At what point would you say those factors have already been priced in? When valuations are double what they were 5 years ago? 300%? 500%? 1000%? Have the fundamentals really gotten THAT much better in such a short period of time?
One could easily argue that in many areas of Southern California, illegal immigration and crime are substantially worse than a decade or two ago. Crowding and traffic have gotten obscene. The state has gone broke and is now writing long term bonds for routine infrastructure maintenance. Native-born Americans are leaving in droves. “Progressive” zoning regulations are plopping blighted low-income housing in the middle of affluent suburbs. These trends are only getting worse with time, and the liberals in charge will fight to the death to keep it that way.
There is a very real possibility that prices will fall dramatically in the near future. CA real estate was always higher than most of the nation for the reasons you listed, and will probably remain that way as long as the pros outweigh the cons. But there is scant evidence that the most recent runup in prices is sustainable once the easy money goes away.
“There is a very real possibility that prices will fall dramatically in the near future”
What tea bag did you pull these leaves out of? Lipton?
You may be right, though of course I hope you're not! ;^) I wouldn't be surprised to see prices drop, but I would be surprised to see them drop dramatically. Even in the Valley, where things are much different than in So Cal. The wildcard is how resourceful people can be in overcoming challenges. I am SO GRATEFUL that we had the (uncharacteristic!) smarts to turn down a loan guy that was trying his best to talk us into an ARM. Instead we got in on a 30-year fixed at 6 percent with no prepayment penalty. An ARM would have made sense if we'd planned on selling our house in five years, but we plan on staying put for as long as God will have us!
Had we wanted to sell our place after a few years, we'd not have made much if any profit, as the property (barring improvements we've made to it) would sell today for about as much as we paid for it three years ago. Flippers have been eating the big green wienie, and I have to say that's a bit gratifying, as we saw many homes that were ridiculously overpriced by flippers hoping to make big quick profits. They pushed the market as far as it would go, and the market finaly said: Go screw yourselves, flippers!
I'm by nature a pollyanna, and am weird enough to absolutely LOVE Southern California (I was not born and raised here; I come from a small town, rural and scenic coastal region). I never thought I'd EVER be a believer in So Cal, but I am. I love the dynamism here, the entrepreneurial spirit, the innovation in capitalism, the underlying resourcefulness and imagination of the people here. Yes, traffic sucks and illegal immigrants are a drain. Yet my perspective is from the Front Lines, and I see the ways many people manouevre around such challenges. The Northridge Earthquake taught me how easy it is to underestimate the people here. So I (eternal optimist) have hopes that all the things you list will become resolved for the better in ways we can't imagine from our present vantage point.
Would 'near future' mean sometime before the sun becomes a red giant?