California Home Prices Keep Going Up and Here is Why

By Ramsey Judah

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California home prices are more than double the prices of the national average. But how did we get here and where is it going?

The last one hundred years in California history has seen an incredible swelling of population. There are about forty million people statewide. Los Angeles County alone currently boasts a population of just over ten million people and growing.

Every real estate market is run by the basic concept of supply and demand. If there is little supply of homes and a lot of buyers, then prices for that supply will be high. If the number of buyers is low and home supply is high, then prices will be low. California has been mostly the former for the majority of its history.

Cities throughout California, including Los Angeles, were built as suburban sprawl with single family homes dominating the landscape. Almost every inch of Greater Los Angeles has some kind of structural development, which means that new supply for single family homes on buildable land is basically frozen.

So what drives up demand is the fact that demand for California is so high with multiple bidders fighting over a home which then drives up the final sale price causing all comparable homes to go up in value as well.

Add to that the moves by homeowners in the 1970s to slow down housing development and the environmental restrictions in place to preserve ecosystems and control waste of building material.

Major zoning changes could face an uphill battle from homeowners who do not want their single family home next door to a four-story condo or apartment building. But is it inevitable?

There seems to be a battle to come as homeowners in a number of communities are becoming more hostile to the idea of new development or redevelopment (knocking down the existing structure to build a new one). Also, an argument can be made that the infrastructure is not there for an increase in housing as the aging sewage and water systems may not be able to have what it takes.

But looking outside of Los Angeles County in places like the Inland Empire, housing construction is ongoing and unhindered. Which could very well push buyers out but increase traffic time significantly for those working in Los Angeles County.

Ramsey Judah is a broker with The Judah Group and can be reached at ramsey@TheJudahGroup.com or @RamseyJudah on Twitter and Instagram

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