Chapman University economic forecast has a decidedly different warning for the California economy: There may be no housing shortage.
The school’s semi-annual forecast actually has a relatively upbeat outlook for the state’s real estate market for 2020. After that, says Chapman economist Jim Doti, he sees a chance of “severe weakness” for the state’s real estate markets as demand for housing dries up with California’s population growth coming to a near halt.
The cooling is already here. Just look at California construction staffing, for example. Bosses will hire 17,000 workers in 2020, Chapman forecasts. That’s down from 27,000 this year and 50,000 in 2018.
One key reason for that chill is that residential building is stagnant.
Chapman sees statewide permitting for 115,000 units in 2020. that is up from 109,000 this year but it’s down from 115,000 in 2018. And it’s nowhere from need of 500,000 units per year as suggest by Gov. Gavin Newsom, a level that Doti says is both illogical and would be impossible to pull off even it was plausible.
A key reason for Doti’s doubt about significant housing needs is his worry about California’s growing net loss of residents to other states, especially departures to places with lower taxes and a cheaper cost of living.
This comes as foreign in-migration slows with a national backdrop of fewer births and more deaths. Plus, demographics suggest there’s a horde of older Californians who’ll soon become home sellers … or their heirs will be.
“Fewer people translates to fewer homes,” says the forecast report. “Rather than there being a housing shortage in California as many people claim, it increasingly looks like the pendulum is swinging in the other direction. That may explain why housing construction in the state isn’t showing much strength in spite of record-low mortgage rates.”
California house-price gains will remain modest. Chapman forecasts 3.9% house appreciation in 2020 after 2.8% this year but 6.3% in 2018.
That tame real estate outlook can also be tied to a slower hiring pace — 268,000 new jobs next year, lowest in the recovery — and fewer pay hikes — 4.6% forecast income growth, lowest since 2016.
And it’s not just a California cooling. national economic growth, as measured by growth domestic product, is forecast to be just 1.9% for 2020 after running 2.3% this year and 2.9% in 2018.