Couple of points which I NEVER see in any of these blogs… As it relates to the wealthier areas.
The run up in prices has been crazy – but it pales in comparison to how much richer the wealthy have become during the current administration (and before).
The top income earners are not only making most of the additional wealth these days (the middle class is slowly declining in buying power), but due to the tax cuts are keeping a greater percentage. The federal rate on capital gains is 15% etc.
The wealthier people are competing with other wealthy people for the really great properties – and these get sold. They have literally nothing to do with the current housing crisis.
Take example where I live, La Jolla CA. A wealthy community (not everyone, but here is where the wealthy live) and the folks in this town with money own the stocks, have stakes in the mergers, etc., are the CEO’s (and all the outrageous salary/options that go with it) and have gotten far wealthier in recent times. Home prices for the good properties (remodeled, new, ocean views, square footage larger than 3K feet, large lots, etc.) have come off their unrealistic heights and are now merely insane. But these properties are the exception rather than the rule. They sell because they are a limited quantity and supply and demand does apply. There are many wealthy buyers fighting over the excellent properties. As these are the properties that sell, they bring up the median.
The vast majority of the homes have flaws. They don’t have a full ocean view, they are 2,900 feet or smaller, they are on tiny lots (La Jolla only allows you to build a house which is 60% of your lot size – example a 4K sq foot lot yields a house which is 2,400 feet max), are near busy roads or schools, or they were last updated before Elvis died. These house are sitting on the market for months and months. They are still insanely priced, but they aren’t selling. This is why the median is up in the wealthier communities.
Where I live (by the beach), there are properties just east of me which are old, smelly, and still priced in with a 250% increase from 5 years ago. Even when they come down to 150% increase, they still are tiny, smelly, crappy, etc. and in a market where people have lost their “everything will increase” mentality, they just won’t move.
In La Jolla 2 years ago, you could buy a 1.2 million dollar moldy, smelly, cruddy, 2,000 sq foot house with no view, put a new kitchen in, new carpet, etc. and sell it for 1.8 million. Those days are over, but even if the house prices are down 10% or more, the buyers who will step up and buy the cleaned up tiny house for over 1.5 million are gone… Because at the end of the party, they are just that… Smelly, tiny, crappy, and filled with termites and no one wants to wake up and realize that they just paid 1M+ for this kind of property.
