Reality Check: Want to Reside in California? It’ll Likely Cost You a Million Dollars

DEBARYLIFE – The most costly big cities are “seeing seasonal price appreciation ramp up faster than anywhere else,” according to a recent analysis by Skylar Olsen, chief economist at Zillow. Perhaps it’s time to give up on California as a dream state.

In Seattle and “coastal California metros,” monthly rises in property prices were the largest. Between February and March, property values increased by 3.3% in San Jose, 2.7% in San Francisco, 2.4% in Seattle, 2.1% in San Diego, and 2% in Los Angeles.

The average home value in San Francisco, San Jose, and San Diego is more than $1,000,000.00. The typical house value in Los Angeles is approximately $974000, whereas the average in Seattle is almost $880,000.

Citing an earlier analysis this week that indicated “much of the monthly increase occurred in markets which have a disproportionately higher number of homeowners that aren’t hamstrung by mortgage rate lock-in,” Olsen wrote, “It’s not a coincidence that these five metros are also where the highest share of homeowners are likely locked into their mortgage rate.”

That is, compared to homeowners with low mortgage rates, homeowners without a mortgage (mostly baby boomers and their ancestors) were more likely to sell. In the Californian cities of Los Angeles, San Diego, San Francisco, and San Jose, a mere 3% of the homeowner population was unaffected by changes in mortgage rates.

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The fact that these four locations had significant rises in home values and have homeowner populations that are significantly impacted by changes in interest rates is also not by accident, as Zillow’s senior economist noted. In contrast to the pre-pandemic period, Olsen stated, “All of these metros have seen below-average recovery in inventory.” However, their inventory was obviously lower even before the outbreak.

Homelessness in California is an issue that has existed for many years in the state. While it is well known, it is nearly hard to build new homes due to years of failed policies, unrestricted local control, and people unwilling to see changes in their communities. Locked-in low mortgage rates prevented homeowners from selling their houses when mortgage rates abruptly spiked after hitting all-time lows.

The current peak of 8.03% for mortgage rates has been reached, although they are still high. The most recent data for the 30-year fixed mortgage rate is 7.30%.

In these already unaffordable urban regions, that merely made the supply of existing homes scarcer (which is largely why existing home sales fell to their lowest point in almost 30 years).

Think about this: “Southern metros have seen a tame appreciation since the beginning of the pandemic—and this growth has been aided by substantial infusions of new construction,” Olsen noted.

Rising inventory and new development caused the slowest rate of home price rise in other urban regions, including New Orleans, San Antonio, Tampa, Orlando, and Jacksonville. Infuriatingly, adding homes drives down prices, or at least holds them steady, as housing specialists and urban economists have long maintained.

Moving up buyers now have a place to go in these metros thanks to a new building, which Olsen noted was acting as a pressure-relief valve. Later, he added, “Recovering inventory in these areas has helped ease competition and bring price appreciation under control.”

Additionally, it goes beyond monthly gratitude. Los Angeles, San Diego, and San Jose saw some of the biggest annual price hikes. Conversely, house prices in San Antonio and New Orleans have decreased from the previous year.

Additionally, price reductions were quite typical in San Antonio, Orlando, and Jacksonville, while residences selling for more than the asking price were more typical in San Francisco, San Jose, and Los Angeles.