As inventory plummets, homes are selling at a frenzied rate, despite an increase in home prices, particularly in hot markets like California. In March, the median U.S. home value has finally exceeded the pre-recession level. Nationally, the year over year home price increased by 6.9 percent. Most states experienced increases, except Alaska, Delaware and Wyoming.
In March of this year, L.A. and Orange County have seen the median price shoot up to about $600,000. San Diego has reportedly exceeded the $600,000 mark for single family residences as of May of this year, an 8% increase over May of last year. As shocking as this is, in other hot markets in California, it’s even higher. In San Jose, the median is close to $980,000 and in San Francisco, it’s around $840,000. In Fremont, the median price is $899,000, where homes have risen roughly $100,000 in one year.
There are a several factors fueling the skyrocketing prices. For one, new construction has been in a severe downturn overall. That means that there is more demand for the few houses on the market at any given time. For another, rich investors from other countries, such as China and Russia, are entering the US market with more frequency now more than ever, targeting the West Coast in particular. This has been spurred by the volatility of banks in other countries, as these wealthy speculators seek out a financial safe haven. Also, the return on rentals is going up, meaning there is more incentive for investors to buy up and rent out properties that would otherwise go to buyers looking for a primary residence.
Confidence in the stability of the market has improved, due in part to an overhaul on lending practices, which now more heavily regulates mortgage companies recession are finally diving back in. Homeowners that were underwater for a decade are now regaining equity in their properties. Foreclosures and distressed sales are not hitting the market with the fervor seen in 2010, which in turn are not negatively affecting home price statistics. Since homes for sale are scarce, sellers find that bidding wars peg their listings well above asking price, at some price points, and rarely sit on the market for more than a month, as we enter into “house-hunting season”. Each of these factors, in part, contribute to not only to robust home prices, but also, a healthier housing market in general, as another “housing bubble” seems considerably less inevitable than it was a decade ago. Corelogic forecasts that at its current rate, we will continue to see median price growth to the tune of at least 5% in 2018.
Article sources: Corelogic, SANDAG, Zillow.