WHY ARE PRICES SO HIGH?
By LARRY ROBERTSON Why are home prices so high in California? Let’s begin by getting past the obvious, Supply and Demand. Obviously this is the best single reason, yet, you must also consider what I call the Buyer’s Psyche. They realize that their home is worth a “lot of money” right now, however, if they were to sell, their new home would cost a “lot of money.” This has caused many potential home Sellers and Buyers to stay right where they are. Many have chose to remodel or expand their current home. This Psyche (as I call it) has caused a critical shortage of available homes. Thus the state is experiencing the lowest inventory this Realtor has seen after 30 years of dealing with market conditions. With inventories at a critical level, we are seeing 3 to 15 Buyers for every property available. This has and will continue to drive prices up, up and up. Let’s face it, everybody would like to live in the sun shine state of California (I don’t always know why, location, location, location and that’s the reality). We will continue to find ways for people to buy the home of their dreams. Now we are seeing 40 year and even fifty year loans. These new loans lower the monthly payment. Also, all that extra interest is Tax Deductible. So if you want that new home, we can find a way to purchase it.
NEW NOTE as of May 2006, we are seeing those many 1/4 point prime rate increases taking affect, slowing down the real estate market in S. California. Now we are seeing inventories building up, Buyers becoming reluctant to take on a higher interest loan. Many being side lined with the gas prices rising. When the economy changes, real estate is the first industry to feel the effects of an economic slow down and on the reverse it is the last to recover from an economic recovery (that’s just how real estate works). Remember as I always say: “Real estate (land) is the only limited resource, with no alternate resource available.”