California's Next Housing Bubble…
First Published Friday, February 13, 2015 — Last Updated November 13, 2017
The charts below show a new housing bubble may be forming in California. That is not to say that a collapse in home prices is imminent. Bubbles take years to form. California is currently suffering from a housing shortage and lacks any sense of euphoria that will lead to over production and an excess of supply. Moreover, they burst at different times in different regions. Lastly, while all states experience a real estate cycle, most states do not experience the dramatic price collapse associated with bubbles.
Current Market Indicators
- We are currently under building. It is estimated that California needs to build in the neighborhood of 100,000 housing units per year more than we are currently building.
- Inventory numbers remain low throughout the state and sales are at a moderate pace.
- Speculators are absent from the market.
- Toxic loan products are absent from the market.
- The rate of price appreciation is less than half of what it was prior to the last market collapse.
- The difference between the short term cost to own and the cost to rent remains in a normal range. Here in Yuba City, the short term cost to own is about 35% more than the cost to rent a similar home. The cost to own was about 125% higher than the cost to rent at the peak of the market.
"With that in mind, home buying still needs to be viewed as a long term investment. As an example, the median home selling price in Sacramento was $217,000 in January of 2003. After the collapse, it didn't return to that level until April of 2013."
Market Charts
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