The housing market has been characterized as sluggish, especially in the past decade. While the stock markets shift momentum can be as fast as a fighter jet, the housing market is more like a cruise ship. Since the previous housing bubble (Bubble, 2015), the turning point was indicated with shift in price appreciation and rising inventory; however, in Southern California the trajectory looks significantly different as compared to the state average of 368,160 units in February, 2015.
For the first time in years, the Orange County and Inland Empire markets have taken huge leaps in inventory. Due to the increasing buying activity in Southern California, investment opportunities are now available at large in these two counties. Los Angeles and Ventura have also experienced increasing inventory, albeit very slowly. On the other side of the spectrum, San Diego remains unchanged. As inventory is finally returning to Southern California this summer, we take a look at the implications it presents for both buyers and sellers.
There is little surprise in the fact that 2013 has been the baseline of inventory growth, thanks to the housing market rebounding after the housing crash. Since then, big investments in construction and development activity across the nation have become the norm. Slowly but progressively, the inventory in Southern California markets has been growing.
The prices in some markets are higher than others, whether or not in relation to rising inventory. For instance, the median home price in Southern California is higher than the state average. As such, someone looking to invest in the local real estate has to borrow more funds or pay a significantly larger sum at the time of purchase, despite having various options available in inventory.
The onset of the housing market means that the average household will have a more difficult time buying a home. With the increase in inventory comes more competition, which turns to an increase in price. The average American will have difficulty purchasing a home in Southern California.
In the Southern California counties, particularly Orange County, inventory is up by a staggering 70%. Compare that to the meager 30% increase in inventory in Los Angeles and you realize that most of the money is being invested. While double digit gains are no longer the highlight of the market, the escalating prices in South California are turning it into a seller’s market where conditions are more favorable for selling and renting.
With the increasing number of options available for homebuyers in Southern California and the ease of borrowing, the inventory could decrease over time. However, given that Orange County is now the hub of real estate activity, the inventory is likely to remain high for quite some time. As a seller in this market, you should know that turnkey properties and rentals will help keep a steady flow of income.
The rising inventory in Southern California, coupled with the ease in regulations by the FHA, shows encouraging signs of prosperity in the local market. Sellers and renters should be ready to watch the buyers outbid each other in the search for a home, sending profit into the seller’s pocket.
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Eric Lawrence Frazier MBA
President and CEO
Bubble, D. H. (2015). Southern California takes the trophy for most overvalued real estate in the nation: Austin Texas now home to inflated real estate as well. Retrieved from https://www.doctorhousingbubble.com/southern-california-real-estate-bubble-austin-texas-bubble-territory/