The real estate market has dominated headlines for the past two years.
For most of 2006, Orange County Register headlines resounded, “OC weekly median hits a record” and “Existing-home sales and prices rise dramatically” on an almost daily basis.
Now, headlines bring us “OC home market ’07 starts with slowest pace in 11 years” and “OC house prices down again.”
Many will claim the sky is falling on the OC real estate market and that foreclosures will skyrocket, home prices will plunge, and with it our economy may be pulled into a recession.
Where is the truth in all this?
Sometimes it helps to step back and consider the reality of the situation from a different, longer-term perspective.
Over the long term, I contend that just two factors drive the desirability of any place, and therefore long-term trends in housing prices and real estate values: a solid, diversified, world-class economy and great quality of life as a place to live.
Vibrant economies with low unemployment and high levels of job creation lead to rising wages and salaries. These factors allow people who do not already own a home to pursue the American dream by saving for down payments and qualifying for homeownership.
Entrepreneurial spirit, high levels of wealth creation and a rising real estate market in turn lead to trading up to better, more expensive homes.
The exact definition of “quality of life” may differ from person to person. But most people value climate, low crime rates, good infrastructure such as moving freeways and roads, environment and access to recreation and arts and culture.
It turns out very few places have both a vibrant economy and good quality of life. However, OC is one of the few places in the world that does.
The county’s economy is at the heart of one of the world’s best, highest growth markets: Southern California.
We consistently have one of the lowest unemployment rates in the nation and highest levels of job creation among U.S. metro areas.
According to the Milken Institute, we have the most diversified high-tech economy in the nation. Finally, if we were a country, OC’s economy would rank 37th,larger than Israel, Singapore and the Czech Republic.
Numerous studies and reports have also placed OC at the top in terms of quality of life among U.S. metro areas.
We have objective numbers to confirm this. According to the FBI, OC has the lowest crime statistics in California. OC’s infrastructure is the envy of surrounding counties, and residents rate their quality of life and arts opportunities very highly.
Last but not least, climate and access to recreational opportunities such as the beach and ocean are second to none.
Places such as Santa Barbara, Aspen, Colo., and Jackson Hole, Wyo., are renowned as great places to live but do not have vibrant economies on a world-class scale. In other words, people have made their money elsewhere before they move there to enjoy great quality of life.
On the other hand, most places such as New York, Boston, and Minneapolis offer great economic opportunities to their residents, but where would you rather spend a January day,in any one of those three or Newport Beach?
Whatever the day to day headlines say about home prices, few places, if any, can offer what OC has: great quality of life and real opportunity to advance and prosper economically. Even those who bought during the last dip in real estate values of the early 1990s, and temporarily saw real estate values slip slightly, were doing very well even five years later.
History has proven time and again that an investment in OC real estate is one of the best investments a person one can make. This time is no different.
How can I say this with certainty? For the simple fact that, as pointed out in the recently released Orange County Business Council 2007 Workforce Housing Scorecard, demand,meaning the number of people wanting to live and work in Orange County because of our consistent, robust job growth,will continue to exceed the supply of new housing units built for the foreseeable future.
We all know the results when demand exceeds supply,prices go up. Remember that the next time a negative housing market headline catches your eye.
Walrod is vice president of research at the Orange County Business Council in Irvine.
