The Southern California median home price in December finally surpassed bubble-era highs, a milestone that took more than a decade to achieve and is once again raising concerns that housing is too costly.
The six-county region's median price surged 8.2% from a year earlier to $507,500, real estate data firm CoreLogic said Wednesday. That tops the bubble-era high of $505,000 in 2007, which was matched in September and November.
Adjusted for inflation, the region's median is still nearly 13% below the 2007 peak, and there are other caveats as well. But the new nominal record is noteworthy as a historical marker and because more borrowers who were underwater probably are no longer.
"It goes to show you just how outrageous the last bubble was — for us to take 10 years to get back to that nominal level," said Christopher Thornberg, founding partner of Beacon Economics.
In none of the six counties, though, did the median — the point at which half the homes sold for more and half for less — reach a new nominal high. The record for Los Angeles County was reached last summer when it hit $575,000 and has dipped $5,000 since then.
CoreLogic analyst Andrew LePage said the discrepancy between county-level data and the regional record partly reflects a slightly higher share of homes selling in high-cost Los Angeles and San Diego counties with fewer in the more affordable Inland Empire.
The Southern California median also was driven higher by a greater number of new home sales, which rose 6.2% even as total sales dropped. The median price for a resale house at $520,000 remains $30,000 below its nominal 2007 peak.
Even so, the latest housing data reflect a competitive housing market in which prices have been rising for more than five years.
Many economists think today's upswing is more sustainable, driven not by risky lending but by an improving economy, historically low mortgage rates and a shortage of homes for sale.
And if a borrower can scrape together a down payment and qualify for a loan, mortgage payments are still cheaper than during the go-go-days of the mid-2000s. That's in part because the average interest rate for a 30-year fixed mortgage has been hovering in the high 3%-range.
"Are we in a bubble today? No," Thornberg said. "In a bubble you are either overbuilding or overborrowing and neither condition is in place."
The flip side is rising costs are putting homes out of reach for many.
The median increased in December, compared with a year earlier, in all six counties tracked by CoreLogic.
Prices rose 9.6% to $570,000 in Los Angeles County; 4.6% to $698,000 in Orange County; 5.8% to $365,000 in Riverside County; 8.0% to $323,000 in San Bernardino County; 7.7% to $559,000 in Ventura County; and 9.1% to $540,000 in San Diego County.
As of the third quarter, only 22% of L.A. County households could reasonably afford a previously owned house at the median price, compared with 26% a year earlier and 42% in 2012, according to data from the California Assn. of Realtors.
That has prompted some people to pack up and leave coastal areas to move inland or even out of state in search of a home. And although job growth remains robust, businesses are reporting difficulty in recruiting workers from outside California.
Indeed, Southern California sales in December fell 3.8% from a year earlier, probably in part because of a shortage of listings. In Los Angeles County, there were 26% fewer homes for sale last month compared with December 2016, according to online real-estate brokerage Redfin.
"You are going to have to see inventory increase before you see prices level," said Syd Leibovitch, president of Rodeo Realty, which has offices throughout Los Angeles County.
Michael Nourmand, president of L.A. brokerage Nourmand & Associates, said buyers are out shopping in full force because they think mortgage rates are likely to rise and they are confident in an economy that's seeing robust job growth and new stock-market highs.
"The economy is good and people are working," he said.
The competitive market has potential buyers writing personal letters to sellers and waiving appraisal and loan contingencies to make their offers stand out. The most competitive homes are those priced in the lower or middle range for a neighborhood, Nourmand said.
Case in point: a recent two-bedroom condo in Santa Monica just south of Montana Avenue that was listed at less than $1 million.
Nourmand said there were 17 offers and the condo is now in escrow for "well over $200,000" above the asking price.
"There is way more demand than there is supply," Nourmand said. "It's crazy."
Low inventory levels and high costs are driving a political debate over whether communities should allow denser development to help alleviate a persistent housing shortage.
This month, for example, a bill was introduced in the state Legislature that would — subject to some limitations — eliminate restrictions on the number of houses allowed to be built within half a mile of major bus routes and rail and other transit stations.
The bill, from Sen. Scott Wiener (D-San Francisco), is likely to face stiff resistance in many communities concerned over the changing character of their neighborhoods.
2:35 p.m.: This article was updated with additional analysis and comment from an economist and real estate brokerages.