Housing Shortage Predicted for South Bay

Piggybacking off the worst national housing crash since the Great Depression, Southern California will soon encounter a crisis of its own,  Leslie Appleton-Young, the chief economist for the California Association of Realtors, told a crowd of South Bay real estate agents Wednesday. A housing shortage is predicted within the next 10 years, she said.

The South Bay Brokers met at the Crowne Plaza Hotel in Redondo Beach to hear about the future of the housing market in Hermosa Beach and other South Bay cities.

"If you look at this data and see, since 2004, new construction has dropped [more than] 80 percent," Appleton-Young said. "And we're still having lots of babies in California. There's a much greater household density going on with people doubling and tripling up, but at some point people are going to be looking for homes again."

Some Southern California towns have already ranked nationally as the hardest hit by foreclosures, according to the Brookings Institute's Metropolitan Policy Program.

Appleton-Young predicted that foreclosures would increase for the next three to four years among moderate-to low-end properties. Meanwhile, the South Bay is not building enough of these affordable homes to keep up with future demand. 

"Those moderate- to low-end properties weren't on the market, yet they were kind of in the foreclosure timeline," Appleton-Young said. "So the sales were drying up, because the mortgages weren't available anymore."

Appleton-Young's data also showed a substantial inventory of high-end properties in Southern California worth $1 million or more that haven't been sold. As the economy recovers and a demand for homes returns, housing inventory in Hermosa Beach may be too expensive to meet housing demand.

Jim Van Zanten, co-chief executive officer and founder of South Bay Brokers, said that local real estate agents should look into short selling houses for the next few years, before the shortage hits. A short sale occurs when a property is sold for less money than what is still owed on it.

"If you're staying away from short sales, there's probably no reason to do that. You're going to have to plow into that," Van Zanten advised. "A lot of people are closing those sales every week."

But even if real estate agents follow this approach, the housing market will remain volatile, Appleton-Young said her data showed.

"We're going to need to build more," she said.