Although expectations of a local real estate price slowdown have continued through years of double digit increases, experts now think that a leveling off is coming. Economists at the USC Lusk Center for Real Estate recently predicted that housing prices will continue to appreciate in major markets such as Los Angeles, though at a much more modest 2% to 8% for the rest of the year.
"A pricing bubble occurs when we have an asset and the price soars dramatically upwards, turns at the top and falls suddenly, sometimes to the same level it starts from," said Dr. Dolores Conway, director of the Casden Real Estate Economics Forecast at the Lusk Center. "But these adjustments are very rare, unless we have a major economic shock that would yield job losses. Even then prices drop over a period of years, not months."
What lends credence to these predictions are trends in other home markets. Once sizzling San Diego, which underwent a similar transformation in its downtown, has seen condo prices cool rapidly over the last six months. Homes that once sold in a matter of days or even hours are languishing for weeks or longer.
Some real estate observers say it's just a matter of time before the Downtown Los Angeles market feels a shift. Indeed, Condosource statistics indicate the San Diego effect could be migrating north. The firm found that last month, it took an average of 39 days for a condo to sell in Downtown, a week longer than the 32-day time frame in 2004. Some realtors say the lag time is due to the slow summer months and point to the fact that there is still more demand than supply for the sleek new condo towers that seem to be announced almost weekly.
Still, the notion that the real estate market has peaked, or soon will, is doing little to affect buyer behavior. Few are choosing to sit on the sidelines in anticipation of the Downtown bubble springing a leak, or bursting outright.
The Compocs, who continue to scout for homes Downtown, say it's a gamble they're willing to take for what they see as a community on the rise.
"Living here would be fulfilling a dream for us, but we're also looking for a good investment," Avianna Compoc said. "Prices will go up a lot more, but it will also take longer than people expect. But that's okay. We're willing to hold on."