Index: Home prices reach the highest levels in years
Southern California market boom is driven by record-low mortgage rates and surge in people working from home, experts say
Southern California house prices continued rising in January as buyers high on low mortgage rates continue to bid up the cost of homes, especially in the Inland Empire, according to CoreLogic’s latest Home Price Index released Tuesday.
Price gains in Riverside, San Bernardino and Orange counties rose to their highest levels in nearly seven years. Los Angeles County’s price appreciation was the largest in three years.
Inland Empire house prices jumped 12.4% in the 12 months ending in January, the biggest year-over-year price gain since June 2014, according to the CoreLogic HPI.
The Inland Empire has seen a surge in demand for all housing, for sale and rental, as employees now working from home seek more space at an affordable cost, pushing prices to all-time highs for the first time since the pre-recession housing boom of the mid-2000s.
But price gains have been steady in coastal areas as well.
Orange County’s house values increased 7.3%, the biggest appreciation rate since May 2014.
In L.A. County, house values rose 8.1%, the biggest gain since March 2018.
Like the S&P Case-Shiller index, CoreLogic’s HPI is based on comparisons between each home’s previous and latest selling prices. The index uses sales comparisons for existing single-family homes only.
Economists have given several reasons for why the housing market has boomed even as the coronavirus pandemic hamstrung the overall economy.
Chief among them have been record-low mortgage rates, with the 30-year fixedrate below 3% for the past 11 months.
Experts also note that the pandemic impacted renters more than the homebuying slice of the workforce, which more often is able to continue working from home during lockdowns.
Demographics also play a role, with millennials reaching an age when people typically start having families and buying homes. At the same time, the number of homes for sale continues to dwindle as homeowners fearful of showings during the pandemic delay putting their properties on the market.
Nationally, home price growth experienced its first double-digit appreciation rate since November 2013. U.S. house prices were up 10% in January.
“First-time buyers (are) driving high demand, (and) entrylevel homes remain in short supply,” CoreLogic Chief Economist Frank Nothaft said in a statement.
Homes selling 25% or more below the local median home price had an annual appreciation rate of 14%, wiping out most of the benefits of recordlow mortgage rates, he said.
“When interest rates rise,” said Nothaft, “the affordability squeeze for first-time buyers will become even more of a challenge.”