“bubble clock“Dig into trends that may indicate further economic and/or housing market problems.
Discussion: Southern California pandemic-fueled home prices are rising at a pace not seen since the early days of real estate’s rebound from the Great Recession.
Source: DQNews/CoreLogic Chronicles of Reliable Spreadsheet Analysis of Homebuying Data, April vs. 1988.
The average sale price for the six-county Southern California area was a record $655,000 in April, up from $60,000 in just three months.
This means that the price of the typical home here is increasing by $1 every 2 minutes during the February-to-April period.
Yes, it’s a prime buying season, so prices tend to jump – an average of 5% over the three months ending 1988 in April. This year the bump was double at 10%!
How rare is this? Only 10 times in 34 years have we seen a great price.
And when was the last time we saw a sharp surge?
Well, there was an 11% jump in the pandemic phase in August – so COVID-19 caused the two biggest spikes in 34 years. But before the coronavirus was a household name, the last time it saw a big increase was in June 2013.
Let’s consider the three-month gains at the county level through April, ranked by the size of the price jump.
San Diego: Record $700,000 average, up $60,000 in three months. That 9.4% gain has been on the top 11 times since ’88.
Orange: Record $872,750 average, up $73,750 in three months. The 9.2% gain has topped 10 times since ’88.
Angel: A record-tying 8.7% gain to $60,000, averaging $750,000 in three months, the highest it has been since ’88.
Ventura: Record $705,000 average, up to $55,000 in three months. 8.5% gain tops 36 times since ’88.
San Bernardino: Record $436,500 average, up $34,000 in three months. That 8.4% gain tops it 23 times since ’88.
Riverside: Record $489,750 average, up $33,000 in three months. That 7.2% gain is more than 25 times since ’88.
On a scale from zero bubbles (no bubbles here) to five bubbles (five-alarm alert)… Five Bubbles!
Southern California housing was not affordable when 2021 began.
And how many people got 10% salary increase from January? Hence, there is a further loss in affordability in the first quarter of the year.
Don’t forget, the required downpayment also increased by 10%.
In addition, mortgage rates have risen from January’s all-time lows, cutting a home hunter’s purchasing power by nearly 4%.
Jonathan Lancer is a business columnist for the Southern California Newsgroup. he can be reached here email@example.com
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