Jon Jaffe, CEO of Lennar Corp., one of the leading homebuilders in the western U.S., said that when people ask if housing is coming back, he says: "No. It's already back." He cited growth in most of the major metropolitan areas his company serves. In the San Francisco Bay Area, prices are up 10 percent, and there's hardly any inventory.
Leslie Appleton Young, vice president and chief economist for the California Association of Realtors, agreed. "In Silicon Valley, it looks like 2005 all over again. And 40 percent of the investor purchases are all cash." She said the existing single-family home market is one of the brightest spots in California's economy.
If anything, the only concern for real estate may be too much growth. "The problem in our industry," Jaffe said, "is that we donaEUR(TM)t have a factory where we start producing houses." Because it takes time to get approvals and permits to build homes, he worries about a shortage of available inventory. And if that happens, he foresees much greater appreciation than any economists are willing to predict.
The forecast is just as strong for the rental apartment market, where the housing bust turned 4 million homeowners into tenants. Conventional wisdom says the rental and homeownership markets should compete against each other, but they're both doing well, especially in California, because of pent-up demand from the recession.
Young professionals working in urban environments are finally moving out of their parents' basements into their own apartments (sometimes as small as 330 square feet), said Robert Hart, president of Kennedy Wilson Multifamily Management Group. The single-family home market, meanwhile, is being fueled by households looking to move up from their starter homes now that the economy is rebounding.
The housing market often leads the way out of a recession, creating jobs as the economy strengthens, and the most recent downturn has been no exception. Art Coppola, chairman and CEO of Macerich, said comparative sales at his Southern California malls are up 6 percent to 8 percent in 2012, and San Francisco has been on fire for the past three to four years. "Our view on the future here is very good."
Politics in Sacramento and Washington may restrain some of the exuberance for real estate, especially the California Environmental Quality Act, which can delay new construction projects by as many as 10 years. But as long as California continues to lay out the welcome mat (Take heed, Arizona!) it will remain the place where people from all over the world want to land.