The most recent question that investors are now asking is that "Is L.A facing another real estate bubble?" This is because home prices have risen higher in Los Angeles, California.
Los Angeles Times reports homebuyers and other real estate investors are starting to wonder if this city in Southern California is in another housing bubble. Some blogs that are being published add fuel to the hysteria as its contents point to "ridiculous listing." For example, there was this property that is listed for a million dollar but "in need of a complete renovation, the $3-million teardowns."
Should there be in doubt, the best reference to predict if the real estate market is about to collapse is the house price index from the Federal Housing Finance Agency. One can examine the price history of the region, particularly in Los Angeles. The record covers all the transaction from 1975 to the present, and the data has been adjusted for inflation. Some short term fluctuations are also found in the data including the 4 major housing price cycles.
A more comprehensive report has been published in Builder On Line Newsletter. It summarizes the report written by economist William Yu in his column in L.A Times.Yu found out that based on records the current trend of home pricing is consistent with the historical norms.
According to Yu, if one uses history as a guide, the cycle of housing prices in Los Angeles always lasts on average of about 12 years. The first 7 years is usually spent in the bull market, having at least 65% real price appreciation, then the remaining 5 years is spent in the bear market.
At present, Yu said that L.A is on its 3rd year in its housing recovery which started in 2012. So far, the market has 27% appreciation. Following the cycle, there are still 4 more years before the turning point. Within that span of 4 years, homebuyers expect 38% more price growth.
