Median Home Prices In California
Home prices in California have found themselves to be the beneficiary of what many are calling a “perfect storm.” Thanks, in large part, to the unique combination of historically high demand and an inherent lack of inventory, the market has tilted heavily in favor of sellers and increased prices by as much as 9% over the last 12 months. As a result, the median home value in California now sits at an impressive $537,315, according to Zillow. It is worth noting, however, that recent appreciation rates are not the result of a brief fad, but rather a continuing trend. If for nothing else, housing prices look to be gaining sustainable momentum, at least for the foreseeable future. In the next year alone, Zillow predicts median home values will increase an additional 5%. By this time next year, Californians could easily be staring at a median home value upwards of $564,000.
Median home prices in California have come a long way since the depths of the latest recession. 2012 saw the average home value in California bottom out at approximately $300,000 — that means home values have increased, on average, $264,000 over the course of about six years. Homeowners fortunate enough to have purchased at the right time are reaping the benefits of what can only be described as historical gains in equity. Buyers, on the other hand, have seen prices increase for the better part of a decade. There’s no doubt about it: California is absolutely a seller’s market. Homes are selling faster and for more money with each passing year, and should continue to do so until more inventory is introduced into the market.
For what it’s worth, most markets in California are already unaffordable for the average buyer. According to the California Association of Realtors, the “unaffordability” rate is resting comfortably somewhere in the neighborhood of 75%. On top of that, 24/7 Wall Street suggests that 16 out of 25 least-affordable counties are located within California’s borders.
Those interested in investing in California real estate should take note of today’s expensive trends, and familiarize themselves with an important concept: it is possible to invest in any market, regardless of whether it’s up or down. While those on the outside looking in may assume home prices in California are too steep to produce any sort of attractive profit margins, they just need to look at things from an alternative perspective. Yes, the higher prices in California make it harder to find viable spreads, but the key is to alter your exit strategy in accordance with what the market suggests.
When prices are high, as they are in the California real estate market at the moment, investors should pay special considerations to buy and hold strategies. Instead of trying to rehab and flip a property immediately, consider buying a property and renting it out. That way, you may offset today’s higher prices with the rent collected on a monthly basis. With rent prices as high as they are, a carefully thought out buy and hold strategy could pay huge dividends over the course of several years. What’s more, you could choose to rehab and sell the property later down the road if the market deems as much.