The spring home buying market is busy this year and prices are rising, a result of too little supply and too much demand.
..bidding wars are common and prices are rising during the popular spring buying season. A report out Tuesday from CoreLogic shows the Southern California median home price jumped 7.1% in March from a year earlier, hitting $480,000 in the six-county area. And despite low inventory, sales rose 7.8%.
County March price Change March sales Change Los Angeles $549,000 8.5% 7,266 9.7% Orange $665,000 6.4% 3,444 8.0% Riverside $352,955 7.0% 3,964 10.2% San Bernardino $305,000 12.1% 2,721 6.0% Ventura $538,500 8.4% 949 3.0% San Diego $515,000 7.7% 3,698 4.3% SoCal region $480,000 7.1% 22,042 7.8%
Why it’s like this
Demand is high
- In March, jobs rose across the six-county Southern California region, from 1.5% in Orange County to as much as 3.8% in the Inland Empire compared to a year earlier. Wages across the state climbed 3.9% during the time period.
- The average rate for a 30-year fixed mortgage was 3.97% last week — below the 5% to 6% range during the bubble, data from Freddie Mac shows.
- Rates had been going up since the presidential election, peaking at 4.32%. They’ve eased back down, but are still higher than before the vote. Agents say the run-up, and fear of future gains, has people rushing to close a deal.
- Consumer confidence in March was at its highest level since 2000.
Supply is low
- California’s nonpartisan legislative analyst’s office estimates millions of additional homes needed to be built between 1980 and 2010 to have stopped the state’s home prices from growing far faster than the nation as a whole.
- Though construction is on the rise, it still remains far below even the insufficient levels of the past few decades.
- Some owners also can’t sell because they purchased or refinanced during the bubble and still owe more than their house is worth.
- Others refinanced in recent years when rates were closer to 3% and don’t want to lose that rate.
- Following the housing bust, investors purchased homes en masse and turned them into rentals, taking thousands of homes off the market.
With prospective buyers crowding into open houses, Southern California mortgage broker Jeff Lazerson worries about the market’s stability.
He says people are increasingly acting out of fear, worried that if they don’t buy soon, they’ll never afford a home in the area.
Even to do so now, they’re stretching.
Lazerson said he’s using “glue and paper clips” to get clients qualified, having them pay down bills, get a co-signer or secure money from parents for a down payment
“They are all pushing and then they push some more,” he said. “I don’t think it’s sustainable at all.”
Dean Baker, codirector of the Center for Economic and Policy Research, who had predicted last decade’s housing crash, said he’s “somewhat concerned” about rapid price increases at the lower-end of the market but said this time seems different.
Baker noted that during the bubble, home prices rose at a far faster pace than rents, indicating that reckless lending, not economic fundamentals, was sending prices through the roof. Today, prices and rents in Southern California are largely rising in tandem.
“It really is a shortage of housing,” he said.
Christopher Thornberg, founding partner with Beacon Economics, also doesn’t see a bubble.
So far, there’s not a “crazy expansion” of credit, he said, and prices have consistently risen in the mid-single digits each year, rather than the double-digit levels seen last decade.
“None of what of we are seeing in the market today has the hallmarks of what I would call a bubble,” he said.
As long as the economy keeps improving, Thornberg said prices should keep climbing around the current pace.