It is tough to find reasonable priced real estate along California’s coast.

The Lawhead Team recently came across an interesting article from Forbe’s about the many reasons California’s real estate continues to stay priced high:

Playing The Surge In California Real Estate

From (Ross Gerber, Contributor)

On its face, the real estate environment seems like it’s in good shape. Not only are prices back up to – and in many cases eclipsing – pre-crash levels, but the number of foreclosures and underwater homeowners has fallen dramatically, especially in some of the harder hit areas around the country. Beneath the surface, however, danger is lurking as prospective buyers nationwide are finding it more and more challenging to find affordable housing.

Along the California coast, it’s not merely challenging to find reasonably priced real estate – it’s nearly impossible. From San Diego to Los Angeles to San Francisco, home values are rapidly rising and a confluence of factors will likely continue to drive the market even higher. Consider the following:

**Prop 13 – A voter initiative passed in 1978 amid an anti-tax revolt, it caps California property tax rates at 1.25% and freezes assessed property values at the original purchase price. While no one likes higher taxes, the measure artificially constrains inventory and make prices soar because it offers older homeowners a remarkable disincentive to sell.

california**Greater investment property ownership – Investors flooded the middle market after real estate hit bottom during the financial crisis, gobbling up foreclosures and short sales at bargain basement prices and converting them into rentals – further squeezing what little affordable inventory exists within these markets.

**Lack of available land – In the most desirable neighborhoods within San Diego, Los Angeles and San Francisco, land is scarce. And when there is development in such neighborhoods, it often involves tearing down a $1 million home and replacing it with one that is three times more expensive. While this is good for surrounding homeowners – who see the value of their properties go up – it makes the broader market more challenging for prospective buyers.

**Foreign buyers inflating prices – From locating a property to negotiating price to going through each exhaustive step of the mortgage process, buying a home often takes months. But for wealthy foreign buyers seeking the safe haven of US-based hard assets, and making all-cash offers to sweeten their deals, it only takes weeks.  And by frequently going above market prices in their offers, foreign buyers have helped drive up the price for everyone else.

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