California Real Estate Dichotomy

Real Estate Outlook Gloomier As Lenders Further Tighten Lending

California Real Estate Dichotomy

Improvement on the Coastal Areas and Exacerbation in Inland Areas

California real estate recovery is a rather complicated case. In fact, statistics show the coastal areas’ economy and real estate are improving while the inland areas’ economy and real estate are still tangibly struggling. This dichotomy presents novel and discomforting challenges to homeowners, investors and policy makers alike.

FACTS

San Francisco Area: Unemployment rates are going down and home prices are going up. In fact, median sales prices for single-family homes and condos increased in December by 15.2% from a year earlier to $380,000 in the San Francisco area, according to MDA DataQuick. This recovery is largely driven by its technology industry and exports. Also, venture capitalists have been investing more in this area.

Southern California: Unemployment rates are still dipping and home prices are increasing. In fact, median sales prices for single-family homes and condos increased in December by 7.5% to $360,000 from the year earlier, based on MDA DataQuick. This recovery is tangibly driven by entertainment and other industries.

Central Valley and Inland Empire: These areas, unfortunately, were struck earlier and harder by a strong wave of unemployment and decreasing real estate property values. This trend is still in place. In fact, unemployment rate is still rising and median sales prices for single-family homes and condos decreased in December in both central Valley by 11.3% to $142,00 and Inland Empire by 10% to $180,000 from the year earlier, according to MDA DataQuick. This persistent downturn is largely the result of a moribund construction industry.

COMPLICATED CHALLEGNE

This downturn is different from the ones we experienced before. In fact, the Southern California in the early 1990s hemorrhaged jobs in defense and aerospace industries. What policymakers experienced then does not work now. In addition, if the employment disparity and real estate misfortunes continue to remain large, even recovery in the coastal areas could be hurt and slowed down, as the adverse effects of the Inland areas’ misfortunes trickle in. As such, this behooves policymakers to allocate funds accordingly to assist the Inland areas’ economy and real estate in the hopes of mitigating the ‘Great Recession.” However, with the CA budget deficit, it remains a daunting task to aggressively and prudently address such complicated issues in a timely manner.

 

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