Study: Los Angeles Not in a Bubble
LA’s position as the most unaffordable big city to buy a house in the whole country and its prices that recently surpassed pre-recession prices might seem to be heading toward a real estate bubble situation, but actually the market’s about halfway through a solid recovery, says the UCLA Anderson Forecast released just today. Oh, whew! The real estate market’s comeback started in 2012; prices have risen 27 percent since then, says KPCC.
The forecast predicts four more years of rising prices and a 35-percent rise in home prices “before there is any sort of correction.” But even though houses are definitely getting more expensive, no one’s ringing the bubble alarm here because “The current rise in home prices seems to be driven by rising effective demand and limited supply, not by speculation,” UCLA economist William Yu wrote in the forecast. Tight building regulations and environmental rules coupled with more jobs means that though more people want to buy houses, there just aren’t enough of them getting built to keep up.
That limited supply means that homes won’t be getting more affordable any time soon. “In fact, just the opposite,” said Jerry Nickelsburg, a senior Anderson Forecast economist. Nickelsburg, speaking about all of California, told the City News Service that the idea that we can “just build more housing” is not, ultimately, going to be effective in the short-term because it takes a while to make the changes in zoning and building regulations that would allow for ramped-up construction to stem demand, and that, on a citywide scale, “Realistically, this is not going to happen in the coming few years.”