The Southern California real estate market experienced another month of record highs. In just one year, home values have seen an increase of 8% media pricing. As we have seen in prior months of this year, the continued lack of supply seems to be the primary reason behind this in conjunction with historically low mortgage rates. Mortgage rates have decreased in the past three of four weeks. Freddie Mac Chief Economist Sam Khater described mortgage rates as “mostly tranquil.” He continues:
“After a sharp run-up in the early part of 2018, rates have stabilized over the last three months, with only a modest uptick since March,” he said. “However, existing-home sales have hit a wall, declining in six of the last nine months on a year-over-year basis.”
As mentioned earlier, the lack of supply seems to be the determining factor for this. The LA Times cites developer’s inability to meet demands of strict zoning laws and opposition from existing residents as a major component.
Many are left wondering how long the strong market can continue? As the economy continues to be strong, it does not look like it is slowing down any time soon. The LA times cited USC Lusk Center for Real Estate Director, Richard Green, who states that he, “doesn’t foresee a crash, but noted that while home-price gains are accelerating, there are signs that rent growth is slowing. Rent, he said, can be a better gauge of how much housing cost incomes can support...I don’t think prices can increase at this rate for very long”. Time will tell how long the market can continue with such vigour before it flatlines.