Sunday, June 05, 2005

California Gold Rush... 2005

The California Building Industry Association estimates that the increases in property prices over the last few years has pumped up homeowner equity to about $1 trillion. That's a lot of zeros! They put the median gain in equity since 2000 at close to $250,000 for a single family home in California. This increase in homeowner wealth is great if you took the plunge and bought a home but not so good for those who were waiting for prices to drop.
In 2000 31 % of California households coule afford to purchase the median priced home. Today that number is only 18%. Many people are permanently priced out of the market as wages have not risen nearly as fast or as high as home prices. Even if home prices were to drop 20%, the interest rate increases would off set the price decline.
Reminds me of a sign an agent had over her desk in 1979 when I entered the business. It was a picture of an old man with a beard to the floor.....the caption: "Someone waiting for real estate prices to drop in California".
My family moved to California in 1952 and prices have gone up and down over the years with one guarantee..Prices always go up!
A home in east Manhattan on a 50x150 lot in 1980 was $120,000. I had many clients who were waiting for the prices to drop as property was too expensive. I think they are still waiting!

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