South Orange County homes have tripled in price from the lows of the mid 1990′s to a current median price of $615,000. Some fear that a real estate bubble exists that will soon burst as it did in 1990 through 1995. We don’t see this as a viable scenario and here’s why.
The balance of supply and demand is always the bottom line on home pricing. Supply of housing has been low for several years now, and demand has been up. Back in the late 1980′s, new home builders were reckless and built up large inventories of unsold homes which contributed to the glut of housing at that time. Learning from the past mistake, builders today have been constructing 63% fewer homes than they did in the late 1980′s, and this rate has not kept up with population growth.
With job growth averaging about 14,500 jobs per year, and builders pulling about 8,500 permits per year (single family and multi-family homes), only about 60% of the demand for new housing is being satisfied currently.Unemployment in
Future job growth for the rest of this decade looks rosy as well. High technology is still rebounding from the dot.com crash of several years ago and
The other factor creating demand especially for
With these factors creating strong demand, and limiting housing supply, we don’t see a bursting bubble even if interest rates do rise significantly. At worst, price appreciation may stagnate, and prices could possibly pull back a little bit for a period of time in order for salaries to catch up to housing prices…
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