So much for the spring and early summer bounce. Southern California is seeing a large increase of inventory. And some of this inventory is coming in the form of new condos and homes. The housing bull market was so good that builders jumped back into the mix to get top price for properties. But of course these projects take time to map out and build out and here we go with this inventory coming online with inventory rising across the spectrum. But as we will see in this election, this is a time when Millennials are largely cash strapped and renting is not seeing as a ridiculous albatross. Many of these younger buyers saw their parents lose their homes in foreclosures or stress out over an inflated asset that is now going to be split multiple ways among the heirs that can’t afford to buy. Welcome to an economic market where the snake is eating its own tail. And of course this is the reality contrary to what the spin masters are trying to peddle out. This is why you hear politicians now talking about wiping out student debt as a main pillar of their platform. Mind you that the majority of Americans don’t even have a college degree. But here in SoCal housing inventory is booming and price reductions are becoming more common.
The rise in housing inventory
It was only a matter of time when the housing correction hit and inventory is now growing dramatically in SoCal. This isn’t some tiny jump, but something significant:
Buyers now have a bit more time to decide which crap shack they want. No rush. Now we have the house humpers trying to convince people to FoMo into the housing market. “Well you should of bought a few years ago!” Okay. Well what about now? Who is going to pay current asking prices on crap shacks that were built during World War II just so they can jam their family into a property with a 30-year mortgage? And let me preface this that this is a nutty geographic market symptom – the typical house in the U.S. cost $226,800 which is reasonable. In other words, in most parts of the U.S. buying a house may actually be a good move. But in SoCal? Not at current price levels.
And Millennials in the state get this. When you watch networks where the average age is 70 you have people that are fully out of touch with reality. But talk with younger professionals and college graduates and their goals are very different. They absolutely do not coincide with what is being spouted by the older generation. These people think that real estate is the only investment available to people. In a market where companies come and go in shorter durations and uncertainty is the mainstream, why should housing be built on this old school mentality where all of sudden you are going to leverage yourself to the absolute maximum level for 30-years? It makes sense in many parts of the U.S. but not at current prices in SoCal but of course this is FoMo land and reality hits people like a ton of bricks here. Just take a walk on any of our beaches and many people are trying to deny the reality of time with plastic surgery and driving European foreign cars deep into their boomer years pretending they are a 20-year old rock star. Hey, I’m all for looking good and healthy but don’t delude yourself from reality – that crap shack house needs a Beverly Hill surgeon to make it look good and that current price is not worth it.
And here in SoCal, especially in Los Angeles, the majority of households rent. Certainly many people “want” to buy – we saw this collective delusion when we offered NINJA loans to everyone. But just because people can jam in with a FHA insured loan or with a minimal down payment doesn’t mean they are better than the “NINJA” aficionados. And so many people now work in FoMo industries: real estate, finance, taco delivery apps, social media apps that turn you into a cute puppy, and other items that will get absolutely smashed when the next minor recession hits.
So here we go – the correction is now happening. You better hope that housing plastic surgery is durable because the tide is rolling out and the club lights are slowly turning on.