MFI = median family income

Chapman University said in its 2010 economic forecast out today that the median price of an Orange County house will increase 4.9% in 2010.

About the best thing that can be said is that weve bottomed out and a slow recovery is under way, the Chapman forecast says. This view is supported by a shrinking inventory of new and existing unsold homes, improving credit markets and growing pent-up demand.

Other elements to the local real estate outlook include:

• Housing affordability will decline slightly next year due to higher mortgage interest rates, but will still (be) attractive by historical standards. (See chart at right.)
• Affordability in Orange County dropped this year to the lowest level in records dating to 2001, with just 29.4% of a median-income familys paycheck going for monthly house payments on a median-priced home.
• That compares to 2006, when 48.4% of a median-income familys paycheck went for monthly house payments on a median-priced home.
• In 2010, Chapman projects that just over 30% of the paycheck will go to house payments.
• New home construction while expected to rise slightly from 2009s post-war record low will still be the second-lowest since the mid-1940s.
• Builders are expected to add just 2,300 dwellings next year. That compares to 2,028 this year and 3,159 in 2008, the previous record low prior to this year.
• While new home construction will be up, those gains will be offset by a 20.4% decrease in non-residential building. Overall, spending on new construction will decline 5.2% in 2010, Chapman projected.
• That decline will be worse than whats expected to happen statewide. The forecast said that California construction should drop 2.2% from the current years levels. And even that smaller rate of decline will be a drag on the states economy, the forecast said.