LOS ANGELES (CBSLA) — Owning a home is part of the American dream for most people, but for many living in Southern California it’s getting more and more expensive to turn that dream into a reality.
According to the California Association of Realtors, the median home price across the state has topped $750,000 — up nearly 24% from last year.READ MORE: Millions In Counterfeit Cialis Pills, Knock-Off Designer Apparel Seized At Port
“This is one of the largest increases we’ve had since 2006, since the last housing boom,” Leo Feler, a senior economist at UCLA Anderson Forecast, said.
He said that the current boom is largely due to a simple economic model.
“We have really high demand and very little supply,” he said. “We normally, this time of year, have around 700,000 to 800,000 homes overall on the market in the U.S. We’re at less than half of that.”
Feler said that despite the high prices, buyers are staying in the market due to continued low rates.
“Buying a home became more affordable because of the lower mortgage rates,” he said. “Now, that said, you still have to make that down payment, and this is where it becomes more of a reach.”
In Southern California, houses are only on the market for about eight days are are bringing in about 2% more than the asking price, according to CAR. But, Feler said, he does not expect to see the same kind of bust that followed the last boom.
“So, looking back, the buildup of the housing boom right before the crash, almost 25% of the borrowers during that period were low-credit-quality borrowers,” he said. “We called these ninja loans — no income, no jobs, no assets.
“This is very different,” he continued. “The overwhelming majority of borrowers are putting 20% down payments. This is really very high quality borrowers.”READ MORE: Ladera Ranch HOA Refuses To Allow Pride Event At Neighborhood Park
Feler also said the biggest winners in this boom are suburban areas.
“So, anywhere single-family homes are available,” he said. “San Fernando Valley, Porter Ranch, Calabasas, Agoura Hills, Oceanside, Anaheim — all of these areas that are further out.”
As for buyers, Feler said they might want to wait.
“This is a really difficult time to try to be a home buyer there,” he said. “There’s a benefit to waiting, just because there aren’t a lot of good options right now.
“So, the fed has said that they’re going to keep rates low at least through the end of the year, likely into next year until the economy has fully recovered,” he continued. “Also, home prices have already appreciated to the level that we think is sustainable and, that said, there’s a benefit to waiting.”
Sellers, on the other hand, he said should go for it.
“What a great time to list your house in the market,” he said. “If you’re looking to downsize, this is a great arbitrage opportunity to be able to take your really large, valuable home, given that there’s so little supply or your home that might have some kinks and quirks that wouldn’t otherwise sell very well. This is a great time to do it.”
Whether buying or selling, Feler said people should have a good financial plan and exercise patience.
“I really don’t think there’s that much more space for home prices to increase,” he said. “And that means that you don’t have to go out and buy in the middle of a hot market.”MORE NEWS: Long Beach Acura Grand Prix To Return In Sept. With Full Crowds
Part of the lack of supply issue being experienced is due to the lack of new construction. Prior to 2008, about 2 million new homes were being built each year. After the bust, that number dwindled to under a million. It has since rebounded to around 1.7 million, though the pandemic had an impact on that last year.