Southern California's residential market can feel overheated, with the bidding wars on homes and busy open houses. But new research from the real estate website Trulia shows area home prices still have a ways to go before they hit pre-recession peaks.
The researchers found that in Los Angeles County, just 37.4 percent of homes are priced at more than they were before the housing bust. In Orange County, 23.5 percent have hit that level, while just 3 percent have in the Inland Empire, one of the epicenters of the mortgage meltdown.
Trulia Chief Economist Ralph McLaughlin said prices rise in strong correlation with incomes, and in Southern California, income growth has been modest in the post-recession recovery.
"That essentially means that prices really can’t rise that much faster because, at some point, people won’t be able to afford those homes," McLaughlin said.
In comparison, McLaughlin said San Francisco incomes have grown nearly three times faster than in L.A. Ninety-eight percent of homes there have surpassed their housing bubble prices.
But real estate experts predict even if it takes them longer, homes in southern California will see a full rebound.
Geoff McIntosh, president of the California Association of Realtors, said the most desirable parts of L.A. County, those near good schools and the beach, are already fetching housing bubble prices.
McIntosh, who sells homes in Long Beach, said he sees stark differences in home values just within the city itself. Prime properties that had fallen to the $600,000 range during the worst of the housing crisis are back to pre-recession prices of around $2 million, he said.
So forlorn homeowners whose homes are struggling to recapture their pre-recession value may want to hold on. McIntosh said prices will keep climbing.
"I don’t believe that it’s likely you’re going to see housing values level off because there’s not enough supply," McIntosh said, referring to California's failure to build enough homes for its growing population. "I think there's still a lot of pent-up demand."
But he added that many unknowns may affect home prices in the future, such as higher interest rates. Realtors are also concerned that the Trump Administration's tax plan will result in a loss of tax benefits of owning a home.