The latest numbers from Case-Shiller CoreLogic show the West Coast continues to see a strong housing market with prices in May rising more than 5 to 6 percent in several key California cities, and double digit jumps in Portland and Seattle, far out-pacing much of the rest of the country.
David Stiff, Principal Economist with Case-Shiller CoreLogic, joined KCBX News Director Randol White to explain the current trends.
NOTE: This transcript is from an interview that was edited for time purposes:
Randol White: What time of year do we most often see the highest appreciation when it comes to home prices?
David Stiff: That would certainly be in the spring, so April, May, June tends to be the months where you see the strongest appreciation.
White: And these numbers are from May?
Stiff: These numbers are from May.
White: Are these May numbers representative of a long-term trend or are we just seeing a spring bump?
Stiff: You know, over the past two years most California markets have performed above the U.S. market. In part, that's because they're rebounding off of pretty low values, so there's been a stronger rebound in California compared to the rest of the U.S. But, I think that's a pattern that will persist for a little while.
White: Here on the Central Coast San Luis Obispo County and Monterey County are seeing numbers similar to the cities of San Franciso and San Diego, well above a six percent jump in prices. Santa Barbara County more in line with the U.S., right around five percent, they're at 4.9 percent. What is it that is happening in those cases?
Stiff: Well, in Santa Barbara it appears to be the case of housing affordability is more of an issue than in Monterey County or San Luis Obispo County. The California Association of Realtors calculates an affordabilty measure for all of California's counties. First time buyers, only 39 percent of buyers in Santa Barbara can afford the median-priced home. That compares to about 55 percent for California as a whole. So I think price appreciation is slowing a bit more in Santa Barbara because it's a little more unaffordable.
White: Any prediction by Case-Shiller CoreLogic as to what we might see heading into the summer and fall.
Stiff: You know, I think what we're going to see is a gradual deceleration in home-price appreciation. We're seeing this in other markets across the U.S. Typically home prices rise at somewhere near the rate of inflation. So, right now we have above inflation-rate home price appreciation. So, I think we're going to see home-price appreciation settle down around four percent per year and we'll see that pattern in California economies as well.
White: So home-price appreciation that falls in line with inflation is considered healthy. Anything above that is considered a strong market or an inflated market?
Stiff: Yeah, if you have a period of time where home prices are rising faster than the rate of inflation or faster than the rate of household income growth, it's generally unsustainable. Now, after the crash and during the rebound, we had double-digit rates of appreciation as markets recovered and that was fine because the crash reduced prices by so much and improved affordability by a huge amount. So, the thing to keep in mind, in Monterey County prices are still 26 percent below their peak, in Santa Barbara County they're still 14 percent below their peak, San Luis Obispo County they're still six percent below their peak. So, prices in all three of those locations are still lower than they were ten years ago.
White: I know this isn't super local to the Central Coast, but those double-digit numbers in Portland and Seattle, what's driving that?
Stiff: Both Portland and Seattle have strong job markets and a lot of migration into the region and that's driving strong housing demand and strong price appreciation.