More homebuyers in Southern California have decided that now is not the right time to buy. Annual home price appreciation in Los Angeles and Orange counties has declined every month since April 2018.
According to the latest S&P CoreLogic Case-Shiller index data, home prices in the two SoCal counties rose 5.5 percent annually in October 2018. Local experts say that this, coupled with dwindling sales, have priced out homebuying hopefuls. As well, real estate agents are reporting that Californians who could buy now don't want to spend what the current conditions require, The Los Angeles Times reports. Shiller index co-founder and Nobel Prize-winning economist Robert J. Shiller explains that if consumers believe that price appreciation slowing down will lead to a price decline, “It’s a feedback loop. Excitement can’t last forever — and that’s what drives a boom.”
If prices aren’t rising as much, or at all, it takes some of the edge off the psychology that has helped drive home-buying in Southern California for decades. Many renters exist in a constant state of anxiety that the home-equity gravy train will soon pass them by. That might drive them to stretch to make a down payment or to buy a suboptimal property.
In Los Angeles, people are particularly prone to “suspend disbelief” about what a home is truly worth, said Yale University professor Shiller. That makes the area vulnerable to booms and busts: “You justify it: This is Los Angeles — the most glamorous city in the world.”
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