This Housing Market Cuts Both Ways

June 16, 2017

While the presidential election is grabbing national headlines, the big story for Southern Californians is the cost of housing.  High housing prices are driving low, middle-income families out of California, and many who are staying are leery of buying, thinking we may be in a bubble that’s about to burst.  That may be wishful thinking, as explained by a UCLA economist:  “LA’s housing market, despite becoming more expensive and unaffordable, is not in a bubble.  The current rise in home prices seems to be driven by rising effective demand and limited supply, not by speculation. . . the housing bubble burst we experienced several years ago is unlikely to haunt us this year or next, and the smart money will continue to invest here.”  That’s where it cuts both ways: painful prices, but a terrific investment opportunity! Although no crystal ball can account for uncertainty in the global economy or U.S. elections, the economic forecast indicates the Los Angeles housing market is in the middle of its rebound and is expected to experience price increases for at least another four years, with values increasing 35%.  That’s a whole lot of increased equity for homeowners.  I point out this good news to grimacing clients as they calculate a down payment and monthly mortgage for a family home in a great school district. There are other silver linings for home buyers as well:  you can get an FHA loan with a 3.5% down payment, and 80-10-10 loan requires only 10% down, and interest rates continue to remain extremely low.  True, high prices may seem daunting to the home buyer wanting to get in the game; but as homeowners, they’ll ride the wave of property value appreciation.  When it comes to investing in Los Angeles real estate I tell buyers, “Get in as soon as you can.”

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