Imagine a housing market where any house would sell within three or four months guaranteed! That is the current status in the Southern California market. Demand has been very high, while supply remains low. It's definitely a seller's market. The California Assn. of Realtors is saying that the housing market in Los Angeles County is beginning to see a shrinking supply. The experts, of course, predict that this will initiate higher sales prices, which is not good overall for the housing market
Southern California has seen trends like this many times in the past and it often leads to inflated housing prices. Most economists say that for this market, 5.2 months is about what it should take to sell a home. When supply is very low, it often causes a bidding war, which in turn causes buyers to pay too much.
"Unless this increase in prices encourages more people to come out and list their home, I don't see how it continues," said Selma Hepp who is the senior economist for the state.
The problems are multiplied with summer ahead and many people trying to find a new home and get moved before school begins. As with so many trends in real estate, there are traditionally long cooling-off periods that precede movements like this. The historically low interest rates are expected to further fuel the drive for new homes in southern California.
Several years back, a similar situation formed and prices climbed significantly with bidding wars a routine. Experts are saying that they are not sure that these unmet housing needs will spur homeowners to list their homes as it has in the past. In the last decade or so, the southern California housing market has fluctuated so radically that homeowners are now more likely to play it safe and just keep their current home.
New Home Sales
The most obvious solution is simply to build a bunch of new homes, but prominent home builders in the state don't seem anxious to invest in building new homes. Their bread and butter for the past few years has been in the area of buying foreclosures, fixing them up and then reselling for a hefty profit. This is a much more cost-effective direction, but it doesn't address the need for more new homes in southern Cal.
Coastal areas are suffering even more. As always, there are never enough fairly priced properties in coastal regions. There are a number of “luxury” type properties and these include Ventura waterfront properties, vineyards in Santa Ynez Valley and Montecito homes. The market has a fair share of high-rise condos as well, even in coastal locales. By the end of summer, these properties that have traditionally been hard to sell, may see a buying boom. Time will tell.