Tuesday, Apr 07, 2009
Recovery USA - where California leads, the rest will follow
Forbes: The American Suburb Is Bouncing Back
The vast flatlands sprawling east of Los Angeles, consisting of roughly 3 million people, have suffered one of the highest rates of foreclosures and surges in unemployment in the nation. Yet now sales are picking up and inventories are finally beginning to drop. Even developers of new properties report a strong uptick in sales. In new developments in the Inland Empire, Brookfield Homes reports sales volumes up 150% since six months ago. Although the economy is still hurting, the housing trend has become much more positive. Statewide, existing home sales have jumped 30% over the past year, taking the inventory from an estimated 16.7 months to less than seven months. Most encouraging, this activity is taking place exactly where the market was hit hardest in the beginning - low-end suburbs.
6 Comments
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1. drewster said...
A little warning for owners of BTL flats in northern cities:
Yet as the prices of houses have dropped many potential [apartment] dwellers have opted to purchase single-family homes -- or are sitting anxiously on the sidelines waiting for prices to drop further.
We've discussed this on HPC for ages now; who is going to buy a "luxury executive apartment" (read: pokey rabbit hutch) when they can get a house twice the size nearby for the same money?
2. inbreda said...
"sales volumes up 150% since six months ago"
So in the last 6 months they sold 3 as opposed to the 1 in the 6 months before that. That's a recovery and a half!!
3. Si said...
Actually inbreda, I think you'll find that's 2 1/2 ;)
4. 51ck-6-51x said...
California's economy has a large dependency on international trade (it has the two busiest ports by TEUs in the U.S. - numbers 7 & 8 in the world) and should bounce back as global production picks up.
5. icarus said...
In that area "median house prices were roughly seven to10 times the average income (in 2007) of potential buyers. Now they are settling close to the historic norm of three times".
Assuming average income of potential buyers hasn't changed much we're talking of falls of 60-70% here. No wonder there's a rise in sales.
6. drewster said...
icarus,
Precisely. California has seen some of the greatest falls in prices thus far. When interest rates are 0.25% and house prices are 3x income, there's no point renting any more. The area described in the article, the so-called "Inland Empire", isn't a glamourous area. Think of it as the Slough or Warrington of California. Most people just want to buy an ordinary house and get on with their lives; they aren't too concerned about wringing every penny of value from their homes.
The region's population is rising too, which no doubt helps put a floor on house prices. Unlike the Poles in Britain, Mexican immigrants to southern California are still arriving in droves.