The year-end 2021 real estate residential property values reflect an aggregate average sales price of $876,216, 15% higher than 2020.
The four attached charts reflect different stories.
The first chart reflects the active inventory being historically low (it’s all about supply and demand).
The numeric chart shows the pricing in dollars going back to 1959.
The Linear View chart shows graphically the numeric values with each plot point based on the actual dollar of value.
The Logarithmic View chart is a better illustration of the historic changes in value. Each plot point is derived by the actual “percentage” change of value, relative to the previous year.
Long-duration property value appreciation has been typical for the region. Many prognosticators say the property values are not sustainable, and the values are in a bubble. Let’s review a little history that correlates with the chart’s value fluctuations…
In the early 1980s there was a Savings and Loans Crisis. That was the first major banking crisis since the 1920’s Depression. 1/3 of the S&Ls failed as the government deregulation tried to financially prop up the Thrifts during the slow growth ’70s, and the S&Ls got into excessive lending in areas they weren’t skilled at (commercial property and construction loans), while they weren’t well-capitalized. Mortgage lending became very tight, and over construction of new properties weighed on property values. San Fernando Valley property values didn’t drop as much as they were stagnant for several years.
Because of local regulatory and tax elements, starting in the late 1980s the regionally strong aerospace manufacturing complex started moving away from the region/state. The San Fernando Valley was essentially the epicenter of the national recession in the early 1990s. Right when the local economy was starting to stabilize, the Northridge earthquake hit in 1994. Because of the recession, property values had dropped, and the property owners that were already upside down on their property values extenuated the foreclosure issues.
Throughout the early 2000’s mortgage underwriting and credit requirements were too easy. It hit a wall in 2007, when over-leveraged borrowers and lenders, and the secondary mortgage market meltdown brought on the “Great Recession”. The pendulum swung the other direction and mortgage money was more difficult to get. Foreclosures and short sales filtered through the system for the next six years.
Why won’t we see a value crash for a while? The US is about 5 million houses underbuilt. The lending regulations and loan underwriting has been tight, and banks are historically high in reserves. Covid-19 has increased the desirability of homeownership. Millennials are entering peak homebuying age so demand will remain elevated for years. Anti-development attitudes make it very tough to build. Supply-chain problems and the high prices they create prevent entry-level homes from being built. Households have ample wealth to spend on housing, rates while going up, are low. Property owners that are in payment forbearance will have an easy time getting caught up as the gov’t is putting pressure on loan servicers to work with borrowers and not foreclose. There will always be foreclosures, but there is so little inventory, they would be absorbed by buyers easily.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me
Ron Henderson GRI, SRES, SFR, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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