It may have been held during the Bay Area's hottest spell of the year, but the burning topic of conversation among those who attended the Pacific Coast Builders' trade show last week at Moscone Center was not the weather. It was how cool the housing market was going to get during the summer, and which way the prevailing winds would blow after that.
Despite the less-than-rosy portrait of the state's housing market painted by the numbers, the folks from Lusk were quick to point out that every picture doesn't tell the story -- at least not the whole story.
"Generally speaking," said the Lusk Center's director, Stuart Gabriel, "we do not anticipate anything other than a soft landing in the housing market. We don't expect a significant falloff in home prices."
"There are some things we should be worried about," said Raphael Bostic, an associate professor at Lusk and director of the center's master of real estate development program, "but in the grand scheme of things everything will be all right."
The things to worry about, said Gabriel, are a trade deficit that has grown from $100 billion in 1995 to $800 billion in 2005, a more than 6 percent decrease in the personal savings rate, record oil prices and a contraction of the gross domestic product. Taken together, these economic elements have the potential to increase inflation.
Everything will be all right, said Bostic, because the health of the real estate industry is inextricably linked to the economy and the economy is strong. Even though the economy and consumer spending are slowing because of higher interest rates and fuel prices, there has been a significant gain in job growth. California has a diverse job market. Further growth is predicted.
Lastly, say the economists, the current cooling off period needs to be put into perspective. There has been an unprecedented run during the past 15 years in price appreciation and sales. Sure, they've fallen during the past year, but only to 2004 levels -- and that was a record year. And prices remain at all-time highs.
"The apartment market," says the Lusk Center's Delores Conway, "is the big story." Occupancy rates, in most of the state's major metropolitan areas, are about 96 percent. During the first quarter of this year, monthly rents increased by 7 to 10 percent. The trend is expected to continue.