We have reached a two-fold situation for the current real estate market in Southern California. On one hand, California has seen a significant drop in prices over the course of a year, while on the other, there has been a decrease in sales.
People tend to worry in a situation where the market sees a significant drop, and you can’t blame them after the housing market crash in 2008 – But lending practices have tightened up to ensure we don’t see a scenario like that anytime soon. Something else is at play in the market.
Some factors to consider:
- California has seen a drastic swing in population density. Southern California as a whole has an attractive ring to those seeking “the California lifestyle”, while others are leaving due to the high cost of living.
- Sales are down, but properties listed for sale have been driving upward.
- While overall sales and prices are down, lower-cost neighborhoods like the Inland Empire have seen overall growth.
- California has governed regulations over new development projects to control the rate of adjustment on the real estate market.
- Unemployment rates in California are very low (4.3%).
- Buyers are pickier than ever about options they find in homes.
- Market shift is focused primarily on homes falling below 1 million dollars.
What could this mean? Housing prices out-driving salaries could be a huge reason why home sales are down. An explanation for this change could mean that we are seeing a market adjustment. But I wouldn’t bet on it lasting very long. Sales are driving the market, even if there has been a plateau.
Click here for The Los Angeles Times full article on Southern California’s current Market Trends.