LA Economic Forecast: The Worst Is Yet to Come

Economists predicted that housing prices will continue struggling to rebound

Updated 2:54 PM PDT, Thu, Jan 7, 2010

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Los Angeles County's unemployment rate will top 13 percent in the first quarter of 2010, with home prices expected to bottom out by the end of next year and rebound in 2011, according to an economic forecast released today.

The report -- titled “What's Next LA? The Road to Economic Recovery" -- was released by Pepperdine University's Graziadio School of Business and Management, Beacon Economics and the Los Angeles Area Chamber of Commerce during a breakfast at the Los Angeles Airport Marriott.

According to the report, total nonfarm payroll in Los Angeles County will fall to 3.83 million by the second half of 2010. The drop in employment is a 7.2 percent decline from the county's peak levels, representing the loss of 300,000 jobs in the county.

Economists predicted that housing prices will continue struggling to rebound, with the median price of a single-family home expected to bottom out at $234,000 at the end of 2010 before resuming “normal” growth in 2011.

“Fortunately, low home prices, rising home sales and stabilizing consumer markets are spurring more activity in the housing market,” economists wrote. “As a result, expect new home construction to resume in the second or third quarter of this year. However, because businesses lag the consumer, do not expect to see a rebound in nonresidential building permits until the second half of 2010.”

Statewide, unemployment will peak at 12.8 percent at the end of this year, “with more job losses yet to come,” according to the report.

Meanwhile, taxable sales, which have already fallen by 14.4 percent, will continue to slip through the beginning of 2010 before resuming moderate growth by the middle of next year, economists predicted.

“The state housing market is feeling for the bottom as the pace of home price and building permit declines are slowing, and the sales of existing homes are up sharply,” according to the forecast. “We expect that home prices will reach a bottom in the first half of 2010, after declining by over 64 percent from their peak in the first quarter of 2007.”