Real Estate Investor Magazine South Africa November 2015 | Page 57

REI OFFSHORE

EXPERT Q&A

COOLING HOUSE MARKET GROWTH IN
CALIFORNIA AFFECTS US MARKET AS A WHOLE

A

California cooling effect could put a freeze on US property market growth with
affordability in many of the state’s markets out of reach, says the latest analysis
report.
Since 2012 price growth in California has buoyed the West of the nation and helped
support nationwide prices appreciation, according to the report from Clear Capital, but
now there is evidence of cooling price appreciation across the state.
It explains that typically, price increases are driven by increases in demand, however,
a look at the San Francisco housing cycle shows that between 2011 and 2015 the spike
in prices has not been the result of increases in overall transactions. Rather, the tight
supply is pushing prices on an upward trajectory placing the market even further out of
reach for new buyers.
It also shows that in slower growth markets like Los Angeles, a mortgage payment
requires upwards of 70% of a potential first time buyer’s income, certainly quelling
demand.
Even the San Jose MSA’s appreciation, which began experiencing dramatic bubble like
growth in 2013, is beginning to slow down with quarterly growth of 2.5%, less than half
of the 5.8% quarterly growth seen two years ago.
While the West continues to lead in sustained gains, markets outside of California will