Experts Are Predicting a Housing Crash in These California Cities
Home prices don’t always go up, even in California. Lately, a mix of rising interest rates, shaky buyer demand, and years of runaway growth has analysts tapping the brakes. Some cities are so far above historical norms that the math no longer works. Here are 15 cities that are sitting on unstable ground.
Irvine
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Irvine tops the warning list for one big reason: prices have surged 410.9% since 2000. Homes here now cost more than double what long-term trends suggest is normal. The local housing market is cooling fast, with foreign investor activity dropping and unsold inventory piling up.
San Clemente
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Since 2000, the city has experienced three serious crashes. San Clemente’s price-to-income ratio has reached 13.2, which makes it one of the least affordable cities in Southern California. Sales volume is slowing, and experts say the area may be overdue for another sharp correction.
Milpitas
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With three historical crashes under its belt, including a steep 21.9% drop in 2009, this Silicon Valley suburb ranks high for volatility. Prices currently sit 99.7% above trend, nearly double what analysts consider stable. Housing demand is heavily tied to tech employment, and recent layoffs have raised new concerns.
Newport Beach
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High-end buyers are pulling back in Newport Beach. Median prices now sit at $3.4 million, up 387.2% since 2000. Sales of homes over $5 million dropped 31% this year. Economists warn that homes in luxury markets like this are often hit hardest during corrections, especially when values sit nearly 100% above historical averages.
Dana Point
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This coastal city is now at 100.1% over its long-term pricing trend. Housing economists see that as a clear signal. Since 2000, home values here have risen more than 390%, but wage growth hasn’t come close to keeping up. Days-on-market have nearly doubled since last year, and mortgage applications have dropped.
Mission Viejo
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Prices in Mission Viejo are up 340.3% since 2000, and that’s created serious affordability problems. Only around 21% of residents can afford a median-priced home. Analysts say the market is now 93.8% above its sustainable trend. The last big one in 2008 wiped out nearly 17% of value.
Costa Mesa
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Nearly $1.4 million is now the going rate for a median home in Costa Mesa, after prices climbed 393.7% since 2000. That puts values almost twice as high as historical averages. Back in 2008, the city saw one of Orange County’s sharpest drops—an 18.1% slide. Today, listings are stacking up while sales slip, an early signal of market stress.
Tustin
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In Tustin, fewer than one in five households can afford a home at today’s prices. Since 2000, housing costs have climbed 378.8%. They’re now sitting 97.4% above the city’s long-term average. The area has a history of housing crashes, including a 16.3% fall in 2008.
La Cañada Flintridge
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In La Cañada Flintridge, the cost of a typical home has outpaced incomes to the point where the ratio now sits above 12—among the highest in Los Angeles County. Since 2000, prices have risen 298.1%. Previous downturns knocked this market back sharply, and analysts caution that even the appeal of top schools may not shield it from the next correction.
Lake Forest
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Home values in Lake Forest are almost 374% higher than they were in 2000, leaving the market nearly 99% above its long-term trend. The Federal Reserve Bank of San Francisco has singled it out as one of California’s most overvalued cities. Price swings here average more than 11%, adding another layer of risk for buyers.
Orange
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Sales volume dropped 19% in the first quarter of the year. During the 2008 crisis, this city saw prices fall by 18%. That history of sharp reversals has experts paying close attention again. Home values have increased 334.2% since 2000, but local wages haven’t moved anywhere near as fast.
Coto de Caza
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Behind the gates of Coto de Caza, the numbers tell a different story than the curb appeal. Since 2000, prices have risen 299.1% and now stand 92.5% above historic norms. Luxury sales above $2 million have slowed sharply this year, and homes are taking nearly three months on average to move.
Fountain Valley
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Fountain Valley is priced more than double its sustainable level—101.8% over the long-term trend. Median home values hover around $1.37 million. The market has seen two crashes before, including a 16.2% drop in 2008. Recent numbers aren’t encouraging: mortgage applications are down 26%, and new listings are up.
San Ramon
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San Ramon has experienced three major crashes since 2000, and patterns suggest another could be forming. Housing prices have risen 308.5%, while income growth hasn’t kept pace. Prices now sit 86.3% above trend. The city is seeing a noticeable uptick in listings and a decline in pending sales.
Villa Park
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Small city, big price tag. Villa Park homes are now priced 89.2% over their long-term average. The current median sits above $2.3 million. This city has already been through three significant downturns, including a 14.3% drop during the 2008 crisis. Without fresh demand, prices may not hold at these levels much longer.