California Home Values and Myths

Published On: October 17, 2024603 words3 min read

I continue to read articles that call for a decline in California home prices. Of course, prices can’t go up forever. Eventually, local home prices will correct, but can you afford to wait? Let’s do the math:

The Median home price in Thousand Oaks today is roughly $1,150,000. Appreciation has been running from 3% to 13% over the last several years, but let’s use a conservative number: 5% annually.

  • In 2025 the median will be $1,208,000 an increase of $58,000
  • In 2026 the median will be $1,268.000 an increase of $60,000
  • In 2027 the median will be $1,331,000 an increase of $63,000

Let’s assume we have another recession in 2028 and prices locally come down 15% (the average recession drop): $1,331,000 <15%> = $1,131,000. Assuming you are in a position to buy in 2028 (in the recession), you’ve saved nothing… and you lost any tax savings you might have gained along the way. Of course, appreciation may run higher than 5%, which makes your situation worse. And there’s another problem: your savings (down payment) will need to grow by more than 5% just to keep up with the appreciation.

Another popular myth assumes lower mortgage rates will make housing more obtainable. This is partially true; lower rates lead to lower payments, which increases affordability. Unfortunately, increased affordability also drives housing prices higher. Policymakers and politicians publicly cry about the lack of affordability, but rising home prices remain an unspoken policy goal. Rising home equity builds market and financial stability, which is good for our financial system. The core issue remains the lack of supply of housing; we just don’t build enough homes to meet the demand, a story that goes back to the San Francisco Gold Rush in 1848. The cost to build in California continues to rise; we lead the Nation in housing construction costs:

  1. Highest labor costs
  2. Highest material costs
  3. Strictest environmental standards
  4. Strictest structural building codes
  5. Highest permit fees and costs

Oops, I failed to mention another issue: the shortage of buildable land. If you travel to any hilltop in the Conejo Valley and take a 360-degree twirl, you’ll see tens of thousands of acres of open land. You might wonder why we can’t build thousands of new homes. Unfortunately (fortunately), a vast majority of the open land you see is owned (and protected) by the Cities, Counties, Bureau of Land Management (federal Government), and a few conservation organizations. Some of this land is public, part of our vast network of parks and trails, and all of it is unbuildable. Much of the open land that’s left is not zoned for housing (environmental concerns), a problem our planning department(s) are working on, but we are basically “built-out.” This is not news for residents; the City of Thousand Oaks has been effectively built out for 20 years.

On the topic of local land, the winds of change are blowing. You might have noticed the recently completed retail/apartment development on Thousand Oaks Blvd., across from Tarantula Hill Brewing. This project is located in the once-failed and now revived “redevelopment” zone, which now allows for mixed-use projects. There is another vacant lot down the street, the pumpkin patch / Christmas Tree property (Thousand Oaks Blvd. and Hodencamp), which is approved for a large mixed-use (retail/apartment) project as well. These developments are exciting, but a couple hundred apartment units built every couple of years will fail to move the needle on our quest for housing. And no, it will not be “affordable.”

Get Started Today

Contact Contour Realty today at (805) 358-3926 or visit our website to navigate the complex local real estate market with expert guidance and turn your home ownership goals into reality.

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