Even though Orange County residents experienced low home price appreciation from August to September—with a -0.5% drop, affordability is still impacting Southern California. Some of the reasons behind this decrease in purchase power are: more-sluggish-than-anticipated economic growth, incomes that haven’t kept up with the cost of living, and lack of available inventory.
The fact that there is a finite amount of space for new construction has left a void in the amount of new homes available. This will likely cause additional affordability issues unless the number of housing starts begins to match local job growth. It’s estimated that California could easily eat up 250,000 new owner-occupied housing or rental units due to new job availability. But this housing demand isn’t even close to being fulfilled currently.
On the bright side, however, home price appreciation is continuing to slow even further. As more inventory becomes available, we can expect housing affordability will start to improve. This calming of house prices coupled with the interest rates that remain incredibly low, will help the housing sales gain traction and allow millennials and first-time home buyers into the market.