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Five More Years Before Foreclosure Bubble Ends

    The chief economist of the California Association of Realtors predicts it will take three to five years to clear the backlog of defaulting homes that are putting a drag on housing prices.

    “It depends on the area, but I would say three to five years,” says CAR economist Leslie Appleton-Young. 

    She predicts three years in areas where foreclosures haven’t been the majority of the market. Then, she predicts closer to five years in the inland areas, where she doesn’t think we’ve seen a lot of the supply come through, yet. She believes there is a “shadow inventory” of negative equity homeowners that are still in kind of a holding pattern in those areas.

    The California Association of Realtors is predicting a 1% gain in home sales in 2012, and a 1.7% increase in the median price of a California home.

    Robert Kleinhenz, deputy chief economist for CAR, said the housing outlook for 2012 will be slightly better in Orange County than the state as a whole. Orange County’s share of distressed sales is among the lowest in the state at 32%, compared to 35% last year.

    Currently, Orange County is behind last year’s sales by 6.7%.  “But the market will reduce or eliminate that deficit by year end,” he said.