Counting the Indicators of a Deflating California Real Estate Bubble

Canceled projects, price discounts, and increased incentives to buyers are already showing up in real estate developments in key U.S. regions, writes estate and affordable housing adviser Michael P. Russell. He reviews some key indicators.

2 minute read

July 7, 2016, 11:00 AM PDT

By wadams92101


empty parking lot of Eastvale, California's best buy and kohl's, mountains in background

Brien Clark / Wikimedia Commons

California's real estate market has been on fire, outperforming the rest of the nation and the economy in general. But it won't last much longer, writes real estate and affordable housing adviser Michael P. Russell:

The retail sector is experiencing the following:

  1. Core retail sales advanced 4.3% in the past year.
  2. An increase in e-commerce.
  3. Declining consumer income
  4. Consolidation of various categories (i.e. sporting goods, department stores)
  5. Tenant location decisions are often based upon rental rate

In the housing sector: 

In January, U. S. home prices climbed at more than double the rate of incomes, a trend that could ultimately create affordability challenges for buyers and extend the time that homes stay on the market.  The Standard & Poor’s/Case-Shiller 20 city home price index rose 5.7% from a year earlier.  In Los Angeles and Orange counties, home prices jumped 6.9% from a year earlier.

Nationally, monthly rent growth for apartment REITs have slowed to 4.1% year over year in March from 4.2% in February.  Markets that are showing signs of deceleration include Boston, Dallas, Orlando, San Diego and Silver Spring, Maryland.  At the same time, MPF Research, a national apartment research firm reports that 55.1% of renters chose to renew their lease, which is the highest renewal rate in ten years.  In 111 markets, apartment rents reached a new peak in February, climbing an average of $7 to $1,175.

Given these factors, homebuilders and apartment developers have cut multifamily and single-family construction more than expected in March, declining 8.8% overall from February.  In February, the West entirely powered the sales numbers.

Ultimately, real estate market health depends on job and real income growth: "From 2005 to 2014, real income growth declined by 4.28 percent."  Citigroup, Inc. warns that the chances for a global recession "are already high and only going to go up," writes Russell—and that was before BREXIT.  

In the main article, Russell goes on to make predictions about how this will impact on public sector planning. 

Wednesday, June 15, 2016 in UrbDeZine

View form second story inside Southdale Mall in Edina, Minnesota with escalators and model cars parked on downstairs floor.

The Mall Is Dead — Long Live the Mall

The American shopping mall may be closer to its original vision than ever.

March 21, 2024 - Governing

Houston, Texas skyline.

Report: Las Vegas, Houston Top List of Least Affordable Cities

The report assesses the availability of affordable rental units for low-income households.

March 22, 2024 - Urban Edge

White three-story brick single-room occupancy hotel in downtown Los Angeles, California.

‘Micro-Apartment’ Trend Underscores Housing Crisis

SROs are making a comeback under a new name as the housing supply remains strained and costs soar.

March 22, 2024 - Associated Press via Yahoo News

Aerial view of Milwaukee, Wisconsin skyline with freeway interchanges in foreground at night.

Milwaukee Residents Challenge Freeway Expansion

Residents are voicing opposition to a planned expansion of Interstate 94, arguing that the project would eliminate the limited green space in the neighborhood.

54 minutes ago - Spectrum News 1

Street Traffic in Manhattan

New York Congestion Pricing Approved by MTA Board

The program took another step forward as the board approved a proposed pricing scheme, but lawsuits still stand in the way of full implementation.

1 hour ago - Smart Cities Dive

White and yellow Metro Transit streetcar in Minneapolis, Minnesota.

Video: Making Transit Better

How trackless trams and other innovations can make U.S. transit more efficient.

2 hours ago - CNBC Marathon

News from HUD User

HUD's Office of Policy Development and Research

Call for Speakers

Mpact Transit + Community

New Updates on PD&R Edge

HUD's Office of Policy Development and Research

Urban Design for Planners 1: Software Tools

This six-course series explores essential urban design concepts using open source software and equips planners with the tools they need to participate fully in the urban design process.

Planning for Universal Design

Learn the tools for implementing Universal Design in planning regulations.