Double digit inflation in home-buying is good news to the Southern California region which hasn't seen home profits for more than a decade. But the question is, how long can it continue? How high will home prices rise before buyers are priced out of the market?

Although many real estate analysts believe that the home buying wave will continue unabated, they base those on current economic indicators - broad-based employment growth, low inflation, low unemployment, and low interest rates. The current market contrasts sharply with the inflation-based boom of the early to mid eighties when real estate values were closely tied to the success of certain boom industries and fueled by Savings and Loan speculation, and then gave way to the inflationary late '80's marked by high interest rates and unaffordable prices.

According to a recent quote by Leslie Appleton-Young, chief economist for the California Association of Realtors, "The thing that always gives you pause in a hot market is the issue of affordability. Double-digit price appreciation can't go on forever without pricing people out of the market."

A just-published article in the Los Angeles Times indicated that Southern California may still be far from reaching its ceiling. Santa Clara County reached its pre-recession peak by March of 97 and, based on current projections, Orange County will surpass its previous high-water mark by the end of this summer or early in the fall, although parts of Los Angeles County probably won't get there until some time next year.  

Home values still have room to grow.

Published: July 1, 1998

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