by Calculated Risk on 3/15/2005 09:46:00 AM

2nd UPDATE: Another good article with more quotes and facts from the Anderson Forecast:

From 2001 to 2004, the value of California's 7 million homes has increased by about $175,000 per home, resulting in a total rise of more than $1.2 trillion according to UCLA Anderson Forecast. Appreciation of apartments has added an additional $440 billion.

"To put this in context, the personal income for the state was $4.7 trillion over the same period of time," the forecast states. "Hence, Californians have been essentially given a 30 percent-plus boost to their annual incomes due to the housing bubble we are currently experiencing."

And on the Central Valley:

The forecast is especially ominous for the central San Joaquin Valley, where the building boom has fueled some of the strongest job growth in the state. Of the 3,900 net new nonfarm jobs created in Fresno County last year, for instance, 2,100 were created in construction, an amount 3 1/2 times greater than that added in manufacturing, according to state jobs data.

UPDATE: A couple more quotes:

“This year we are expecting trouble with housing in the second half that will make GDP growth a little weaker than normal, but it (is) unlikely that a recession could get started that quickly without more telltale signs today,” [UCLA Anderson Forecast Director Edward] Leamer’s report said.

“The key here is that at best the state economy can be expected to maintain slow growth over the next few years as the weak housing sector saps off strength created in other parts of the state’s recovering external economy,” the report stated. “On the other hand, a sudden rise in interest rates or some other spark that could cause the housing sector bubble to implode at a faster rate could instead cause another recession, both in California and the U.S.”

ORIGINAL POST:
This morning, at a UCLA conference, forecasters will caution on the impact of a Real Estate slowdown on California and the Nation. From an LA Times article:

Half of the private-sector jobs created in California in the last two years are connected in some way to real estate. Meanwhile, property values in the last four years have swelled $1.7 trillion, the equivalent of about 35% of the total personal income in the state since 2001.

This sharp increase in home equity has spurred consumer spending that, in turn, has fueled more economic growth.

"We have an economy that's rolling along on the basis of a false sense of wealth," said Christopher Thornberg, a senior economist with the Anderson Forecast team.

In a previous post, I discussed the impact of a housing slowdown on employment. The following graph shows the growth in employment in just one housing related area: mortgage employment.



We see that we have added 200K jobs in the mortgage industry alone in under 4 years. The mean salary (according to the BLS in 2001) was $45,380 for the mortgage industry.

Click on graph for larger image.
Graph thanks to ild and Elroy.

Another example: Just 2 years ago, there were 338,579 licensed RE Agents (brokers and salespeople) in California. Now, according to the Department of Real Estate, there are 423,315 licensees.

More from the article:

Thornberg said that in California, where home prices have increased faster than in the rest of the nation, the situation is precarious. Even a simple slowdown in the accumulation of equity in the state, he said, could harshly depress spending habits, job creation and economic expansion.

Real estate has become central to California's economy. Real estate-related jobs account for about 10% of private sector jobs in the state, according to the Anderson Forecast, and are growing rapidly.

Of the 243,000 private payroll jobs added in California since 2003, 122,000 are linked to the industry — jobs with construction companies, mortgage processing centers and the like.

And Thornberg's final comment: "The best-case scenario is mediocre."