Southern California housing prices rise will continue in regions.

There has been a lot of talk about the housing bubble in California. I think the talk of a "California housing bubble" is exaggerated. First off there is no such thing as Calfornia real estate market. Real estate markets are entirely regional. So there is a San Diego real estate market, a Los Angeles real estate market, a Sacramento real estate market and so. When trying to determine whether or not a market has a bubble is a difficult task. Homes are not as illiquid as stocks. You cannot quckly sell your house as you would a stock. When a stock drops, it drops rather quickly while in the housing market simply goes stale. It takes longer to sell, buyers push back on prices and there is more negotiation that goes on.

So in certain markets in California such as the Los Angeles market will remain stable for several reasons.

1. First off supply. Housing is in short supply in Southern California and always has been. Due to the build out of Southern California, many of the desirable neighboorhoods are simply not available for moving in. Gentrification is ongoing through out much of Southern California where people are moving into neighborhoods that were once undesirable. At this point Los Angeles is running out seriously bad neighborhoods.

2. Employment Data is strong. Monster just released it's employment index for Southern California. Its shows strong growth in demand for knowledge worker jobs which tend to be higher paying. This will help fuel prices as employment remains high.

3. Mortgage rates are still incredibly low. With these historic lows, this will continue to support prices at these new higher levels.

Median home prices in the Los Angeles area will continue to rise to roughly $600,00 before leveling at that price. Other markets in California might slow. We are already seeing signs that Sacramento is cooling and housing inventory is increasing. Other markets like the Bay area continue to be torrid. I also expect the high desert areas such as Bakersfield will continue to rise in price.

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