LA Area, San Diego Home Prices Rising Faster Than National Average, While San Francisco Lags

August 25, 2020 Updated: September 24, 2020

Commentary

The prices of single-family homes in the Los Angeles–Long Beach–Anaheim metro area and also in San Diego are rising faster than the national average, according to the S&P CoreLogic Case-Shiller Index.

This very well-constructed measure indicates that home prices in metro area increased 3.9 percent in June from the year-earlier period, while prices in San Diego are rising even faster—5 percent in the same time frame.

By comparison, June home prices in the 20-city composite segment of the index—across all 20 of the largest metropolitan areas—are up only 3.5 percent year-over-year.

On the other hand, prices in San Francisco rose just 1.4 percent.

Home prices in the LA metro area are likely benefiting from many factors, including, but not limited to “the Netflix effect”—all those movies for all those new streaming services getting made in Hollywood; very low mortgage prices; continued family formation; very low housing supply being made available by current owners; and many other factors.

Some of these factors, such as low mortgage costs, are buttressing all housing markets across the United States. But Southern California has seen a particular reduction in mobility (people leaving their homes) and is unique in its benefiting from “the Netflix effect.”

San Francisco will likely show some sort of benefit as more data becomes available, from all the very-high stock prices of all those companies based in and around that city, which include Apple, Alphabet, and Tesla.

The data released Aug. 25 from S&P CoreLogic Case-Shiller covers through the end of June.

Robert J. Shiller won a Nobel Prize in economics in recognition of the great analyses he introduced to the world of understanding asset prices, including the Case-Shiller set of home price indices. In those analyses, prices are tracked using sales of houses for which there have been multiple sales transactions. If two transactions fall within six months of each other, that data is ignored. But the great benefit of using all that other data is that the economists at Standard & Poor and CoreLogic can assess how the value of a recent transaction compares to the last time that same home had a sales transaction.

In this way, if the housing stock gets better over time (perhaps because homes get bigger or more desirable land becomes available), then home prices won’t be seen to be going up just because the overall housing quality is going up.

Conversely, if the quality of the average home is decreasing (because homes are becoming on average smaller or the overall density is going up), then home prices won’t be seen to be falling just because overall housing quality is going down.

Tim Shaler is a professional investor and economist based in Southern California. He is a regular columnist for The Epoch Times, where he exclusively provides some of his original economic analysis.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.