Southern California Housing Market is Nearing Equilibrium

Real Estate Tips
November 5, 2014

Southern California Housing Market is Nearing Equilibrium

Real estate investors in Southern California have had a wild roller coaster ride for a few years, but September’s numbers on home sales in the region show the market is reaching equilibrium. Home sales went up for the first time in 2014 during September. That is a five-year high for a September and just slightly higher than the same time last year.

For the first time in over two years, no Southland counties had a double-digit year-over-year price gain according to CoreLogic DataQuick. This is good news for anyone looking to buy homes. The market is less crowded as would-be buyers have been priced out and investors have backed off. Homebuyers are finding less situations with multiple offers and more serious, pragmatic sellers.

Housing Market Equilibrium: What Does it Mean to Me?

It is probably a good thing the market is catching its breath. If the market is stabilizing, this will mean more predictable returns on housing investments and less uncertainty overall. Stronger income and job growth along with the slowdown in prices could allow more would-be buyers to catch up.

Prices aren’t rising at the 20%-plus pace of last year, but they are still rising enough to keep sellers motivated. Housing market equilibrium, or any market for that matter, is reached when the supply of a product is exactly equal to its demand. With no surplus or shortage of the product in the market, prices tend to remain stable. Buyers and sellers both require the scarce resource that the other has. That creates an environment with considerable incentive for both parties to exchange.

Southern California Housing Market Indicators are not Only Things to Consider

As always, real estate investors need to be aware of many different factors in order to be successful. Market indicators are great tools, but they are only part of making good investment decisions. You have to make sure you can profit from the specific properties you are purchasing. Market indicators are general tools; you have to use your own skills to ensure your investment is wise.

One of the most important things a real estate investor should have in place is an exit strategy that will mitigate as much loss or create as much profit as possible. ALWAYS think about how to safely handle your investments in the event of unforeseen obstacles. You can be successful no matter what the economic conditions, if you are perceptive.

Exit strategies are like safety nets. You hope you never have to use them, but you still need them there every time. Plan for the best, but be prepared for the worst, and you can be successful in anything you do.