California consumers to feel recession 'deeper and longer'

03.28.09
By Timothy Jones

A new study links the current lingering recession to broader international economic conditions and says that California may be worse off than most states.

According the UCLA Anderson Forecast, a recovery of the U.S. economy depends largely on the return of world trade.

Consumers in California are suffering particularly badly because of a drop in spending and a once booming construction industry skidding to a halt, says the UCLA report.

So what is the diagnosis for the residents of the golden state hoping to regain their financial footing?

UCLA economists predict that the ongoing recession will lead to sustained unemployment in California reaching almost 12 percent by mid 2010.

"Though the California economy will be growing in 2011, it will not be generating enough jobs to drive the unemployment rate below double digits until the following year," according to UCLA Anderson Forecast senior economist Jerry Nickelsburg.

Despite these dismal expectations, there is some good news emerging from the west coast.

A new report from the California Association of Realtors says that existing single-family home sales in the state jumped 83 percent in February. The median price of an existing home in the California dropped by over 40 percent, it says.

The realty group says that homebuyers in the state looking to obtain a home loan are now finding more reasonable rates.

A thirty-year fixed mortgage interest rate was on average 5.13 percent last month but hit almost 6 percent this time last year, says the California Association of Realtors citing Freddie Mac data.

Some mortgage brokers have noticed an uptick in existing home sales since the government introduced its first-time home buyer credit of $8,000 for eligible taxpayers which can be applied either this year or when filing 2009 returns.

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Unemployment numbers expected to be steep in California