Tune in to the national conversation, and California’s high and rapidly rising home prices are notorious. But most of the state has yet to return to the elevated price peaks of the Millennium Boom.

Nationally, nearly half of all home values have reached or exceeded their Millennium Boom peak, according to Zillow. Regionally, the home price picture varies greatly across California.

Unsurprisingly, the Bay Area has an above average share of homes which have rebounded to their Millennium Boom peak, including:

The other major metro areas in the state have seen fewer than average homes return to peak levels. This includes just:

Aside from Riverside, the only major U.S. city with a lower percentage of homes that have rebounded to peak values is Las Vegas, with less than 1% of homes regaining their lost value.

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The uneven recovery lingers

The knowledge that most home values remain below their pre-recession peak means many homeowners who purchased in 2005 and 2006 are holding onto their homes today, for fear of selling at a loss. But real estate professionals needn’t concern themselves over today’s low (by comparison) home values.


Even for those homeowners who purchased near the height of the Millennium Boom, most are no longer underwater on their mortgages. Given the decade between the start of the recession and today, most California homeowners have paid their ways out of insolvency, with only 3.6% of homeowners still stuck with negative equity in California as of mid-2017. As home values continue to rise, this share decreases each quarter, and will approach zero by the end of this decade.

It’s also important to remember the home price peak of the Millennium Boom — achieved in California during 2006 — was vastly inflated and unsupported by fundamentals. Home prices during these years were propped up by predatory lending, the massive overuse of adjustable rate mortgages (ARMs) and a public overly exuberant in the housing market. Renters who had no solid financial basis to buy became (temporary) homeowners, only to lose their homes to foreclosure during the recession.

In 2017, most of these issues have been cleared from the market. Stricter lending regulations are in place, ensuring only homebuyers with the ability to pay become homeowners. This protects the housing market from another big bust — and includes the side effect of less volatile home price increases.

A forecast for home prices

What’s next for home values in California?

The state’s varied regions have recovered at different paces, depending on local economies and regulations. Therefore, real estate professionals can look to their local markets for an eye to the future.

Desirable coastal areas where zoning has held back new construction have seen the quickest home prices increases in recent years. These price rises will continue as long as restrictive zoning practices persist. This has held back would-be homebuyers who wish to buy but cannot due to insufficient supply and too-high home prices. As a result, home sales volume has decelerated and real estate fees have slowed too.

Inland areas will also see home prices continue to rise in the coming years, until the next housing peak, expected around 2020-2021. These years will experience a great confluence of first-time homebuyers finally entering the market and Baby Boomers retiring and relocating to more retirement-friendly homes.

In the meantime, small adjustments may occur from month to month, including a brief slowdown in sales and prices as mortgage interest rates increase going into 2018. Any real estate professional looking to get rich quick in 2018 will need to wait until volume and prices pick back up, starting in 2019.

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