Monthly Archives: February 2013

There is no housing bubble in Southern California

A construction worker installs a window in a new home in San Mateo, California. Housing starts need to pick up significantly if the supply and demand imbalance in Southern California is to be corrected.

A construction worker installs a window in a new home in San Mateo, California. Housing starts need to pick up significantly if the supply and demand imbalance in Southern California is to be corrected.

There is not housing bubble. But of course you could be excused for thinking that there is, if you live in Southern California. The real estate market here is distorted, with supply and demand out of whack.

The Great Recession meant that we didn’t build any houses for four years. The supply of “distressed” properties — foreclosures — is getting tight, because banks are working through their backlog and because they don’t want to flood the market and crush what is for them a good thing: rising prices.

But rising prices are a mixed blessing. In some parts of Southern California, everyday buyers who need a mortgage are getting priced out by all-cash buyers and investors looking to snap up properties at a reduced price, relative to what they hit during the peak.

This has led some market observers to say that we’re dealing with a housing bubble in the region. But that’s not really the story. There are some micro-bubbles. But if you look at the Case-Shiller home price index, it’s clear that, although prices have trended up steadily in Los Angeles County since the beginning of last year, the region isn’t seeing a price spike on the order of what’s happening in, for example, Phoenix, where prices have surged by double-digits.

“We’re not at a bubble level yet,” said Terry Sandven, Chief Equities Strategist for U.S. Bank Wealth Management.

He added that “housing is a bright spot in the economy,” but he echoed an observation that has now become commonplace when studying the Southern California market: inventory is tight. “It’s at 1990s levels,” he said.

Sandven said the overall outlook for housing is favorable.

The National Association of Realtors has pointed out that the inventory crisis will eventually ease, bringing supply and demand back into balance.

But before that happens, housing starts need to pick up — and they’re currently running well below the 1.5 million-per-year average they’ve achieved over the past four decades. What will close that gap is a more free flow of credit — both to consumers and to homebuilders. But it could take a while for that to develop, given that banks have been much stingier with loans since the financial crisis.

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Crabtree Report Bakersfield home prices set to rise 18 percent in 2013

Bakersfield home prices are on track to rise 18 percent this year — an average increase of $30,000 per house — according to a widely read monthly report released Thursday.
Local appraiser Gary Crabtree based his forecast on dual sets of data: one on the city’s monthly price changes over the 12 months ending in January, the other on price changes over the previous two years.
His report said Bakersfield median home sale prices are on track to reach $195,000 or $196,000 by the end of this year, up from January’s $164,490 median. (The median is the point at which half the homes sold for more money and half went for less.)
Between January 2012 and last month, he noted, the city’s median sales price rose 26.5 percent.
“The forecast is a function (of) median price change ONLY,” Crabtree wrote in an email. “It assumes that conditions in the past will remain the same into the future, thus it does not take into consideration other factors that may influence price such as interest rates, availability of credit, employment, job growth, inflation (including materials or labor costs) or population growth or loss.”
He added that factors underlying the market’s improvement are lack of supply, low interest rates, realistic loan underwriting and a declining inventory of distressed properties on the market.


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The 25 Hottest Neighborhoods for 2013

Great neighborhoods are the building blocks of great cities. Together, these dense collections of utterly unique histories, cultures, tastes and attitudes combine to create larger communities greater than the sum of their already considerable parts.

That is why Zillow set out to identify which neighborhoods – regardless of the city that surrounds them – will be the hottest in 2013, based on their anticipated gains in home value between December 2012 and December 2013.

Zillow analyzed forecasted Zillow Home Value Index (ZHVI) data for more than 5,100 individual neighborhoods in hundreds of cities nationwide. Below are lists of the top 10 hottest neighborhoods based on expected home value appreciation, and the 10 neighborhoods expected to show the least home value appreciation.

25 Hottest ’Hoods


Gains in home values are often driven by the same factors that contribute to dynamic neighborhoods – things such as changing local demographics, proximity to popular goods and services, attractiveness of the local housing stock and local reputation. And that remains true in a general sense.

But on this list, theres an additional factor at play: plain old supply and demand. In many of the hottest neighborhoods, there is little available supply to meet robust demand from buyers either seeking a bargain or looking to live in traditionally desirable neighborhoods. As a result, prices are expected to quickly rise as buyers engage in bidding wars on the few available properties, which in turn brings up values across the board.

As you’ll see, the hottest neighborhoods list is also dominated by neighborhoods in cities – specifically, California cities – that were among those hardest-hit by the housing recession. A large number of homeowners in these areas remain trapped by negative equity – or “underwater,” owing more on their mortgage than their home is worth – and as a result have a very difficult time listing their homes for sale. This contributes significantly to the kinds of supply constraints outlined above.


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