The UCLA’s Anderson Forecast of the California real estate economy skews very negative so keep that in mind.
The rate of population growth and job growth in California given in the article are much lower than in Arizona. Those two factors, among others, put California real estate at a real disadvantage compared to Arizona real estate. I expect Arizona homes to return to “normal” appreciation (4-6%/yr) at least a year before California.
2 responses so far ↓
1 Brian McMorris // Sep 14, 2007 at 6:04 am
Exactly…the Case/Shiller home price appreciation data is from extensive national and international research over a time frame of several hundred years (see Shiller’s book “Irrational Exuberance 2″). 5% nominal (1-2% real rate after deducing for inflation) is the very long term real estate appreciation average. This number fits real GNP growth, so makes mathematical sense.
To get back to the long term average using year 2000 and the $100,000 as the baseline (from your Case/Shiller chart further down the page), it will be 2014 before $200,000 should be the achieved on the chart (at 5% appreciation it takes 14 years for a price to double). Phoenix is now at around $250,000 on the chart, so there are many more years of adjustment to come, by this measure, before “reversion to the mean” is complete.
2 Brian McMorris // Sep 14, 2007 at 6:07 am
My Bad…I double checked the chart and Phoenix is actually 215,000 on the chart…so less pain, but still a long time before a gain.
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