General Question

Charles's avatar

Why did the real estate market bubble so high in SoCal, NV, and FL and not so high in TX, CO, IL?

Asked by Charles (4791 points ) December 25th, 2011

Some states had much higher real estate bubble price run ups during the early 2000s. Parts of SoCal, NV, and FL are states that really ramped up. However, other states didn’t bubble nearly so high? The lending rules were pretty much the same, the rates were the same, the national economy was pretty much the same. Why wasn’t the bubble basically equivalently felt everywhere?

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11 Answers

JLeslie's avatar

Because FL and NV especially had a lot of investors buying property. No one was living in a lot of the places, they were second homes and homes purchased to flip or rent. So, what that means is those states were very overbuilt, and when the market started to go down, the econmy and the real estate market, there was a glut of housing for sale, but no buyers. Laws of suppy and demand, suppy was huge, and demand became very low, because don’t need to buy investments or second homes.

The reason FL and I assume NV, had all of those interested parties in buying there is it is a vacation, fun place to be. Not only American from northern states were buying in FL, but Europeans and Latin Americans also. Let alone Floridians who saw investment opportunity.

SoCal I know less about. The prices were extremely inflated there, probably because of the jobs paying so much money to a portion of the population. Maybe they had people from Asia buying property? That I don’t know. I don’t know exactly how everything happened in that market though. Maybe they had a lot of job losses? Not sure.

john65pennington's avatar

Location, location, location and not to mention the high crime rate between the six locations.

robmandu's avatar

Can’t speak for the rest, but in Texas, we haven’t been hit by the Great Recession quite so hard.

Less people out of work => Less people defaulting on mortgages => Less devaluation of property.

JLeslie's avatar

@robmandu That goes with what the OP was saying, that TX was not part of the huge bubble.

Coloma's avatar

California has, historically, been a highly desirable place to live.
I live in a “gentlemans ranch ” community an hour out of the state capitol in Sacramento.
My area is very diverse, old timers that have held large family properties since the goldrush era, city transplants from So. Cal and the Bay area, bohemian types like myself, good ol’ boys etc. lol

People up here think nothing of commuting an hour or more to work in the city and inspite of the bubble bursting and a good amount of homes and properties up for sale, this remains a highly desirable area to live and raise a family and for those like myself that like living in a beautiful, natural and pastoral setting with peace, safety and solitude.

I got pretty serious about buying some out of state investment property in 2006— 7, but, honestly, other than several resort areas in the Rockies, N.M. & Colorado, possibly Utah, no other state holds the appeal for me like the good ol’ Golden State.

It’s hard to find such diversity in other states, miles and miles of awesome coastline, one of the most amazing mountain ranges anywhere, The Sierra Nevadas where I live in the high foothills Deserts to beaches to mountains to subtropic eco systems….hard to find any comparable places, along with parts of the Pacific NW.

Judi's avatar

I think the real estate inflated so fast here. We were the most volitale part of the market. Other places didn’t take such rapid increases, so they didn’t fall as hard.

Brian1946's avatar

I’d say another reason the bubble got so big in SoCal, is because in most of the lower-elevation areas, the weather is very mild and semi-arid.

In those areas, there are almost never any snow or tornadoes. Also, no hurricane has ever hit So Cal, AFAIK. Apparently this appeals to a lot of people in spite of the earthquake risks.

Nullo's avatar

Those areas have more desirable real estate. Illinois is ugly (I say this as a transplanted Calipean, not as a Missouri native), Texas is boring, and it takes a certain kind of person to live in Colorado.

robmandu's avatar

@JLeslie, I understood that point from the OP… and also that the question about what was different between those sets of states. My answer, in that light, was that Texas has a relatively lower unemployment rate as compared to CA and the rest.

What do you think the point of this question is?

JLeslie's avatar

@robmandu I started my answer about why those particular markets burst at first, but then realized the question is asking about the bubble, to me that means why the prices went up, not why they did or didn’t come down.

Nullo's avatar

Thought of an addendum today: Illinois is in a bad way, financially.

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