by Calculated Risk on 3/29/2006 11:43:00 AM

The LA Times reports: Economists Predict State Slowdown

A slowdown in the California economy will begin late this year and continue for the next two years as a cooling housing market leads to job losses in construction and related industries, according to the latest UCLA Anderson Forecast, to be released today.

But there is no evidence that a recession is near, the widely watched quarterly forecast said.

A few tidbits:

"We see the housing crunch as a force that will slow growth, not stop it," said Christopher Thornberg, senior economist and author of UCLA's state forecast.
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Now, the trend is becoming clear: The housing boom that has driven the state economy has peaked and is starting to soften, Thornberg said.

"The only debate now is how hard a landing there will be and what will it mean for the general economy," said Thornberg,
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Over the last two years, construction jobs have made up nearly a fourth of all new payroll jobs in the state — "far above any normal level," Thornberg said.
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As many as 200,000 jobs in construction and related fields will be lost in the state, including contractions in real estate sales and mortgage banking positions, the report said.
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Although UCLA forecasters have consistently been more pessimistic about the housing boom and California's economy than many other analysts, their views are notable because they were among the first economists to predict the 2001 recession.
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"There is no justification for the prices we're seeing now," Thornberg said.

He predicts that annual home-price appreciation will slow to 6% by the end of this year and will flatten in 2007.

He also sees a 27% decline in home sales this year and next