Supply-Demand Imbalance and Low Mortgage Rates Drive California Home Price Growth


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Rising demand for real estate and shrinking supply have caused San Francisco to become one of the most expensive places to live in the U.S. since the beginning of the decade, while falling mortgage rates have boosted purchasing power.

According to an analysis by John Burns Real Estate Consulting, home price growth has outpaced income growth by 70 percent in the San Francisco metro area since 2001, the second highest rate in the country, behind Los Angeles. That figure includes the 44 percent benefit homebuyers have obtained from low mortgage rates, which have dropped from 7.2 percent in June 2001 to 3.97 percent for the week ended Dec. 17.

The analysis points out that California homeowners have benefited the most from the imbalance between supply and demand. Six of the nine U.S. housing markets where JBREC says that “home prices have risen faster than can be explained” are located in the Golden State, including San Jose, where they have outpaced incomes by 53 percent over the past 14 years.

Source: Pacific Union blog

(Image: Flickr/FutUndBeidl)