Home prices in Southern California have long been higher than most other states. In May, the median price was $650,000, surpassing its bubble-era peak reached in 2007.
The high demand and a market shortage drive the price up. For many, California is a desirable place to live. The housing demand is growing faster than the number of new homes because of rising employment. However, new home construction in California is facing a handful obstacle: the state has stringent regulations on construction quality, while the costs of labor and undeveloped land are both extremely high.
Foreign investment also plays a significant role on home prices. China is by far the biggest foreign buyer of southern California property. Last year, 80% of a new community in Irvine was sold to Chinese buyers, with about 75% of them paid full cash. Foreign buyers on average are paying a lot more than local buyers. With a lack of supply in the market, this clearly moves up the price.
The very low interest rates, fixed mortgage rate affect the home prices, too.