Orange County jobs are seen growing faster than expected while home prices are seen holding steady this year, according to Chapman University’s updated 2006 forecast released Wednesday.
“We see average housing price appreciation showing virtually no change in 2006 and then declining by 5.9% in 2007,” Chapman economists wrote in their forecast.
Six months ago, Chapman predicted that the median price of an OC home would fall by 4.2% this year.
Instead, the median price for an OC home has continued to rise. Prices hit another record in May, even as sales for the month dropped to their lowest level in two decades.
May’s median was $635,000, up 8% from a year earlier, according to La Jolla-based market tracker DataQuick Information Systems.
But the number of homes sold in the county continued to slow in May, dropping 32% from a year ago.
The number of unsold homes on the market has been rising since early 2004, according to Chapman. Still, the number of unsold homes is nowhere near where it was in 1995, during the county’s last real estate downturn.
Job growth remains solid, according to Chapman. The school’s forecast expects the county to generate 26,000 jobs this year, a 1.7% gain.
That’s 6,000 more jobs than previously expected.
Continued growth in construction work is part of the upward revision. Other growing segments include financial services, entertainment and leisure niches, according to Chapman economist Esmael Adibi.
Job growth is expected to slow somewhat in 2007 to 1.4%, or 21,000 new workers. Job growth has cooled from its 2.3% pace in 2005.
OC job growth peaked at 6% in the first quarter of 1998. Since then only the manufacturing sector has declined in jobs.
“But the manufacturing bloodshed is over,” Adibi said.
Office vacancy rates are seen rising to 10.5% with layoffs among mortgage companies, Chapman said.
The school pegged the current vacancy rate at 8%. Real estate brokerages put it at 6%.
“This is the first reversal in vacancy rates” since they began falling from their 18% peak in 2001, Abidi said.
Chapman revised upward its forecast for interest rates to 5.75% this year, about a point higher than previously projected.
Rates then could “drop slightly” in 2007, said Jim Doti, Chapman’s president.
The Fed has raised rates 25 basis points 16 times since June 2004 to ward off inflation. The rate now stands at 5%.
