Geez. What are the salaries like there? How the heck can anyone afford to buy them at these prices? And if they can't afford to get in, why is the demand still so high?
Just nuts....
LQ
Well, here's what usually happens.
If you were able to buy a house a few years ago, you now sell it at high price and either plow all of your capital gains into the new house to make it affordable or move further out in order to afford an upgrade.
Sometimes in addition to that, both husband and wife work full time jobs in order to make ends meet.
The only people who can usually afford to buy such overpriced homes are those that have sold THEIR overpriced home in the same area, which is a foolish excercise in my opinion.
The people that are priced out are usually Fisrt Time homebuyers. The housing market in California is essentially a pyramid scheme and the problem is we are not getting enough suckers to come in at the bottom of the pyramid.
Maybe 50% above the national average. Not enough.
How the heck can anyone afford to buy them at these prices?
A lot of the sales turnover comes from people selling existing homes and trading up. Some of it is dot-com money that got redeployed from the stock market after the NASDAQ crash. Some of it is mortgage companies handing out adjustable rate-mortgages to marginal buyers like Monopoly money, with the buyers planning to refinance before the balloon payment hits in a few years (they are in for an ugly surprise when rates go way up). Some of it is that there are only a small number of urban and suburban places you can live in this state without subjecting yourself to gang or drug-related violence - the price of security is very high. And some of it is the traditional California price inflation driver: Midwesterners who decide that they just can't take one more winter.
Some cite illegal immigration as a factor, but I think it only affects the security aspect - illegals aren't buying houses.