There are a few differing opinions on the current state of the real estate market in Southern California. Below we delve deeper, and offer a thorough analysis of the current state of the real estate market in the area.
Over the past year, the housing market has begun to return to normal rates. During the last few years, the market was too volatile for investors, proving too much of a risk. But lately figures have shown that things are starting to get back to normal. The California Association of Realtors show that price increases are returning to a historically normal territory; which in the long run is helpful because it puts the market back on the path for sustainable growth. For example, the median home price has flat lined at $382,000 through October of this year. This may be due to a number of factors that include an extensive supply of homes, buyers fatigue due to inflating prices, and high mortgage rates. The number of listings has also risen over the past year causing a higher supply, which is deemed healthy. This is partly due that the number of listings are from homeowners as opposed to banks selling repossessed properties (sales of foreclosed homes in Southern California went from 56.7% in 2007 to 7.1% in 2013).
Look for Cash Flow, Not Appreciation
However, what investors looking for real estate in the region should be eyeing is not the appreciation of the homes but the viable cash flow opportunity. To avoid a bubble, investors should be looking at homes where little money has to go into it, so no matter where the market is, the amount you lose is less substantial and everything can be seen as a profit. The housing market in Southern California is now becoming harder to sellers due to the pullback which can benefit a potential buyer. A 28% increase in prices in the area has occurred over the last year, creating a buyers’ market. Buyers, who are usually harder to come by in the autumn and winter, are now encountering sellers who are willing to cut their prices and make house alterations in order to make a sale.
The housing market in California is looking to continue to grow in 2014. According to a report from the California Association of Realtors, sales are expected to transfer toward primary house buyers and home prices and sales will both be announcing future gains. CAR reports that they expect home sales to gain 3.2% in 2014. Projected sales are now at 444,000 units, up from 2013 figures of 430,300 homes sold. What this shows is that the housing market in California has improved in the last year and is supposed to continue that trend in the next. The California Association of Realtors president Dan Faught elaborated on the report in an interview with Housing Wire recently. “As the economy enters the fourth year of a modest recovery, we expect to see a strong demand for homeownership, as buyers who may have been competing with investors and facing an extreme shortage of available housing return from the sidelines.”
If new construction keeps demands of homes in balance, the higher rates and price rises show that the California housing market, even that in Southern California, should be in better shape in the future.
Marcela de Vivo is a freelance writer from Southern California. She loves writing about the economy and the housing market. When she’s not writing, she loves to spend time with her children. Follow her on Twitter!