I quickly wrote this e-mail to the author of this article ([email protected]). There are obviuosly many more points to make but I just had to say something.
Diane,
In my opinion this article is totally misleading and does not reflect the reality of the current market conditions in Southern California. There is no mention of the home price to income and home price to rent ratios. There is no mention of the ballooning inventories in California that show no signs of abating. The record inventory for San Diego was in June 95 at 19,250 (bottom of last downturn), according to zipreality right now they have 21,290. The record inventory adjusted for population growth is 22,174. They should break that record in a month or two. Orange County inventory has increased from 7245 units on 1/2/2006 to 15,048 on 5/30/2006 – DOUBLED, Los Angeles county is adding 3000 to 4000 units to inventory every month. Unit sales are down throughout the entire region.
“The main culprit behind the latest price hike is the unrelenting demand for limited housing, a problem fueled by record-low mortgage-interest rates, adjustable-rate financing and a population stampede into Southern California that shows no sign of slowing.”
If this is true then why are areas of Southern California approaching RECORD HIGH inventories. That statement is very backward looking. I request that you being a journalist try this exercise, go to UHAUL.com, find a truck and get a quote of how much it cost to move into California verses moving out of California, I used Irvine and San Antonio. It is 1000% more to rent that UHAUL out of California than to move into the state, 1000%. What does that say? I am not saying the structural problems outlined in this article do not exist, they do. What I am saying is you can only take the structural problems of building restrictions and immigration so far. Yes they will make homes more expensive but the rate of appreciation in the bubble areas such as California transcend any of these structural problems. I am very surprised that the LA Times would run this article now. The implication is that current home valuations in the area are economically justified, the empirical data of rising inventories, declining unit sales, and rising foreclosures tell a completely different story.
Now really think about this, San Diego is the bellwether for Southern California real estate, we are only in the first stage of this downturn and SD is already at the historical high inventory. This is a quote from a San Diego realtor Bob Casagrande about the reality of the California housing market
“The reason that both the average and median prices have increased during the past year is that the sales distribution has shifted dramatically. The low end of the market has been crushed by the loss of buyers due to the increasing interest rates, especially the ARMs. The net effect is that the mix of homes sold has proportionally more expensive homes than previously. So comparing the average/median price now to the average/median price a year ago is like comparing an apple to an orange. Price reductions are real and ongoing and increasing.”
This is probably not the only e-mail you will get. Astute observers of this real estate market will call you out on this. This market is heading for a major correction and that argument is being backed up by the data everyday.
