Home prices in Southern California have managed to reach the peak of the housing bubble back in 2007, causing further concern over the rampant housing affordability crisis that continues to plague the state.
This past September, the median home price in the region of Southern California reached the peak of $505,000 from the days of the housing bubble. This marks the first time in ten years that prices have reached that milestone according to CoreLogic, a California-based analytics company.
That’s almost a 10% climb from the year before, and in some parts of Southern California, home prices have soared even passed pre-recession highs. The median home price in Los Angeles County hit $575,000 in September, while prices in Orange County reached $710,000 during the same time period.
That said, prices in this region of the Golden State are still under the 2007 peaks when adjusted for inflation.
A decade ago, housing prices in Southern California spiked so high in just a few short years that the housing bubble that grew inevitably burst. What followed was a slew of foreclosures that plagued homeowners and a recession that took its toll on the state – and the country as a whole.
Prices inevitably dropped as more and more homeowners defaulted on their mortgages. But ten years later, the housing market has recovered almost entirely, and prices have continued to climb back up. Mortgage rates have dipped to historic lows as the Federal Reserve made attempts to help consumers start spending and borrowing again in an effort to stimulate the economy.
High Housing Prices Not Necessarily a Reg Flag For Another Economic Crisis
Despite home prices being as high as they are and the housing affordability issue they’ve caused, economists are not as concerned as they were a decade earlier. Back then, risky lending was rampant, putting homebuyers in a vulnerable position to take out massive home loans that would be difficult to sustain.
Today’s housing price increases, albeit uncomfortable for many, are stimulated more as a result of a thriving economy, a low mortgage rate environment, and a tight housing inventory.
Buyers Being Pushed Out of the Market
Having said that, the sky-high housing prices across the state are keeping many would-be buyers out of the market. The housing affordability issue continues to be a huge hurdle in the market, making it increasingly difficult for residents to take the leap into homeownership, despite thriving wages.
Many are choosing to continue to rent, while others are considering leaving the state altogether in an effort to find cheaper prices. In fact, one-quarter of Californians who took part in a recent UC Berkeley poll claim to consider moving out of state as a result of the out-of-reach housing prices.
And with the current Republican Party’s tax reform bills on tax deductions associated with homeownership, the perks of buying and owning a home may be dwindling. House and Senate bills are currently proposing that certain tax deductions associated with mortgage interest and property taxes be significantly reduced or even abolished another, leaving less money in the pockets of California homeowners come tax time.
Efforts to Solve Affordability Crisis Still Have a Long Way to Go
In an effort to tackle the affordability issue in California, Governor Jerry Brown recently signed a slew of bills aimed at reforming current affordability housing laws. The bills deal with all sorts of facets of the affordability crisis, including funding for low-income housing developments, reductions in the cost of new home construction, and less red tape when it comes to getting permission to build new developments.
California has long been one of the most expensive states in the country as far as real estate is concerned, and there doesn’t seem to be any cooling off of prices in sight. In the meantime, would-be homebuyers – particularly first-timers – are finding it tough to break into the real estate game, even while making decent incomes.