Study: IE has the state’s wildest home-price swings

The market with the biggest seesaw for home prices in California is the Inland Empire.

The region making up Riverside and San Bernardino counties is home to the state’s largest swings in home values, according to an Orange County Register study.

The Register tallied annual changes in home values in seven big California markets, as calculated by Federal Housing Finance Agency indexes since 1978.

The ranking tracked four factors: the gap between best and worst years; the share of down years; price-swing variations known as “standard deviation”; and the 44-year average price gain. Its final grade was an average ranking of these four yardsticks.

The housing market of Riverside and San Bernardino counties took the top spot because it was No. 1 for all four volatility yardsticks. The Inland Empire’s housing market has an up-and-down history due the region’s fast-growth and erratic economic history.

Next came Greater Sacramento, followed by Los Angeles, Orange and San Diego counties, then the San Jose and San Francisco metro markets.

In the Inland Empire, there’s a 57 percentage-point gap between the largest gain of 29 percent in 2004 and the largest loss of 28 percent in 2008. The IE market suffered down years 30 percent of the time, with a typical 10.6 percentage-point variation in year-to-year price swings. Local prices have gained an average 5.8 percent a year.

In third-ranked Los Angeles County, there’s a 43-point gap between its biggest gain of 26 percent in 2005 and largest loss of 17 percent in 2008. The L.A. market had down years 30 percent of the time, with a typical 9.5-point price-swing variation. The average gain was 6.3 percent a year.

In fourth-ranked Orange County, there’s a 44-point gap between its biggest gain of 26 percent in 2004 and the largest loss of 18 percent in 2008. The OC market had down years 25 percent of the time, with a typical 9.1-point price-swing variation. The average gain was 6.1 percent a year.

The bottom line: Falling home prices in California are not just the result of events surrounding the 2008 global financial meltdown and housing collapse, according to the Register.

Between 1978 and 2006 – just before the real estate bubble crashed into the Great Recession – the seven big California housing markets combined had down years 22 percent of the time. That’s roughly once every five years.

In the decade of recovery from the mid-2000s housing bust, the seven markets have had a total of five down years.

The Southern California market – with overvalued homes, high mortgage rates and growing economic uncertainty – seems overdue for a price correction, according to the newspaper. It concluded that recent gains seem unsustainable, especially since mortgage rates soared in 2022.

— Dana Bartholomew

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