California Property Looking Lucrative

by 21 Jan 2013

For the ostensible ground zero of the 2008 housing crash, California has mounted a sturdy rebound in both property values and home closing rates. As I noted in a previous post, the markets demonstrating the strongest yearly recovery were overwhelming located in the West Coast. As the cross-national housing recovery seems slated to maintain momentum throughout 2013, investors are left wondering as to what areas might be the most promising areas of new investment.

Corroborating reports that have emerged throughout the past two months, a new release from the Los Angeles Times validates that California’s formerly lucrative market is now rebounding strong as a whole. As the story notes, California’s median home value hit a four-year high at the close of December 2012. In fact, year-over-year, the median value of California home prices jumped a full 21.5%. Judging by the uneven waters the California market has been sailing for the past four years, it seems that this sharp rise in the value of California real estate has much to do with the market steadily climbing away from rock bottom.

Taking all this into account, what are the concrete market factors which seem to be motivating this return to stability? It seems at the moment that a combination of loan and mortgage responsibility combined with escalating market demand are working in tandem to persistently strengthen California’s property sector. As the Los Angeles Times piece notes, foreclosures and loan default began a decline at the close of 2011. California’s collective housing inventory has also dropped, leading to a sort of supply-demand bottleneck with those seeking new homes now facing greater competition for quality property.

The latter equation seems to be a particularly staunch motivator for the rise in home property values. A rebound in consumer confidence has done wonders to encourage previously shy buyers to reexamine the housing market, and now that the worst of the foreclosure crisis seems to have passed these same prospective homeowners are much less shy about putting down loans for new homes. This has turned into a rather fortunate chain of events for California is particular, as the record lowering of interest rates has made putting down for a loan significantly less intimidating.

While figures about commercial real estate remain somewhat cloudier, positive market indicators about residential property continue to accumulate. The percentage of homes sold month-over-month that were forced onto the market due to foreclosure is continuously declining, reaching a low point of 15.5% of sale volume in December. Similarly, the percentage of homes sold as short sales are declining, with the 25.3% of homes sold in December being put on market at less than their actual price- a decline both month-over-month from November and year-over-year from December 2011.

So, ultimately, what may this mean for investors? We may be looking at a point where safe investment in California real estate could return positive asset increases for savvy surveyors. Those who examine region-specific market factors (especially buyer demand and local job market recovery) could very well ride the crest of building market demand and turn a profit on selling property that only becomes more valuable with time. Luckily the collaborated economic data from the close of Q4 2012 point towards property market growth, so we may be looking at a time to redirect some liquid cash towards housing investments.

Harrison Stowe is a writer for NVR Inc., a prime developer of Chesterfield new homes. Addressing a range of real estate topics including investment, mortgages, and new construction, Stowe combines finance knowledge with additional experience working with Ryan Homes in the current real estate market.



Is TILA-RESPA a good or bad thing long term?