Orange County Real Estate Bubble? ... NOT !

Although Home Prices have increased dramatically in he past several years, we don't see a bubble bursting scenario.South Orange County homes have tripled in price from the lows of the mid 1990's to a current median price of $615,000.  Some fear that a real estate bubble exists that will soon burst as it did in 1990 through 1995.  We don't see this as a viable scenario and here's why. The balance of supply and demand is always the bottom line on home pricing.  Supply of housing has been low for several years now, and demand has been up. Back in the late 1980's, new home builders were reckless and built up large inventories of unsold homes which contributed to the glut of housing at that time.  Learning from the past mistake, builders today have been constructing 63% fewer homes than they did in the late 1980's, and this rate has not kept up with population growth.With job growth averaging about 14,500 jobs per year, and builders pulling about 8,500 permits per year (single family and multi-family homes), only about 60% of the demand for new housing is being satisfied currently.Unemployment in Orange County has been some of the lowest in the country hovering around 3.8%, as compared to 5.7% in Denver, 6.1% in Chicago, 9.2% in Detroit, 6.3% in Cleveland, etc.  There are fewer sellers of existing homes since more jobs are available here as compared to many other major metro areas.  Whereas, in the early 1990's orange county experienced thousands of job losses due to the Aerospace melt down and other related industries.  Also, jobless workers migrate to Orange County  looking for higher paying jobs.Future job growth for the rest of this decade looks rosy as well.  High technology is still rebounding from the dot.com crash of several years ago and Orange County is a major player in that arena.  Also, bio-technology is poised to be the next big growth sector producing high paying jobs, and from Irvine to San Diego is the bio-tech corridor of the world.The other factor creating demand especially for south Orange County has been the great quality of life which has been popularized nationwide by the recent success of 'the OC' and 'Laguna Beach' TV shows.  People who have become successful in life look at south Orange County as an ideal place to retire or own a second home to enjoy the near perfect weather, beautiful beaches, multitude of entertainment and recreational choices, and robust and diverse economy.With these factors creating strong demand, and limiting housing supply, we don't see a bursting bubble even if interest rates do rise significantly.  At worst, price appreciation may stagnate, and prices could possibly pull back a little bit for a period of time in order for salaries to catch up to housing prices...For a more in depth look at home prices, visit our website below if you would like to see Orange County real estate for sale.See AlsoSouth Orange County Real EstateHome Prices, Photos, MLS Search and more. more...

www.veryoldbird.com/realestateinvesting
Originally Posted on 8/15/2005 10:52:22 AMContent source: http://ocrealestateblog.com/public/item/94576