People ask me all the time: “are we in a bubble?” Or they’ll comment: “prices have to come down soon.” Despite the image above, I really don’t have a crystal ball — nobody does. But I do think there may be more room for prices to continue rising for the near term.
- Even though prices have now reached or exceeded their nominal levels from the last peak, adjusted for inflation, we are still about 13% below.
- In Southern California, resale, rather than new construction homes are still $30,000 below their last peak.
- The current market differs a great deal from the last peak. Lending is much less risky, historically low mortgage rates (almost half what they were in 2006), and tighter inventories. This should add a level of further sustainability to our current market.
- Another important, and little discussed metric is incomes vs. housing cost. Today, the monthly payment on a median priced California home ($541,650) would consume just under 55 percent of the median household’s income ($67,739) in 2016. That’s only slightly higher than California’s historic average of 50 percent. Get this: In 2006, at the height of the last housing bubble, house payments were equivalent to 90 percent of the median household income!
David Lubell is a Licensed California Real Estate Agent (BRE# 01928231) with Keller Williams. Learn more about David by reading his bio. Reach out to him via email or call him directly at 424-248-5329.