It’s that Ol’ Debbil Supply & Demand

We have noted from time to time recently that home prices in California — at least in the desirable parts of the state —  have been rocketing upward in spite of the nominally prevailing recession. How can that be, being that California is in the throes of a waning recession, but a recession nonetheless? Here is a headline from today’s L.A. Times which explains it all:

Supply of new homes for sale remains extremely low. Despite explosive housing price gains last year, builders and their financiers are hesitant to make big bets on the housing rebound.

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“Despite explosive price gains last year, builders and their Wall Street financiers remain hesitant to make big bets on the rebound.

“The slow construction is among many hurdles facing buyers seeking affordable homes. Cash-rich investors — many of them buying homes to rent out, rather than resell — have eaten into supply, especially at the lower end of the market. Meanwhile, many homeowners still aren’t selling because they lost too much equity during the housing crash.

“That may seem like an ideal opening for builders to put up new developments. But Southern California’s supply of new homes had dwindled to about 2,200 at the end of last year, compared with a peak of about 19,000 in 2006, when the housing market started to collapse, according to the Real Estate Research Council of Southern California at Cal Poly Pomona.”,0,6820450.story#ixzz2up9BH04U