Southern California Real Estate Market Fires Up Building in Outlying Cities
New Southern California home construction surged 55% over the year ending in June 2020. Builders outpaced construction growth more than any year since 2005-2006. As a result of social distancing and sheltering in place, a significant location change in building and sales areas appeared in California. New construction moved outside the usual commuter areas to cities with more affordable home prices.
Remote locations were made possible by employers giving the green light for more employees to work from home. Employers believe that workers may continue working from home part-time after a COVID-19 vaccine becomes available.
Because of housing demand increases, 57% of home builders reported raised home prices of at least 4.5%. Along with expanded construction areas, elevated expenses in building materials raised new home sale costs, creating higher sales prices in local real estate markets.
New Home Prices Influence Southern California’s Resale Market
The six counties in Southern California saw sales jump 43.5% from May to June. This spike set the highest increase ever from May to June in statistics recorded since 1988.
“Every single place is getting multiple offers,” said Amber Dolle, an agent specializing in the San Fernando Valley.
Why? Homebuyers are bidding in a market with low inventory and cheap mortgages. Also, most homeowners have over 50% equity in their property. Compare this to 2008 when houses were over-financed with poor-quality mortgages.
In Los Angeles County, the median price rose 4% from a year earlier.
In Orange County, the median price rose 4.1% from a year earlier.
In Riverside County, the median price rose 7.8% from a year earlier.
In San Bernardino County, the median price rose 7.4% from a year earlier.
In San Diego County, the median price rose 1.7% from a year earlier.
In Ventura County, the median price rose 3.5% from a year earlier.
Increased Building in Outlying Cities
Riverside and San Bernardino Counties had the highest home price increases.
Developers continue to build new homes at a fast pace to catch up with demand. Before the coronavirus, it took two hours to drive in rush hour traffic from Riverside to Orange County. Because employees now work at home, the same drive can take only 40 minutes.
