Posted on 02/28/2005 10:32:05 AM PST by Smogger
A psychological milestone is approaching, with its arrival possibly only a month or two away. What happens then remains to be seen.
Barring an unexpected downturn in the real estate market, sometime this spring the median price of an existing home in California will top half a million dollars. The income required to buy that median price home has already topped $100,000.
Is California pricing itself out of the market?
"There's no question we are approaching a milestone," said Jack Kyser, chief economist with the Los Angeles County Economic Development Corp. "We are already seeing corporations that want to move to California, but with the price of houses where it is, they can't even get their senior executives to agree to the idea."
The state hasn't quite reached that level yet, but the median was at record highs both statewide and locally according to January 2005 numbers released Friday by the California Association of Realtors.
The state median home price was $485,700, up 20.1percent from a year ago and up 2.4percent from December, while the median in the San Bernardino-Riverside area hit $338,780, a 38.2percent bump from a year ago and a 3.5percent increase from December.
"We are seeing a whole different world," said Steve Johnson, director of Riverside-based Metrostudy, a housing think tank. "Those of us who have houses are extremely happy, but we will spend our equity visiting our children and grandchildren in adjacent states."
It was less than 2 1/2 years ago, in October 2002, that homes in the area sold for a median price of $183,700 and were increasing by about 15percent annually.
Analysts like Johnson thought they were making bold predictions when they posited increases of 25percent over 18 months.
Instead, the local median has soared by more than 84percent in 27 months.
Few are expecting a quick slowdown.
"Southern California has gained 1.53million new residents since 2000 and is due for another 1.8million-person growth in population by 2009," Mark Schniepp, director of the California Economic Forecast, told a local audience recently. "The increase will require more than 600,000 new homes in the region by 2009."
Since it's cause for celebration when the entire state output of new homes tops 200,000, that much construction is the tallest of orders.
"Demand for housing in California continues to outstrip supply, which is reflected by the dramatic median price appreciation experienced by every region in the state," said Leslie Appleton-Young, vice president and chief economist with CAR. "Seven regions posted median price gains in excess of 30percent compared with a year ago."
Four Inland Empire cities were among the 10 with the greatest median-price increases in January. Norco jumped 61.3percent and was the highest-priced city in the region at $637,250, while Adelanto was up 60.3percent, Hesperia 59.4percent and Desert Hot Springs 54.6percent.
The massive increases are actually affecting another part of the housing market, a part that could have even greater consequences.
"To the south of us in San Diego, we are seeing a large number of apartments being converted to condominiums and sold," Johnson said. "We've seen that with more than 3,000 units in the last year in San Diego alone, and we're starting to see that trend move into the inland counties.
"The rental market is already tight, and this will make it worse."
With mortgage rates rising, sales aren't expected to top 2004's record year statewide. For one thing, the Unsold Inventory Index in January was at 4.2 months, up from 2.3 for the same period a year ago.
"Although inventory increased, it's still low by historic standards," said Jim Hamilton, president of CAR. "Buyers are taking a little more time before making an offer compared with last year, in part because the specter of significant increases in mortgage interest rates has diminished."
But what happens when the median hits $500,000?
"It's hard to say," Kyser said. "It's all related. College seniors are graduating into one of the best job markets in recent years in California, but they'll be asking themselves if they can afford to live here."
City by city housing prices in January 2005, with the median price for existing home sales and the percentage increase or decrease from a year ago. Information is from DataQuick Information Systems.
Cities Median price Change in one year
Chino $403,250 up 27.2 percent
Chino Hills $500,500 up 25.1 percent
Claremont $452,000 up 2.7 percent
Diamond Bar $460,000 up 22.2 percent
Fontana $335,000 up 39.6 percent
La Verne $426,000 down 3.2 percent
Montclair $355,000 up 34.0 percent
Norco $637,250 up 61.3 percent
Ontario $315,000 up 26.0 percent
Pomona $315,000 up 26.0 percent
Rancho Cucamonga $401,000 up 25.3 percent
Rialto $287,000 up 39.7 percent
San Dimas $490,000 up 27.6 percent
Upland $400,000 down 12.3 percent
Michael Rappaport can be reached by e-mail at m_rappaport@dailybulletin.com or by phone at (909) 483-9395.
Come to Pittsburgh, median home is around 120k, higher than most cities in terms of college educated, and labor costs and tax costs are WAY LOWER than Cali.
You need manufacturing labor, you will have em lined up around the block for 30-40k plus bennies.
Live somewhere where you can actually afford to raise a family.
A Gallon of Milk going up to $30.00 a gallon?
Is California pricing itself out of the market?
Not possible, since they've already run everyone off with politics.
Mr. Supply, I'd like to introduce you to Mr. Demand.
Aha! How ya doin' Yogi?
Let it go on its own way as a country.
After over 15 years in San Diego, my brother sold his house and moved to Montana. With the increased value and equity, he was able to pay cash for a custom-built home on a couple of acres.
Wonder what your home is worth? Here is a quick and free way to get recent prices in your neighborhood.
http://realestate.yahoo.com/re/homevalues/
If no one lived there, demand for housing would drop and so would prices.
I'm selling one of the three homes I own in Orange County this month and moving to one in Lake Arrowhead. I bought the house 7 years ago for 300k and I am listing it for 825k.
BTW..state and local tax burden last year in CA was 9.8%, PA was 9.4%.
To be followed by an introduction of Mr. Needle to Mr. Bubble.
keep the HUD money pumping, multiple wage earners per household, easy mortgages from the banks (soon you will see 40 and 50 year mortgages) - and the bubble just keeps ongoing up. the problem us,unlike the stock market bubble, our entire banking system is hinged on the RE bubble.
Soon? 40 year mortgages are here (in California) now. Along with interest only loans, and loans where you borrow the down payment.
MY GOD!!! Yogi, is that you??
Mike
When we lived in Pittsburgh(1986-1993)we lived in a decent house that cost us about $35,000.
Well actually I am sure the illegal aliens have a lot to do with it. Most of the apartment stock is taken up with them so that pushes people into homes. Thus higher demand and Higher prices.
I have lived in California all my life except for a stint in tex. and colorado for school. I can walk outside anytime of year and basically not think about if I will die if I am not dressed warm enough. We can go to the mountains to ski, ocean to surf, and desert to what ever you want in the desert in the same day.
Yes I guess it is expensive to live here but if you know the joy of being outside year round, with your choice to do anything you want entertainment or work wise, then all those things have a price.
If you are talking about spiritual issues... well there are not many luke warm christians sitting in the pews at churches here. See it is counter cultural to go to church thus no social pressure to pretend to go to church because mommy and daddy will bug you. California is a mission field no different than africa, asia, europe.
California is not for everyone, but those that love a certain quality of life, an outdoor active life, with diverse geography, options to do things, then the west is where to be. I dont see that changing in the future unless their is a claticlismic event.
What kind of job does he have?
My wife and I sold our tiny (<800 sq ft.) little cottage near Morro Bay, CA for $337k last year. We moved to St. Paul, MN, and bought a house twice that size for half the money. Paid cash, too, and had a nice pile to use for other things, like retirement.
Watch for this trend to grow as the boomers near retirement age. CA is going to see the population moving away that is 55+.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.