It’s been three years since the sub-prime mortgage crisis began, triggering a global recession. Richard K. Green, director of the USC Lusk Center for Real Estate, takes stock of the housing market in California and other states. How close are we to real estate recovery, and will we ever see pre-2007 prices again?
“The main answer is things have stopped getting worse, and they stopped getting worse a year ago,” Green says.
“California is doing a little better than the rest of the country — particularly places like Arizona, Nevada, Florida, Michigan and Ohio,” he notes. “California was among the hardest-hit states, and we’re starting to come out of it; those other places aren’t.”
However, even in California, housing prices and home sales are far from realizing 2006 peaks. “In Los Angeles, prices are about where they were in 2002. In San Bernardino, Riverside, Fresno and Kern Counties, they’re lower,” Green says. “We’re seeing small increases, but it’s hard to know how to interpret that, because what’s being sold is changing.” He explains that rising prices may simply be due to shifts in the type of housing stock involved; for example, foreclosures made up half of home sales in the region a year ago, but in 2010 dropped to a third.
“Overall, we’re just bumping along flat,” Green says.
Looking to the future, Green believes that cities like Riverside and Bakersfield may never return to 2006 prices in our lifetime (discounting possible inflation). However, the prospects for other parts of Southern California are rosier. On L.A.’s Westside, prices have the potential to reach their old highs within a year or two.
As with all real estate, demand is key. “Places in Malibu are like buying a piece of art, not a home,” Green says. “Rich people value trophies, and a house in Malibu is a trophy.”
Discounting these isolated gems, many places may not rebound to 2006 levels. Before the crash, prices had really gotten out of hand in certain areas, Green says. The mortgage crisis, dire as it was, had a corrective effect.
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