The prices of residential real estate in six counties within California have recorded a 10% rise compared to last year’s prices alone. This has been the reality for most of California for the past 5 years.
A closer look at the prices of homes within the region reveals how expensive houses are getting. In Southern Bay last year a single family home retailed at $1 million. As of now, the average home is retailing for $1.1 million.
In Los Angeles, the median is up to $575,000 which is $25,000 higher than 2007 peak.
California Realtor association is predicting a 4.2% rise in the current prices come 2018. And economists believe prices will continue rising for 2 or more years.
Is this a bubble?
The rising prices have people talking about another real estate bubble. However, many analysts feel we are still far from calling it that. Despite the rise, most regions are at least 18% shy of the last peaks. The rise is also not restricted to California alone with most regions across the country reporting the same.
Buying is also better than it was in 2006. Fewer people are borrowing to buy thanks to restrictive crediting.
Economists still believe there is still time and room because of a housing shortage.
Under-building and strict regulation affect the availability of houses. Fewer people are selling their properties. Today they risk losing tax advantages and gaining taxes on profits they made. If the proposed federal tax bill stipulating how long a seller can stay in a home before selling is passed, homes will be even scarcer.
The fact that the former bubble took 10 and a half years to finally burst, is another reason analysts believe the market still has some time.
Does this mean buying a house is affordable for California residents?
Contrary. In 2012 nearly half of the residents in California could afford a home. The condition has long changed with only 26% said to be able to afford one.
Along with the rise in real estate, the price of rent is rising as well, meaning fewer people can save for a home.
Houses selling for a higher price ($2 million and higher)are currently thought to be overpriced and are at a higher risk of hurting investors.
Affording a home is a big concern for most residents. The prediction of a rise may not be the greatest news for most people hoping to own a home in the region.
What is the future for home buyers?
The mortgage interest rates are raising moderately as well. 3.6% in 2016, 4% this year and predictions are estimating it to rise to 4.3% in 2018. This, however, is not likely to discourage home buyers.
Those selling their homes would like to sell their homes at a better rate than those who sold six months ago.
Buying for entry-level homes, however, is likely to keep dropping as fewer people will be able to afford them. That would mean more people may opt to move to more affordable areas.
Hopefully, a correction will soon be reached to help regulate the prices and help more people afford homes and avoid a burst that may cause nasty repercussions like in 2008.