California Dominates Several Housing Headlines

California has dominated several housing headlines,especially in Southern California and San Francisco. Three articles were big news this past month as California dominates profitability with 13 (count ’em), of the most profitable housing markets in the nation, according to local economist, Jonathan Lasner.  Another headline, “Southland Home Prices jump 11.4%”, reflecting January’s year over year gains from 2017 to 2018.  

Another article worth noting:  The Cost of Living, in terms of rent.  Orange County posts an average rent of $1,871.  The median house payment based on an all time high median home cost of $700,000 for a home comes with an average monthly payment of $3,226.  Figure half the home sales are below that figure, hence the definition of median, and you can easily see at the starter home end of the spectrum, your house payment could be lower than rent, or fairly close, and will for sure surpass when you add in the tax breaks still available for all homes $750,000 and under.  Are there murmurings at this point of a housing bubble?…Well, yes.  Not to be confused with the Great Recession, as stated loans and “D” paper have in no way made a comeback.  But have prices risen drastically, with very tight inventory and very high demand, causing people to possibly overpay, waive their appraisal contingency and act very quickly.   

Appraisers have had little reason not to bring appraisals in at most sales prices, although we will probably start to see some hesitation now.  But with interest rates rising (more on that later), and purchasing power waning, we may see some slow down and price softening next year.  So for sellers, this may be your time; everyone wants to time their sale perfectly, but greed will get a home seller in trouble.  Buyers, yes prices haven’t come down yet, but while you wait, you will watch your dollar shrink as rates rise.  What is more important to you, price or cost?  I would say for most people it is cost.  As long as you are buying a home to live in, committing to a reasonable period in that home, real estate market history tells us, you can’t go wrong.  If you are a novice investor or a flipper, buyer beware.