A study has come out explaining that a city like LA will never support the kind of growth we are seeing at the moment. The fact that my house in the area would be getting priced out by the area is a small part of their problem.
L.A. has more than 1 million residents, including the suburbs. So you can tell that the area is not immune from high prices.
The real reason the LA housing market is overpriced is they have too high of a house price to begin with. For the 1% of California that own homes, buying is no problem, because you have low interest rates and that’s generally what you save up for. Home prices go up, and up and up, and keep going up, until suddenly someone goes out and buys a big house and starts racking up huge bills.
The second reason the LA housing market is overpriced is that they have too many new homes in their city now. Too much is built in the city to make it affordable by those that can’t afford to pay more than 5x that of the house, and keep building.
I have been told by a few different sources that the next wave of real estate in Los Angeles will go from 10% to 20% of existing homes.
This means that all those single family houses that have been built in the LA region are more than five times the value of homes in the rest of the state.
People who live in areas that are already too expensive to live in the Los Angeles area, are now forced to move to more expensive area, like the Bay area, even if they can’t afford to buy a home in the LA area, while those who are currently living in the higher priced areas are forced to build bigger and bigger houses, because the demand for housing is sky high. The new housing that’s currently being built in LA is going to cost more, and there’s a huge supply of houses for sale with these new higher priced homes. These huge new homes are going to turn LA housing into something that can be bought for less. That’s happening already in the Bay area.
It’s happening more frequently than you may think.
The Los Angeles area is having its own foreclosure crisis right now, and it is going to get worse than the housing bubble, just because the average household income is going to go down.