According to Fitch Ratings, the average home price in parts of Southern California was 5 to 9 percent higher in the fourth quarter of 2017 than what should be expected given economic fundamentals. It also says that 17 percent of all housing nationwide is overvalued by 10 percent. National housing prices as a whole were 3 percent higher than they should be in the fourth quarter of 2017 according to Fitch. Although housing prices are higher than what may be expected, a price correction may not be imminent.
Mortgage insurance company Arch says that there is only a 3 percent chance of home prices falling in the state over the next two years. That was determined using data from the third quarter of 2017. The data also shows that there is only a 5 percent chance of prices falling nationwide in the next two years. In fact, market conditions in 18 states were considered more vulnerable than what exists in California.
In California specifically, Arch found that Orange County had the highest risk of a price decline at 8 percent. Los Angeles County has a 2 percent chance of seeing a price decline over the next two years. Overall, the insurance provider said that the signs of a housing bubble such as increased interest in home flipping and higher debt levels had not yet shown themselves.
The prices of residential property are rarely static, and there is no guarantee that a home’s value will remain the same or increase. Therefore, buyers may want to research market conditions to get a better idea as to whether a main residence or investment property will offer adequate value for their money. An attorney can review the terms of a purchase agreement to help buyers understand what they are entering into.