It’s been seven and a half long years since the bottom fell out of the housing market in the Orange County area of Southern California. This month, housing prices in the area have finally surpassed those seen before the Great Recession for the first time. Admittedly, the area of California is first to achieve this, but at the same time, many housing experts in the region are not quite ready to discuss the possibility of this as the beginning of a new housing bubble.
What Experts Say is Behind the Rise in Housing Prices
Instead, local housing experts cite reasons such as historically low mortgage rates, strong growth in the job market, and an ever dwindling supply of homes for sale. In reality, just the steady decrease in the number of homes for sale alone can have a dramatic effect on the price of houses. According to Nela Richardson, chief economist for Redfin, “It was a lot different back in 2006, that price growth was fueled by a lot of crazy toxic mortgage products.”
By the numbers, the median price for new and real estate homes as well as condos has soared by 5.9% from those seen only a year ago to approximately $651,500. This information was just released by CoreLogic a real estate data firm. This figure is $6,500 higher than those seen at the peak point of 2007 and does not take into account annual inflation rates.
A Highly Political Situation
The current rise in housing costs comes on the heels of incredible shortages in affordable housing all across the state of California. Prices have reached the point at which the government has begun to come under extreme pressure from middle-class home buyers who suddenly find themselves unable to find affordable housing. It has become so bad that many California businesses are claiming the high cost of living here is driving them to move their businesses and associated jobs to other states.
The big question for many, concerns how long this trend is going to continue. A large number of economists believe that prices are going to continue to increase for an extended period, though perhaps not at current rates. Job growth in Orange County is running at 3.5% and Los Angeles County is at 2.4% annually as of May 2016 a whole percentage point above that of nearby Los Angeles County. This, along with increasing wages are expected to keep contributing to rising house prices.
The Demand Keeps Going Up
The largest driving point behind increasing prices, however, is the huge demand from buyers for property, on that does not seem to be slowing down. In fact, if anything the demand is steadily going up, while the supply of houses keeps dropping.
Not everyone agrees with this situation, in fact, Christopher Thornberg, who is a founding partner of Beacon Economics states that no housing bubble is forming due to far tighter lending standards. Along with this the California Association of Realtors latest Housing Affordability Index shows that the number of households who can afford to buy a median-priced home is far below that seen in 2006 to 2007. No matter who you choose to believe, it should be obvious that housing prices in Pasadena and LA County are expected to continue experiencing exponentially for some time to come.