Los Angeles real estate overpriced?
According to the real estate website Trulia, the three Southland regions of Orange County, Los Angeles, and the Inland Empire, are all suffering from huge price increases without large increases in income. This makes recovery increasingly difficult to achieve. These high housing costs are some of the most overpriced in the country, and ranked among the five most overvalued markets in the U.S. according to Trulia.
Rising interest rates and new mortgage rules contribute to the affordability issues that sideline many uncertain buyers. The new rules gummed up some sales in January and February while brokers adapted. In certain western regions, prices jumped last year due to investors and large inventories of foreclosures. In addition, home prices are growing faster than personal income is growing. With personal income increasing 2.8% while prices are up 18.9% in metro Los Angeles according to S&P/Case-Shiller.
The gap between home price and income is skyrocketing in Southern California, more so than in any other area. If a new housing bubble forms, it would develop in these three Southland regions first according to Kolko and his “Bubble-Watch” report. However, Kolko also states that the outlook is much more positive than in 2006.
Price gains have mostly halted recently, due to rising interest rates and investor pull back. These conditions could allow the broader economy the time it needs to catch up to the housing market. According to chief economist Mark Zandi of Moody’s Analytics, the housing recovery needs a new economic engine. The job market must continue to improve in order for people to have the confidence to start buying more homes.
After the housing bust, lending standards dramatically shifted, which hurt sales. If credit eased it would also help the housing market.
Thankfully, the overall outlook for the spring is positive and healthy. Signs in data point to an upturn. The California Assn. of Realtors reported that pending home sales increased quicker than normal. The inventory of homes on the market is also up 13% from Febuary 2013 across the six-county region. It will take a few months in order for the actual health of the recovery to become clear.
Factors beyond the housing market are highly influential. The main question is if people looking to purchase homes can pick up slack for investors. Which is determined by the health of the economy.
If you have any questions about Los Angeles real estate, please contact Jeff Russell at (800) 791-4714 or email firstname.lastname@example.org. Jeff Russell Real Estate is ready to assist you. For more information about real estate in Los Angeles, visit www.russelrg.com