The housing market has been on a solid upswing the past several months. Prices have been increasing across the country and especially in California. Less attention has been paid to the 500 pound gorilla in the room: the reasons behind the jump in prices.
Why are prices up?
Answer: No inventory.
Nationally, inventory is down about 50% from its peak, while California is down by even more.
For several reasons we laid out earlier this year, no one is selling their home. I don’t want to go into specifics here, but the major reasons, in order of importance, are:
- The majority of buyers from 5-7 years ago cannot sell their home for more than they paid for it.
- Banks are holding foreclosures off the market until prices rebound more.
- Investors and big money are buying lowered priced homes as soon as, or before, they hit the market.
You can squarely see the troubles the market faces in the historically low levels of inventory. I think that many people have lost perspective on just exactly where the market is, and how far it has to go to get back to normal.
Here’s a look at how the 5 biggest cities in California have fared over the past 5 years:
| City | Peak Inventory | Current Inventory | % Change |
| Los Angeles | 7,649 | 1,691 | -78% |
| San Diego | 6,214 | 1,177 | -81% |
| San Jose | 4,979 | 516 | -90% |
| San Francisco | 2,567 | 449 | -83% |
| Fresno | 2,462 | 540 | -78% |
| Total | 23,871 | 4,373 | -82% |
Los Angeles Real Estate Trends
