#1: Value & Comparative Investments
Q: Over the past three decades, home prices in Orange County have risen by a factor of five while the rate of inflation has only gone up by two times as thirty years ago. That is a great return for homeowners, not to mention the mortgage interest deduction. Was this better than the stock market?
A: Stocks comfortably outperformed housing prices in the same 30 years ago, with the Dow Jones index increased by 11x from 2,000 to 22,000 going back to 1987. This statistic is another example of the wide-ranging economic fundamentals that support the increased home prices.
2: Is Orange County Real Estate in a Bubble?
Q: Data from CoreLogic shows that the median selling price over the last five years increased by a 10-percent rate using average annual gains. Was the boom-time mid-2000s housing bubble similar to today?
A: Not exactly. In the five year span that concluding in 2005, local home price appreciation in Orange County was averaging 18 percent per year! That number is still two times as much as today's appreciation.
#3: Rent Increases?
Q: Rents for residential property in southern California has risen this year at a 5.2 percent annual clip based on date from the Consumer Price Index. Is that increase high based on the last three decades?
A: Yes, it is. The normal rate is 3.3 percent for the last thirty years. Economists and investment property owners will argue it is based on demand which sustains the rise. Once housing becomes extremely challenging, rent control, becomes more of a topic.
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