Home prices in parts of Southern California are at record highs — and keep rising
Andrew Khouri and Liam Dillon
In many corners of Southern California, home prices have hit record highs. And they keep going up.
In Los Angeles County, the median price in June jumped 7.4% from a year earlier to $569,000, surpassing the previous record set in May. In Orange County, the median was up 6.1% from 2016 and tied a record reached the previous month at $695,000.
Across the six-county region, the median price — the point where half the homes sold for more and half for less — rose 7.5% from a year earlier and is now just 1% off of its all-time high of $505,000 reached in 2007, according to a report out Tuesday from CoreLogic.
The price increase was even greater than the 7.1% rise recorded in May, and some agents say there are no signs of a slowdown in the Southern California market.
“This time of the year, it usually winds down a little bit after the Fourth of July — I am not seeing that,” said Hooman Zahedi, a Redfin real estate agent in the San Fernando Valley.
Home prices have now been rising for more than five years, the result of a growing economy, rock-bottom mortgage rates and a shortage of homes on the market.
Those factors have led to a surge in prices nationally as well.
The Case-Shiller index, also released Tuesday, showed prices across the country jumped 5.6% in May from a year earlier. The index lags other price indicators, but is widely considered the most reliable read on home values and offers a more accurate depiction of where the market is headed than the median price.
It does so by comparing the latest sales of detached houses with previous sales and accounts for factors such as remodeling that might affect a sale price over time.
The rate increase nationally in May was the same as it was in April, but locally the index showed a pickup. Across Los Angeles and Orange counties, prices rose 5.59% from a year earlier, the highest gain since September 2016.
Economists said that absent a recession or a surge in mortgage rates, California home prices could keep climbing at 5% a year for the foreseeable future.
That’s faster than the long-term average of 3% nationwide, but it’s difficult to build housing in California and the economy is strong, said Richard Green, director of the USC Lusk Center for Real Estate.
“It could go on for another four or five years,” he said.
The price surge nationwide is helping many homeowners recover from the housing bust, but is also raising concerns over affordability — particularly in California, where as of 2015 about a third of homeowners paid housing costs deemed unaffordable, according to an analysis from Harvard University’s Joint Center for Housing Studies.
Renters have it worse, the analysis showed, with more than half paying more than 30% of their income on housing costs — the threshold where costs are typically considered a burden.
The situation in California — which many agree has reached crisis levels — can largely be blamed on a mismatch of supply and demand, according to economists. For decades, they say, developers in California have failed to build enough homes for all the people who live — and want to live — in the state.
Green estimated that developers would have to immediately erect 100,000 new homes in L.A. County for prices to stop rising and then build an additional 35,000 each year. Last year, the county permitted just under 20,000 new homes, according to the Real Estate Research Council of Southern California.
Government officials say they are trying to take steps to address the problem of affordability.
In Los Angeles, Mayor Eric Garcetti is advocating for a fee on new development to raise money for below-market housing — a policy known as a “linkage fee” and used in cities such as San Francisco, San Diego and Oakland.
And in Sacramento, Gov. Jerry Brown and legislative leaders have said they will put housing at the top of their agenda when they return in August from a monthlong break.
Legislators have proposed a package of bills aimed at raising money for subsidized housing and making it easier for developers to build all kinds of housing, which often faces pushback from residents concerned over traffic and neighborhood character.
The bills won’t be easy to pass though, despite Democrats holding supermajorities in both houses of the Legislature.
Business-friendly Democrats are wary of asking Californians to pay more to subsidize housing, especially after voting this year to increase gas taxes and reauthorize the state’s cap-and-trade program. Progressive Democrats have concerns about sidestepping environmental laws to allow developers to build more quickly.
CoreLogic’s report showed that home prices in Southern California rose in every county last month compared to a year earlier, not just in Orange and Los Angeles counties.
In San Bernardino County, the median was up 12.3% to $320,000; in Riverside County, 7.5% to $357,000; in Ventura County, 2.7% to $565,000; and in San Diego County, 9.8% to $543,500. Across the region, sales rose 4.3%.
Chris Thornberg, founding partner of Beacon Economics, said he doesn’t expect a recession and thus doesn’t foresee a time when home prices stop rising.
“Candidly, the only thing that could upset the apple cart in California is if we build a whole bunch of housing and that’s as likely as an alien attack.”
The original article can be found here.