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California was one of the hardest hit states during the recession but according to my next guest -- rebounded to become the top housing market.
In the country joining me now John -- CEO John Burns real estate consulting John.
Thanks for joining us I noticed that cash purchase is accounted for about a third of more home sales last year in California.
Which is twice the normal -- by the way where's all this cash coming from.
A lot of it's coming from big investor groups that are buying distressed homes -- we're seeing a huge influx of foreign buyers particularly from China.
We're paying cash for homes.
But does that really reflect a healthy housing market there was can be people out there who -- kind of wealth but is that -- A healthy situation.
Well how miss not the normal market I think there's some people taking it and fact I think the Chinese Stewart taking advantage of the fact that home prices have fallen so much -- throughout the exchange rate on top of it in their housing bubble that made them affluent.
But what this is all doing is as and it's it's creating pretty solid fundamentals we've.
We've gotten really strong job growth about 2% job growth.
And constructions down 84% from the peak and it's only up 5% in Southern California year over year 'cause it's so supply constraint here.
And the months of supply there's virtually nothing on the markets of the fundamentals are very strong.
We've heard about an inventory.
Restriction you know the problems with the -- lack of inventory for some time now have you seen any change -- that up also known as.
Wanting to put their home on the market more likely now to take that step because they believe these prices are coming back.
-- so they were starting to see that slowly come back there.
About 10% of the people there were under water a year ago are no longer under water and are able to sell their homes.
So that that's the level of improvement so far but I'm expecting it to accelerate.
He -- California's housing recovery.
Is a different story what you mean by that.
Well on the -- country it's driven by strong job growth and we're starting to see construction comeback in Southern California.
It's got okay job.
It's a different type of recovery and what will that mean.
Since they're not gonna build for the demand -- means prices are gonna go upside I'm expecting far more price appreciation in California than in the rest of the country this year.
What are you hearing about the mortgage market we get a lot of conflicting information have one guess is say look you can get a mortgage it's it's bad to be had but then others say no banks just don't wanna have any part of it what are you hearing.
Your first guess is totally right.
I -- it it it if it's easy to get a mortgage if you can document three years' worth of income and your total debt doesn't exceed 43% -- your income.
Self employed folks a few other people there were out of work two years ago it's a little hard for them but that's about it.
You say you're expecting more appreciation those prices what's reasonable and how far do you have to go before you would say we're back to what what -- be -- to normal.
OK so we -- even debating this a lot internally.
That that if you look if you look at the price in relation to incomes today we're actually are at normal.
But if you look at the mortgage payment work more than 30% below normal.
So what were expecting some pretty significant price appreciation.
A lot of its induced by low mortgage rates -- you're gonna have David Stockman on letter Lynn he's got a point out this is totally fed induced an artificial and investors and and I think he's right that that's what's kick starting the recovery here but I think what's going to happen this year and next -- -- gonna see normal buyers come back into the market.
Alright very interest thing John Burns thank you so much for joining us appreciate it.
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