Is buying a home in California really worth it? – Orange County Registry

The “Looking Glass” examines economic and real estate trends through two distinct lenses: the “glass half empty” of the pessimist and the “glass half full” of the optimist.

Buzz: Home hunters who think California’s real estate market is a little crazy should note that it’s been the country’s craziest — and second most profitable — market in nearly half a century.

Source: My trusty spreadsheet reviewed 47 years of Federal Housing Finance Agency “all transaction” price reports for the states and the District of Columbia. This curious price index analyzes the results of sales as well as the valuations drawn from the appraisals of refinanced mortgages purchased by government support agencies.

To measure market volatility, each state’s 185 four-quarter periods since 1975 were studied to find two extremes of valuation – periods of gains of 10% or more and periods when prices fell by any amount. what amount. The frequency of these extreme fluctuations was tracked by state.

Glass half empty

California has had 69 four-quarter spells with double-digit price gains (the highest in the nation) since 1975. Additionally, there have been 46 spells of depreciation (#4 among states).

This is on top of a volatility index showing a 62% chance of either extreme price over the past 47 years. That’s a higher level of valuation than any other state and nearly double the national standard of 32%.

The second wildest state was Rhode Island at 58%, Connecticut and Massachusetts at 55%, and New Hampshire at 52%.

The least volatile market, by this calculation, was Kentucky at 15%; then North Carolina and Nebraska at 16%; and Georgia and South Carolina at 17%.

Oh, and California’s economic rivals? Texas was No. 37 at 24% and Florida was 22nd at 35%.

glass half full

The story says that antacids should be part of any California homebuyer’s move-in kit, especially at a time when various online tracking services can provide regular updates on home valuation changes. a house.

But these gyrations brought more gains.

Since 1975, this California price index has risen at an annualized rate of 6.7% – the second best in the country. US gains were 4.6% over 47 years.

The top country in the country was DC with 6.9%, and after California, Washington with 6.5%, Massachusetts and Oregon with 6%.

The smallest gains were seen in Mississippi at 3.3%, followed by West Virginia, Arkansas and Alabama at 3.8% and Ohio at 3.9%.

Rival Texas was No. 26 at 4.6% and Florida was No. 16 at 5.1%.

What awaits us

Over the past half-century, California’s overall economy has transformed from a fast-growing jobs engine to the nation’s largest and slowest-growing business machine.

These trade fluctuations have not always been smooth, which has added to real estate volatility. And the inability of the state’s housing stock to keep up with California’s erratic but expansionary economic pace can also amplify price swings.

Economic theory says investors expect to be compensated for volatility — so profits from premium California homes could add another challenge to the statewide housing affordability crisis.

However, the weight of profit-generating fluctuations can have repercussions.

Yes, home prices in California have gained 21% in the four quarters ending in March. But that bounty was only the 16th largest among states.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be contacted at [email protected]

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