SoCal Real Estate Bubble Very Unlikely
As a Pasadena Realtor, I often hear the woes of buyers and current home prices. As I have been sharing for over a year, the prices will not be dropping dramatically any time soon.
Pessimistic minds state that the prices are so high that they must come down or that another housing bubble is imminent. Well, according to one mortgage insurance company’s latest reports, there’s only a slim chance Southern California home prices will fall in the next two years.
Arch MI gauged the economic foundations of home values in 100 major metropolitan areas to determine local housing markets with “minimal” risk. Locally, Arch MI found solid performance among regional businesses and limited development of new homes as factors that should keep home prices firm.
Orange County was the riskiest market in the region — if having a 4 percent risk of a price decline in the coming two years is what you consider dicey. That compares with the county’s 28-year historical average of 25 percent chance of falling home values.
Arch MI noted Orange County’s home prices were up 12 percent in the two years ended in 2017 — only the 52nd highest among the 100 large metros studied. Per-capita homebuilding of 18 single-family homes per 10,000 residents — ranked No. 63 out of 100. Business output rose 5.2 percent last year, the 40th fastest growth nationally.
Los Angeles County had 2 percent risk of decline as 2018 started vs. a 1980-2018 average of 27 percent, according to Arch MI.
That score came as L.A. home prices surged 15.9 percent in two years — No. 32 biggest gain; per-capita homebuilding of 6 houses per 10,000 population was fourth slowest nationally; and business output rose 4.9 percent last year, No. 51 fastest.
In Riverside and San Bernardino counties, Arch MI found risk of home-price declines at 2 percent vs. a 28-year historical average of 25 percent.
Inland Empire home prices are up 15.6 percent in two years — No. 33 highest — as per-capita homebuilding of 26 per 10,000 — ranked No. 52 — while business output rose 5.5 percent last year, 29th fastest.
Arch MI doesn’t find much risk out of the region either: The nationwide risk of decline was 5 percent even after home prices rose 12.6 percent in two years. Yes, that was up from 2 percent a year ago.
“Housing markets in most cities are exceptionally strong due to a shortage of homes for sale,” Arch MI wrote. “Construction has lagged the growth in households and employment for nearly a decade. Even recent interest rate increases and higher taxes on some upper-income earners didn’t slow the market, as many had feared.”
Riskiest big markets, by Arch MI’s math? Texas and Florida!
No. 1 diciest was Houston (22 percent chance of price declines within two years) followed by San Antonio (20.3 percent); Tampa-St. Petersburg (19.2 percent); Cape Coral-Fort Myers (17.8 percent); Austin (17 percent); Fort Lauderdale (16.9 percent); and Miami (16.4 percent).
“Housing markets aren’t likely to cool until the economy slows, either from substantially higher interest rates or an unexpected economic shock,” Arch MI wrote. “Short of a war or stock market crash, housing markets could continue to surprise on the upside over the next few years.”
Source: OC Register
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Michael Robleto
REALTOR®-Podley Properties
Michael Robleto is a REALTOR® with Pasadena based Podley Properties. His analytical and open approach to sales has served his clients well in his twenty years of sales. Michael blends kindness and compassion with a modern technology-driven approach to real estate. You will be hard-pressed to find an agent that will work harder to protect the interests of buyers and sellers.
Michael leverages his personal passion for historic architecture to provide his clients unknown insight on the pros and cons of older homes. Michael grew up in an older Bungalow home, has lived in California all his life and has spent 23 years in Southern California. He often writes on real estate and Pasadena related topics which can be found on Facebook, YouTube, Twitter and Instagram under the common profile name of his blog BungalowAgent or at www.BunaglowAgent.com/blog.