The Inability To Get Ahead In California
The San Francisco Chronicle reports from California. “The 21,000 real estate professionals in San Francisco this week for a conference survived the housing downturn and saw the market rebound strongly this year. Bay Area prices are up about 32 percent compared with last year to a median of $540,000 - although medians are much higher in places like San Francisco and Silicon Valley. In 10 years selling homes in the East Bay, ‘This was the best year ever, ever, ever,’ said Liz Rush of McGuire Real Estate. ‘The market is out of control in a really good way.’”
The Mercury News. “The Bay Area is an anomaly, and the strongest housing market in the state, California Association of Realtors chief economist Leslie Appleton-Young told members of the Silicon Valley Association of Realtors at the local trade association’s economic seminar last month. Its recovery has been unparalleled, with high income earners, high desirability and no budget constraints, said Appleton-Young. ‘You really are a beautiful anomaly,’ she remarked.”
From KQED News. “Last Thursday Forum launched KQED’s ‘Priced Out: The Bay Area’s High Cost of Housing,’ discussing what’s driving the market, what these prohibitive costs mean for the region, and what to expect in the short and long term. One guest went so far to say, ‘God wanted the Bay Area to be expensive,’ citing the lack of space to expand development and good weather.’”
“What do you sacrifice to be able to afford housing in the Bay Area. Here’s how some listeners have weighed in: ‘I pay half my monthly salary for a condo for my little family of 4. We haven’t been on a family vacation for over 5 years. No new cars, hand-me-down furniture. I know we have plenty to be thankful for, it’s just a struggle sometimes, and really scary knowing our savings won’t last long in an emergency.’”
“I commute 4 hours round trip 3 days a week. This allows me 2 have an affordable mortgage.”
“The ‘middle class’ life in Marin, when you don’t come from money: retirement, housing, savings, kids. Pick two if you’re lucky.”
The Los Angeles Times. “Housing affordability fell last quarter in California, reaching the lowest level since 2008, as the housing recovery locked some buyers out. Only 32% of potential homebuyers in the third quarter could reasonably afford a median priced single-family home, the California Assn. of Realtors said Thursday. That’s a sharp drop from 49% in the third quarter last year.”
“A recent report from Fitch Ratings estimated prices in much of coastal California are more than 20% overvalued based on market fundamentals such as income, employment, population, mortgage rates, housing units and rental values. ‘Most concerning,’ the report said, ‘there is growing evidence that recent gains have been bolstered by an increase in investment sales, both to institutions and local investors.’”
“The sharp price increase raised concerns a bubble was forming in some regions, although the market has cooled recently.”
The Sacramento Business Journal. “Proving the hottest days of Sacramento’s rebound housing market have passed, the region is now occupying a high spot on another list: The number of homes where sales prices went down. In a new report from Redfin, 35 percent of the homes in the region had a price drop in September. That puts it second only to Atlanta, where 42 percent of homes did so.”
“Sacramento also topped another Redfin list, of price drops compared to a year earlier. In September, 17 percent more homes had their list prices drop than in September 2012, when buying demand from investors blunted much of any need to do so.”
Wall Street Cheat Sheet. “Bubbles do not usually make a significant comeback in such a short amount of time. Home prices peaked in 2006 and started their infamous plunge. However, many measures have been implemented by the Federal Reserve to re-inflate home prices. While home prices are bringing back memories of the housing bubble, the pace is expected to slow as affordability issues weigh on the real estate market.”
“In a recent survey from Redfin, home sellers are showing more disappointment in buyer interest. The percentage of survey respondents who think it is a ‘good’ time to sell their home plunged to 34 percent in October, compared to 48 percent in the third quarter. Meanwhile, 39 percent of respondents are worried about ‘general economic conditions’ when selling their homes.”
“‘The market is softening. Instead of homes getting 10 offers within the first week, they might get one or two,’ said Redfin Riverside, California, Market Manager Paul Reid. ‘Moreover, buyers are more emboldened. Some are making offers below list price and contingent on the sale of their home … and winning.’”
The Voice of San Diego. “Trulia chief economist Jed Kolko published an analysis of home affordability in the U.S.’s top 100 metros. His analysis was simple: It compared the median household income in the metro area to the median home price. The results don’t reveal anything we didn’t already know: The Midwest is a place to buy and the East and West coasts are places to rent. In particular he notes that San Diego is among the least affordable markets in the nation.”
“If I look at my own situation, the neighborhood I live in (Ocean Beach) is cheaper to rent by half than to buy. Which is to say, we spend roughly 30 percent of our income on rent here. If we were to buy, we’d spend 60 percent of our income on a mortgage (assuming we could afford the down payment and get a loan, which is highly unlikely given those numbers).”
“What’s troubling for the city is that I make pretty good money, well above the median household income. I can only imagine what it’s like for those who are at or below the region’s median household income. San Diego is great at getting people to show up. I count myself among the many transplants. I’ve been here for 14 years now. But I’ve also seen many of my cohort leave too soon. Often the rationale boils down to their inability to get ahead here.”
