One of the worst financially impacted areas of America to feel the effects of the real estate crisis is California and southern California specifically. Why would there be any reason to buy in this specific market if it has been so devastated over the last four years.
That is it, you have basically answered you own question with the question. The whole south of the United States has been devastated by the housing crisis, but the areas where overbuilding and jobs losses were more prevalent got hit the worst (California, Nevada, Arizona, Texas and Florida). The northern manufacturing states like Michigan and Pennsylvania got hit hard too, but they will not recover very soon and are not the best locations for investing in real estate yet, although that can change at any time. If you are interested in the northern areas, keep a close eye on the news and job recovery statistics.
Because the housing market has taken such a big hit over the last four to five years that means that prices are at decade lows for existing homes and the full retail price of new construction is also at decade lows (although square foot on square foot you will pay more for a new construction home).
If you have any handyman type of skills you can even get better prices on existing homes that are slightly and lightly neglected while they have been sitting in a lenders foreclosure inventory or while the owner has been challenged with trying to sell the property.
#1 The first reason why property in Los Angeles County is a good deal now, is because it is financially a good deal now. On average the homes in Los Angeles county have lost 26% of their value over the last 5 years. This is across the board with the more upscale properties to the north and in the hills losing even more. These losses equate to profits for the next person that will be the owner of any of these properties. Just because a property has lost 25% to even as much as 50% of its equity does not mean the real and true value of the property has evaporated, in California the prices normally recover eventually. This is not the same for all parts of America, but it is true for California.
#2 Population trends is one of the strongest factors that effect home prices. This is a factor that is directly associated with housing availability. It is just simple math, more people, more housing needed. More housing needed the higher the demand and the higher the price per unit. California and specifically Los Angeles county is a location with a net increase of population. Even though the housing market is not seeing a turn around this very minute, it is only a matter of time until demand outpaces the supply.
#3 Employment trends also have a major impact on housing demand and also prices. Los Angeles county is one of the few regions in America that have already started to show signs of economic recovery in all sector of the economy from manufacturing to construction. The population is increasing at a very steady rate and unemployment is dropping at also a steady rate. People are going to California for a reason and that reason is pretty obvious if you take the time to look at the big picture.
When you take the time to consider all that the State has to offer and you also take the time to imagine and consider why so many people are moving to, returning to or relocating to California then you can see that this is a location that many tens of thousands of people see as a location that holds promise for their futures and the futures of their families.
They are willing to sell the farm and move to Burbank or Hollywood. They see that the future is bright in sunny California. The new governor has pledged to balance the State budget to the tune of $25 Billion dollars within only 18 months. That is a huge undertaking in its own right. Things look really good for people in and people considering relocating or repatriating to California.
I cannot blame any one of them for making the move and I could not with any conscience offer an alternative that is better.
This is a great example of how popular California is, 99% of Americans only know two zip codes, the zip code where they currently live and a little pocket of people that live in Beverly Hills…. 90210.
When you consider how severely the residential retail housing prices have dropped, the mass exodus of people from California over the last 5 years, the influx of people returning to California because of the recovery in employment and the overall economic “big picture” and you throw them all in a blender and hit puree, the thin red paste you pour out will spell financial success over the next few years if you have the ability to buy a residential property within the first half of this year.
The key to your success is to either have an intimate understanding of the market you are interested in (Burbank is not the same as Hollywood or Encino) or to find a Realtor that is extremely and intimately familiar with your area of choice.
The downturn in the housing market has not only produced some of the best real estate values in years, it has also produced some of the best Realtors of our life time and you would be foolish to not take advantage of their skills, experience and expertise.
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