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GDP Growth To Slow to a Trickle in Q4

LOS ANGELES-Expert cites continuing subprime resets, creeping consumer uncertainty and illiquidity in the market for the negative forecast.

By Daniel D. Williams | Updated on November 06, 2007

LOS ANGELES-Just when you think you’ve heard all the bad news you can stomach about the economy, the latest data provides another shot to the solar plexus. Citing a recent study by Goldman Sachs, economist Stuart Gabriel said analysts there believe California home prices are roughly 35% to 40% overvalued. According to the study, the median sales price of a home in California was $589,000 in August, but should be around $375,000.

Those figures elicited a collective groan from the audience at yesterday’s annual UCLA Real Estate Conference. While Gabriel, director of the Ziman Center for Real Estate at UCLA, said he didn’t necessarily concur with the Goldman figures, he added that home prices in California could drop 10% to 20%. The state’s inland area–from Sacramento down to the Inland Empire–would be hit the hardest.

“California was the epicenter of non-affordable housing and the epicenter of subprime loans,” Gabriel said. “You can go up and down the [interior part of the] state–this is where a huge amount of these [subprime] loans originated.” Subprime loans accounted for 40% of loans in California in 2006.

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