Today’s Los Angeles Times reports in a front-page, above-the-fold story that the symptoms of the ol’ housing bubble are back. The story reports that down in Huntington Beach (a nice but by no means posh community in Orange County) people have started camping in front of the sales office of a subdivision, advertised as offering homes from “$1,200,000 and up.” Alejandro Lazo, Building Boom is Back, L.A. Times, April 14, 2013, at p. A1. And as of February (as compared with last year’s February) the median price of a Southern California home has gone up 19%. The current median price is $401,000 — which means that one-half of Southern California homes go for more than that. And take our word for it, if you were to find a $401,000 or less home in our neck of the woods (the distinctly unfashionable Burbank/East San Fernando Valley area) you wouldn’t want to live in it.
The causes of the price increase are said to be (a) a lowered supply (especially of large homes) brought about by reduced construction following the 2008 collapse of the housing market, and (b) historically low interest rates that make mortgage payment cheaper. But whatever its causes, a bubble is a bubble and we feel that a frenzied seller’s market in million-dollar homes is not sustainable. So stay tuned, and see what happens when interest rates go up, as they inevitably must, sooner or later.