates and strong economic growth, the likelihood of a dip in home values at the national level is remote, the panel said.

"When the economy as a whole was weak, the housing sector really hummed and it has been on a roll ever since," said Paul Merski, chief economist of the Independent Community Bankers of America. "The American dream is really alive and well. In the next 10 years we see a solid and bright future."

There were signs, though, that the boom may be starting to cool. The Commerce Department reported yesterday that new home sales tumbled last month, with sales of durable goods also lower than expected.

The drop in home sales was the biggest in 10 years, as rising mortgage rates cooled the housing market from the previous month's record high.

Speaking in a news teleconference from Washington, the panel cited low interest rates and improved access to home loans as key reasons for the boom of recent years. Members told real estate journalists that home affordability remains a challenge in metropolitan areas where home production lags behind population growth.

Despite low affordability, real estate prices in California are reaching record levels, noted David Lereah, chief economist with the National Association of Realtors.

"People find a way to buy homes even when they are unaffordable," he said. "Is there a problem if that is the case? I think there is."

The panel offered no solutions for home buyers in high-cost markets, however. Higher prices are, in part, the result of land-use regulations imposed to protect the environment and reduce urban sprawl, said David Berson, chief economist for Fannie Mae.

The Homeownership Alliance is a coalition of housing industry organizations. Written copies of the forecast are available on the Internet at www.homeownershipalliance.com.

One economist not on the panel, Robert Kleinhenz of the California Association of Realtors, said it was hard to compare California's volatile real estate market with the rest of the country.

Nationwide, about 58 percent of households can afford a median-priced home, compared to 21 percent throughout California and only 15 percent in San Diego County, he said. The national median price for a detached, single-family resale home is about $176,000, compared with about $527,000 in San Diego County, according to the Realtors association.

By the association's measure, the year-over-year rate of home appreciation here was nearly 34 percent, he said. That compares with a national appreciation rate of just over 7 percent.

Kleinhenz agreed with the panel that improved access to loans has helped consumers. "The unfortunate cloud that hangs overhead is the shortfall of housing production" in California's major cities, he said.

The Commerce Department report indicated that new U.S. home sales fell 11.8 percent to a seasonally adjusted annual rate of 1.093 million units from an upwardly revised record high of 1.239 million in March.

But analysts stressed that sales above 1 million remained strong on a historical basis and the drop was no cause for alarm.

"I think we're finally getting some indication as to what the impact of rising mortgages rates is going to be. Housing is going to cool off a little bit," said Mark Vitner, an economist at Wachovia Securities.

Reuters contributed to this report.

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