After weathering a downturn that lasted the better part of this decade, Southland homeowners--many of whom have never seen a profit from real estate--are ready to ride the next big wave.
They know all too well that this wave won't last forever. So the question is: How long and to what heights?
Most analysts are optimistic about what they see--broad-based employment growth, low interest rates and moderate price increases.
All of which compares favorably with the real estate boom of the late '80s, when the economy was more dependent on certain industries, interest rates were substantially higher and the values of homes soared beyond people's ability to afford them.
"The thing that always gives you pause in a hot market is the issue of affordability," said Leslie Appleton-Young, chief economist for the California Assn. of Realtors. "Double-digit price appreciation can't go on forever without pricing people out of the market."
But Appleton-Young noted that most of Southern California remains far from reaching that point.
In March 1997, Santa Clara became the first California county in which the median home price exceeded its pre-recession peak.
Based on current projections, Orange County will surpass its previous high-water mark by the end of this summer or early in the fall; Los Angeles County probably won't get there until some time next year.
L.A. County, in particular, is cushioned from runaway price increases by having experienced a disproportionate share of the state's layoffs and property foreclosures in the recent slump, Appleton-Young said.
Indeed, analysts agree, one reason for the lopsided ratio of buyers to sellers is that home values have some catching up to do.
"Prices are still very low in Southern California compared to what they could be," said Acxiom/Dataquick's John Karevoll.
The moderate pace of growth might also be having the effect of keeping inventory down, since so many homeowners who bought within the last decade have negative equity.
Whatever the reason, the combination of low supply and high demand inevitably pushes prices upward, and some economists see ominous signs.
"Things are going up faster than I'd like," said Albert Gobar, a consultant to new-home builders. Rapid price growth has several negative effects, he explained.
Entry-level houses become inaccessible, slowing new-home construction and holding back the move-up market
Moreover, Gobar said, soaring prices often result in distorted behaviors.
"People begin to speculate in housing, or they get fearful that if they don't buy a house now, they won't be able to later, so they stretch," he said. "Builders see a chance to make money, and they bid up the prices of lots. It can't last."
But some experts see a major difference in consumer psychology this time around.
Like someone forgiving a trusted friend after a painful betrayal, home buyers are approaching the market much more cautiously in the wake of the extended downturn.
"It's taken a while for people to become comfortable with real estate again," said Karevoll. "The recession scared them thoroughly and, as a result, there's more level-headed numbers-crunching going on.
"I don't see any frenzy," he concluded. "People are buying well within their means."