By Jodi Summers
The state economy is down the tubes. Prices in some parts of Silicon Valley have dropped as much as 45 percent, thanks to the technology crash. Everyone in Southern California keeps wondering when real estate prices are going to plateau or drop. Because inquiring minds want to know where the local real estate market is going, we’re going to pull out the crystal ball and give you some insight into the dynamics that influence housing prices.
Factor one: Supply and demand — on a local level — determine housing prices. Let’s talk about where our coastal economy is headed.
Sure, the state has issues. California — supposedly the sixth richest economy in the world — has an awful state credit rating and a budget deficit that has been estimated between $6-$20 billion, according to our governor, Arnold Schwarzenegger. The upside is that some experts believe that California’s problem is less of an economic one than a budgetary or political one.
Of course, we here at the beach live in our own economic bubble, driven by and large, by entertainment and tourism. (Did you know that Venice Beach is the second most popular tourist destination in Southern California?) Us westsiders should benefit by having the “Governator” in power. The Schwarzen-eggers live locally. Arnold’s campaign headquarters were in downtown Santa Monica, and he owns property throughout Santa Monica, Venice and Brentwood. Surely, he wants to see economic strength in his neighborhood.
In his inaugural speech, the Governator declared, “I’ve been speaking out about the needs of bringing back fiscal responsibility to this state, bringing back the positive business atmosphere, bringing back businesses, bringing back jobs and bringing back our education.”
Bringing back jobs: Think the Governator might take steps to return of some of the entertainment industry projects that have run off to Canada? It would certainly behoove the Governator’s post-political career, which has been closely tied with local businesses like Digital Domain, Universal, Sony and MTV. Expect to see more high paying positions open up on the westside as movie development comes back to SoCal. Which ties right back into that old real estate cliché, “homes are where the jobs go at night.”
So more high-end jobs are coming into the area and the individuals who fill those positions are going to want to live somewhere near where they work.
Factor two: There is an ample supply of houses on the market.
You know local real estate. Any desirable property that comes on the market sells in days, often times over the asking price. There is more demand than there is supply in this area.
Now let’s bring in the Hollywood factor. Step aside O.J., there will be even more local TV coverage coming our way, and this time it should be positive.
The Governator has ownership and intimate involvement with our neighborhood, including the naming of Santa Monica College President Piedad Robertson to his transition committee. With our celebrity governor, and our local media moguls, the whole country is going to see how pretty Santa Monica is on a regular basis. Think that might increase demand?
According to a May 2003 report from the state department of finance, last year 591,000 people moved to California. Our state population now totals nearly 36 million. The median home price is expected to climb 13 percent to $414,000 next year. The minimum income needed to buy that home is $93,490.
State and federal projections show relentless population growth for California, even though anti-sprawl and environmental concerns have slowed new housing construction.
Time is on the side of sellers. The demand for new homes is there. The supply is not. As long as the need is there, prices will continue to rise. Perhaps when the sun stops shining and the waves stop crashing on the beach, we have the next set of disasters and TV shows stop filming here, people will lose interest in living by the California coast. (If you would like to more information of interest to property owners, , or call at (310) 309-4219).
Originally published in the Santa Monica Daily Press print edition on October 22, 2003. Read the original PDF.