Low inventory drives recovery of home prices in L.A.

(CBS News) LOS ANGELES -- Home prices in Los Angeles are up more than 14 percent over last year, rising so quickly that Alex and Belen Griswold had to rethink their plan to buy a bigger home for their growing family.

"We decided the best way actually to get a good house in a good area for us, for the next five to 10 years, was actually building a new -- completely new house here," Belen says.

The rising value of their home has allowed the Griswolds to take out a home equity loan to pay for construction.

"At the end of the day, I'll be able to put in the money here, have the bigger space that we need, be able to get my money back because of the market condition and not spend as much as I would have buying elsewhere," Alex says.

A low inventory of homes on the market is driving the rapid recovery in prices across southern California.

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In March, 52% of homes listed for sale in Los Angeles were under contract within two weeks, many with multiple offers coming in above asking price -- something not seen since the housing bubble burst six years ago.

Realtor Ben Lee says his listings get bids within days.

"It's a frenzy," he says. "I will have people calling me before it hits the market, trying to get in and get their clients an advantage. I'll have multiple buyers lined up outside."

That's what discouraged the Griswolds from buying a new home. Alex Griswold says he doesn't think the market is a bubble right now.

"I think it's a correction," he says. "We're getting to what the proper prices of these neighborhoods should be."

Low mortgage rates are also fueling the housing recovery in Los Angeles. The average interest rate on a 30-year fixed mortgage is now 3.4% -- that's close to a record low.