The How and Why Behind the Calming of California’s Housing Market

The How and Why Behind the Calming of California’s Housing Market

2 min read
Harrison Stowe Read More

Join for free and get unlimited access, free digital downloads, and tools to analyze real estate.

As market observers have long noted, California’s housing market has been persistently volatile.

The only consistent fact about the West Coast’s housing market has been its capacity for sharp price gains and painful crashes. Since the housing market began recovering, the California housing market has seen an exceptionally sharp rise in property values, much of which has been bolstered by the strength of the San Francisco and Los Angeles job markets.

The Housing Recovery

As the housing recovery has progressed, it seemed only those with outstandingly high income were likely to have much available home choices in the Golden State.

That being said, there’s some evidence things are evening out. A recent report in the Los Angeles Times notes that the rise in home prices seems to be slowing somewhat. This is currently running hand-in-hand with an overall slowing of home sales, which occurred at a flurry pace throughout 2013.

Related: California Housing Market Losing Momentum

According to figures provided by the Los Angeles Times, the typical house in the six-county Los Angeles region sold for  $410,000 in May. This is up only 1.5% from April, a comparatively slight increase against the climbs we’ve seen in the prior twelve months.

Additionally, the annual year-over-year gain only recorded at 11.4%. While this is still a strong climb, it’s far from the spikes we’ve seen in past months. This looks like an indicator of relative price stability, and broader market trends seem to be validating this. We’re seeing a simultaneous decrease in investor purchases and a climb in available inventory.

The breadth of available has likely gone a long way toward easing price gains, since inventory constriction has typically been one of the strongest guarantees of value inflation.

So Does this Mean Housing Will Become Affordable?

Well, considering this is the southern California housing market, that’s a very relative term.

As a large positive, it seems that we won’t see a continuous spiking in home values that could prove destabilizing. Sales recorded this May tallied at 15.1% less than in May of last year.

Related: The What, Where, When and How of Investing in Southern California’s Volatile Real Estate Markets

That being said, housing in the region wasn’t particularly buyer-friendly to begin with, and those who subsist on salaries that would be more than suitable for supporter a mortgage in much of the country won’t have much luck around San Francisco and Los Angeles.

In Conclusion

It’s likely that California’s housing market will enter a period of comparative stagnancy. Neither demand nor prices will likely rise within the following months, leading to a calm and relatively unremarkable time for the local housing market.

On the other hand, it looks like the number of distressed sales and foreclosures are declining. If patterns continue, there’s a chance that the long-term fate of the California housing market is that it will become comfortably predictable.

Do you agree?

Be sure to leave your comments below!