“The median selling price for an El Dorado County home last month was $520,000 with two-thirds of those sold in escrow within 30 days at 99.99 percent of the listed price.
Since the first of the year a total of 1,500 homes have closed escrow in the county at the collective median selling price of $500,000. The number of yearly sales is running above last year’s and the median selling price has jumped $50,000, or about 12 percent.
In the last seven years county home prices have doubled.
What’s not to like about those numbers?
The odds are favorable that strong sales and increasing prices will continue for another year, maybe two. The economy is humming along, having created 5 million new jobs over the past two years.
Unemployment, at 3.8 percent, is the lowest in 50 years, gross domestic product will exceed 3 percent growth for the first time since 2005 and the stock market has been close to an all-time high. The Great Recession is a fading memory. It doesn’t get much better than this for homeowners.
Most everyone was thinking the same back in 2006. That was the last time county home prices were in the $500,000 price range. They had doubled in value during the previous 10 years and it appeared nothing could stop them from going higher.
Everyone had a ton of equity in their homes until lenders showed us how easy it was to convert equity to cash and buy stuff. And we did. Cash-out refinancing drove consumer spending and the economy until it eventually went right off the economic cliff.
Looking back, there have been five major recessions that have negatively impacted home values since I began my real estate practice. My first, 1973-1975, was the Organization of the Petroleum Exporting Countries (OPEC) oil embargo that caused oil prices to quadruple. Imagine paying $15 a gallon today for a vehicle that averaged 10 miles to the gallon.
National wage and price controls were initiated, millions lost their jobs and home values fell like a rock. With each subsequent recession I became more sensitive to the warning signs of another.
The next year or two appears pretty good for real estate but an increasing number of economists think we are headed for a setback. About half the economists who responded to a recent CoreLogic survey said they expect another recession by 2020.
If the Costa–Hawkins Rental Housing Act is repealed, there will be political pressure for local governments to adopt rent control, “affordable housing stabilization.” That’s likely to happen now that it has the official endorsement of the Democrat Party.