I just updated my Case-Shiller charts with the latest Case-Shiller data which is through June. (The “June” data really represents April-June.)
Let’s compare and contrast two hot markets, Denver and Dallas, to two other hot markets, Los Angeles and San Francisco.
Denver and Dallas sat out the The Great Real Estate Boom and Bust of the 2000s so I’m not too worried about them having bubble prices now. Since 2000, home prices in Denver and Dallas have have increased half as much as home prices in LA and SF.
Prone to bubbles. For whatever reason, San Francisco and especially Los Angeles are prone to real estate booms and busts as you can see in the chart below.
The China Question
Chinese buyers have been a big factor behind the super fast home price appreciation in Los Angeles and San Francisco in recent years.
The big question now is whether the economic problems in China will cause the Chinese to want to buy more homes in California or few homes in California.
John Burns Real Estate Consulting has heard a handful of reports of Chinese buyers cancelling new home purchases in Southern California in recent weeks. I’m going to extrapolate that one data point and bet the Chinese economic turmoil will significantly cut the amount of Chinese money flowing into California real estate.
Real estate is famous for it’s inelastic supply, small changes in demand can cause big changes in price.
- Official Case-Shiller press release (pdf)
- San Francisco Real Estate Bubble 2015