Immigration Blamed For Housing Shortage
May 3, 2002
Analyst Forsees ?Socially Significant? Housing Shortage In Southern California
By Bridget McCrea
Inman News Features
The housing market in Southern California is the tightest it has been since Patrick Veling, an industry analyst and consultant with Real Data Strategies in Brea, Calif., began tracking absorption rates and other real estate data years ago.
A report Veling compiled last week based on data from a Southern California multiple listing service showed current supply at the current pace of sales at just over eight weeks with many median price ranges ($350,000 to $450,000) at one to two weeks? levels of supply.
But Veling, unlike some other industry experts and analysts, isn?t attributing the area?s skintight housing market entirely to low interest rates or lack of activity by the state?s home builders.
He said the real roots of the situation run much deeper into such societal and demographic changes as immigration and household formation rates.
As evidence, he points to DataQuick data that show eight of the top 10 home buyer surnames in the state belong to people of Asian or Hispanic descent.
"California has seen a far greater influx of immigrant population over the last 20 to 30 years. Now many of those residents have created a second generation of young urban-cultured people who need housing," he said.
That need for housing could push the state into the "socially significant" housing shortage that has been threatened for years, but hasn?t yet completely materialized.
This type of shortage would mean the real social demand for housing, as a result of household formation and increasing population, would prevail and establish a new benchmark for housing values.
"This isn?t an economics-driven shortage as much as it?s a societal issue," said Veling.
Prior housing booms and busts have been subject to economic whim: when there was a chance for speculation, the related trend markets ran up in value, said Veling. But then the bubble would inevitably burst, bringing the market back down to a new baseline.
This time, Southern California?s tight housing market has been fueled by the potential of investor gain, but the market has moved from speculative-driven activity to more need-based activity in the last 12 to 18 months.
"There?s a tremendous amount of pent-up demand for housing," said Veling, who bases his conclusions on anecdotal evidence, research and analytical studies of MLS data in Southern California and nationwide.
Veling pinpointed California as the first state to show signs of possible entry into a socially significant housing shortage.
He would not speculate as to whether the situation forebodes a similar housing crunch in other states. But he said many other states are feeling the pinch and reporting housing inventories in the 12 to 24-week range.
"The understanding we have from all metro markets, with the exception of the Midwest," said Veling, "is that markets are in similar circumstances regarding inventories."
Copyright: Inman News Service