by Jacob Rueda
The housing market is in a constant state of flux. Prices in high-demand areas keep rising with no sign of them going down. This trend has led to significant challenges for prospective home buyers, who face fierce competition and limited inventory.
According to Kiplinger, the top five housing markets in the U.S. as of June 2024 are:
Manhattan, NY
Honolulu, HI
San Jose, CA
San Francisco, CA
Orange County, CA
The average home prices in these markets range between $1.3 million to $2.7 million, with three of the top five markets located in California.
"You find a lot of people wanting to come here," said Moises Olivares, a Realtor based in Southern California. He attributes the influx of people to the state's robust economy and favorable climate.
The average price for a home in California is over $900,000, according to a May report from the California Association of Realtors. By comparison, home prices in Utah average out to just over half a million as of July.
At the opposite end of the spectrum, Flint, Michigan, known for being one of the worst housing markets in the U.S., has average home prices just above $61,000.
Several factors determine the price of a home, including location, the size of the property, and the condition of the home. Olivares said that buyers' visions for renovation also play a role.
"Maybe they can build a second unit or expand the house," he said.
With high demand and inventory low, some home buyers are willing to pay well above asking price.
"A house in LA, in one of the high-end areas, ended up selling for $700,000 above asking price," Olivares said, "When I ran the address and I saw that, I was like, the house was worth 1.5 million and ended up selling for 2.2 million."
This intense competition often prices people out of homes. Olivares attributes this to the free market nature of the industry and the economy.
"Real estate is a free market and if you have the money, if you want to do it, you can do it," he said, "Nobody is going to tell you, 'Hey, wait, you cannot pay $700,000 above asking.' You're allowed to do that if you have the means."
High competition not only contributes to the limited inventory but to the overall pricing of homes in a market. What people are willing to pay above asking price impacts the value of the next home that comes up for sale.
Low home inventory also affects renters, who can also be priced out of places to live as well. With prices in markets like Los Angeles as high as they are, finding an affordable house or apartment can be challenging.
"Right now, an apartment in Los Angeles in, let's call it, one of the least desired areas is going for $2,000 and we're talking about a two-bedroom apartment," Olivares said, "If you want to rent in a better area, you have to be prepared to pay above $3,000 per month."
High rents is part of the reason homelessness has grown in Los Angeles. Between 2018 and 2023, homelessness in L.A. County increased 40 percent in part due to high rents. A four-year moratorium on rent hikes ended in February, allowing landlords to raise rents six percent annually in rent-controlled properties.
Past legislation aimed to protect home buyers and renters, but Olivares believes it is "impossible" to ensure equitable housing opportunities for everyone.
California passed SB 1079 in 2020, which prevents hedge funds and other large corporations from bulk-buying foreclosed homes.
Federally, the Federal Housing Administration's FLIP rule prevents the sale of a home that has been owned for less than 90 days. In essence, the rule stops quick resale of homes that have been "flipped" in a short period of time.
Regardless of that, Olivares said everything comes down the aforementioned "free market."
"In a way, the consumer dictates what happens with the market," he said. With some prospective home buyers driving others out of the market and impacting local prices without restraint, legislative measures have limited impact on controlling rising home prices.
Watch the interview with Moises Olivares below.
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