Succinct sum up of the state of strong housing markets from article about Los Angeles
Nothing particularly new but very succinct in the LA Times interview with Dana Kuhn of the Corky McMillin Center for Real Estate at San Diego State University.
Orange and Los Angeles Counties have pretty much recovered from the housing crash, while the "Inland Empire" -- San Bernardino and Riverside Counties -- has not. Coastal markets across the West have mostly recovered (SF Bay never really declined, San Diego, Seattle and Portland are all successful).
While not mentioned in the article, this is pretty much true of desirable center city markets on the east coast, in and around New York City, Washington, Boston, Center City Philadelphia, etc.
Points from the article:
1. Pent up demand for housing is running into limited inventory because since the 2008 crash, production of new housing has been limited. Therefore, prices go up.
2. Low mortgage interest rates abet a rapid rise in prices.
3. Limited land supply in the most desirable places makes for more complicated and more expensive projects. From the article:
Land is increasingly scarce, and that’s forcing people to build up rather than out. And those higher-density projects are more sensitive politically, more difficult to get approved and take longer to get through the pipeline. You can have agreement about needing more housing in a given market, but when it actually comes down to [building] those 300 units on that corner in that neighborhood, you get resistance.4. Wages haven't kept up with housing price increases.
[Here he doesn't discuss how this may drive changes in housing tenure forms. E.g., sharing houses including the purchase, see "Two couples pool money to live under one roof," Toronto Star and an increase in the willingness to rent out a portion of a house or to create and rent accessory dwelling units. See "How real estate speculation, ugly architecture, and gentrification shape Austin’s urbanity," Architects Newspaper and "Accessory Dwelling Units Become Legal in Honolulu County," Hawaii Life. Initiatives to approve ADUs are moving forward in San Francisco, Ann Arbor, and many other cities as a result of high housing costs and the need for greater supply, especially of lower cost units.
Or how this is abetted by a rise in interest in urban living on the part of higher income households (not necessarily wealthier, but higher income) which reshapes the market and works to price out middle income buyers also.
5. Because of high priced single family detached housing, new home buyers are likely to end up with attached housing or condominiums in denser multiunit residential buildings.
6. And in neighborhoods which are attractive, but not their first or preferred choice, what the Live Baltimore residential attraction program calls "one over neighborhoods" which are near or adjacent to more popular much more expensive neighborhoods, with similar housing stock but are less likely to possess thriving commercial districts and access to other amenities ("Pigtown Chosen as a Live Baltimore “One Over” Neighborhood," SouthBaltimore.com). From the LA Times article:
And they’re probably not going to be able to afford to buy that unit in the same neighborhood in which they would rent if they were renters. So they have to make a lifestyle concession in order to become homeowners.7. Younger demographics (millennials) may be less interested in buying housing now, in part because they'd rather rent to live in attractive places where they can't afford to buy, but as they age and the nature of their household changes, and their income changes and a mortgage interest deduction becomes attraction, housing purchasing will increase within this demographic.
8. Prices will continue to climb, we don't know for how long, as long as inventory is constrained, demand is high, and mortgage interest rates are low.
Labels: housing market