Over the decade the Consumer Price Index (CPI) for the state has gone up nearly 32 percent. This includes rent and also the owner’s equivalent of rent figures. This is the measure that is often used to examine inflation. It may be flawed since it understated the housing bubble going up and does not capture the crash with home prices going down. Yet this is the figure often used in government studies and also to base monetary decisions taken by the Federal Reserve. How did home prices in Southern California perform over the last decade?
This is where you can see the housing bubble clearly. In areas like Riverside and San Bernardino (the Inland Empire) home prices have actually come under the overall rate of inflation. In fact, San Bernardino is seeing prices like those back in the early part of the decade. So the housing market is not uniform across the spectrum even in a regionally close area like Southern California. The three areas that are largely in bubbles are Los Angeles, Orange, and Ventura counties and the data above shows why.
In Los Angeles County home prices are up 72 percent over the decade and this is where half of SoCal lives (approximately 10 million people). This is twice the overall rate of inflation. If we were to use the 32 percent rate, home prices would be closer to:
$200,000 x 1.32 = $264,000