Are you thinking about buying a home in California in 2021? Wondering what kind of…
Are you thinking about buying a home in Southern California in 2017 or 2018? If so, you should know that the real estate market has changed dramatically over the last few years. To bring you up to speed, we’ve created this update on the SoCal housing market.
Buying a Home in Southern California: 3 Things to Know
Home prices have risen steadily over the last year, in most cities across Southern California. But they appear to be rising more slowly now than in the past. But don’t let that cooling trend fool you — there’s still a lot of competition among buyers. This is largely due to inventory shortages in many housing markets.
Those are just a few of the things you should know when buying a home in Southern California in 2017. Here’s an in-depth look at these three important trends.
1. Home prices have risen steadily over the last year couple of years.
Buyers who are planning to buy a home in Southern California in 2017 will encounter higher prices than those who purchased within the last couple of years. That’s because house values across the region have risen steadily.
For example, the real estate information company Zillow reports that San Diego’s median home value rose by more than 6% over the last 12 months (roughly April 2016 to April 2017). In Los Angeles, prices rose by 8.5% during that 12-month period, while the San Bernardino real estate market experienced a one-year gain of 8.1%.
So that’s the first thing you need to know about buying a house in Southern California in 2017. Housing costs have risen over the last couple of years, in almost every city across the region. But they appear to be leveling off to some degree, which brings us to item number two…
2. Prices appear to be rising more slowly, as we enter summer of 2017.
The Southern California real estate market is experiencing a trend similar to many cities across the country, in the sense that home price growth appears to be slowing down.
While prices are expected to rise in most California cities over the next year, they will probably do so at a slower pace than in the past.
For example, housing analysts recently predicted that home prices in San Diego would rise by around 3% over the next year (through May of 2018). That’s quite a bit less than the 6% gain recorded over the last 12 months. Similar predictions have been made for other housing markets across Southern California.
While the numbers vary from one area to the next, the overall trend is the same. The general consensus is that home prices will probably rise more slowly over the next year than they did in the last couple of years.
This anticipated slowdown is partly due to the fact that home-price appreciation has outpaced wage growth in recent years. This has led to affordability problems in some parts of Southern California, which could be why we are seeing something of a cooling trend with home values.
Of course, predictions are rarely 100% accurate. So we shouldn’t get too wrapped up in the exact numbers that are being forecast.
Here’s the takeaway for those planning to buy a home in Southern California in 2017: While prices might be slowing, they are expected to continue rising to some degree in most cities across the region. This means that home buyers who delay their purchases until later in 2017 or 2018 could encounter higher housing costs.
3. Housing inventory is still tight in many cities, driving competition among buyers.
Those who are planning to buy a house in Southern California in 2017 should be prepared for competition from other buyers. This is especially true in the major metro areas such as San Diego and Los Angeles.
Demand for housing is still high in most parts of the region, but inventory is lacking. In many cities, there just aren’t enough homes listed for sale to satisfy the current level of demand. This forces buyers to compete, often fiercely, for a limited number of properties.
According to a recent report from the state’s Department of Housing and Community Development, an estimated 180,000 new homes need to be built annually to keep up with population growth in California. But only 80,000 per year are currently being built.
A six-month supply of homes for sale is generally considered to be a “balanced” market. When inventory drops well below that level, it becomes a sellers’ market. As of June 2017, most cities in Southern California had two to three months of supply. The San Diego real estate market was even more constrained.
So those are some of the things you should know about buying a home in Southern California. Given the recent drop in mortgage rates, and the expectation for continued home price appreciation, one could make a case for buying sooner rather than later.