An excellent thought regarding the increase in pricing:

The run-up in prices caught the attention of Dean Baker, co-director of the Center for Economic Policy and Research in Washington, who regarded the trend as “serious grounds for concern that these markets are being driven by speculation.”

“While some speculators buying up homes at a bottom can be positive, the sort of price rises that you are seeing there may be excessive,” Baker said in an email to The Times.

He noted that a big factor in the rising median price is increased sales of high-end homes, which skew the results to the upside. Indexes that track specific home resales, such as Case-Shiller, show far lower price appreciation.

Still, Baker said he thought the California market could experience “serious gyrations” because of the heavy purchases by investors hoping to sooner or later flip the homes at a profit.

“The speculators likely have pushed prices above where the market would put them in some markets,” he said.

Ed Leamer, director of the UCLA Anderson Forecast of the economy, had a more sanguine take on the trend than Baker.

“I am inclined to think that what he calls speculators know more about the market than he does,” Leamer said. “It’s a good thing for professionals to be putting a floor under home prices.”


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