“Bubble Watch” digs into trends that may indicate economic and/or housing market troubles ahead.
Buzz: Southern California home prices broke another $100,000 price barrier nearly 11 times quicker than the previous 100K breakthrough.Source: My trusty spreadsheet tracked DQNews’ median prices for six Southern California counties and the benchmark’s history of breaking through $100,000 price levels.
In another symbol of the curious homebuying frenzy of the pandemic era, the median selling price in the six-county region surged in February to $706,000 — the first time the benchmark had a “7” as its first digit.
Just 15 months earlier in November 2020, this price yardstick crossed the $600,000 mark. That’s a 14% annualized gain for the period.
This swift appreciation is far different than the time the housing median took to break $600,000, and that tale serves as a harsh reminder of the previous housing bubble and its painful demise.
SoCal’s median initially hit $500,000 in April 2007, just as buying binge was peaking. The benchmark spent only five months above $500,000, before tumbling to $247,000 (yes, half off!) in the spring of 2009.
The index didn’t come back to $500,000 until June 2017. All told, it took 163 months — that’s 13-plus years — between the first time the median passed a half-million and when it cracked $600,000 in late 2020.
That’s 13-plus years of local home prices earning only a 1% average annual gain for the period. Yup, almost nothing.
And yet, this painful period was preceded by three swift breaks of 100K barriers.
$300,000: The median crossed it in May 2003, 35 months after the first $200,000 price in June 2000. That was 15% annualized growth.
$400,000: It took only 13 months to reach it in June 2004. That was a 25% annualized gain — almost twice as swift as pandemic era gains.
$500,000: It took 34 months to hit it in April 2007. That equaled 9% annualized gains.
On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … FOUR BUBBLES!
Look, these 100K mileposts are far more symbolic than economically meaningful. And as prices rise, each threshold is a smaller percentage gain.
Still, they’re noteworthy moments that can tweak emotions, like smiles from owners and sadness from house hunters.
And the wild swings in the time between these “historic” events should serve as a reminder that price increases — and certainly huge gains — are by no means guaranteed. And the years surrounding the Great Recession aren’t the only example of stagnant homes prices.
DQNews’ database doesn’t tell us when prices first topped the $100,000 barrier. It starts in January 1988 with a $133,500 median price.
But it took 12 years and five months to crack $200,000. That period was highlighted by another housing boom turning into a bust — a downturn that chilled real estate for much of the early-to-mid 1990s. This era’s gains averaged just 2% annually.
So, over the past 34 years, Southern California had two periods in excess of a dozen years where prices were barely moving higher.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at email@example.com
Source: Orange County Register