Data from the National Association of Realtors suggests a housing bubble may be on the verge or bursting in some markets, like coastal California. Overall, U.S. home prices in the second quarter were up 4.3% vs. a year earlier to $279,600, with 16 markets posting declines. That’s a slight appreciation dip from averaging 5.5% annual gains in 2016-2018, a period when just eight U.S. markets were losers. Silicon Valley prices in California took the nation’s second-biggest loss in the quarter: a 5.3% year-over-year decline, which is a huge contrast from 2016-2018, when the San Jose-Santa Clara market’s prices averaged 15.7% annual gains — the No. 1 gain nationally. San Francisco suffered the seventh-biggest U.S. decline of 1.9% in the year, which is again quite the decline from 9.6% annual increases. Three other coastal California markets had eroding gains: (1) Orange County with 0.6% gain, down from 5.8%, (2) San Diego with a 1.6% increase, down from 6.7%, and (3) Los Angeles with a 1.8% increase, down from 8%. California’s more affordable inland markets fared better at 5.6%, but still dipped from a previous 8% yearly rate. These declines may be attributed to the steep run-up of prices in recent years and a recent cooling of the state’s business growth pace. However, California has company, as second-quarter depreciation also occurred in markets in Illinois, New York, Wisconsin, Florida, Oklahoma, Hawaii, Colorado, Kansas and Connecticut.
People talk about the need for more “affordable” housing in California, but the creation of relative bargains with price cuts on existing homes often scares off the same house hunters who claim they want to pay less — fearing overpaying as a price slide begins, and choosing to wait to buy in hopes of steeper discounts. This wait-and-see mentality can amplify an already souring situation.