You see it in the housing market reports and in all the analytics released by firms such as RealtyTrac – California is not a very affordable place to live in. When it comes to premium pricing, you’re sure to find it in the Golden State, especially in hot markets such as Los Angeles and San Francisco. So how is it possible, looking at things heading into the spring home-buying season, to afford a home in California?
As it turns out, the easiest piece of advice is probably the hardest to follow, and that’s to save money. And that advice actually comes from an expert, namely California Credit Union League chief economist Dwight Johnston, who doesn’t expect any change in the state’s housing market trends in the foreseeable future. In an interview with Housing Wire, Johnston said that in order for people to be able to afford a new home in California, saving money matters more than ever before, what with income growth still considered slow by most standards.
Johnston also said that there are some reasons why homes in California are still so expensive. “First, lack of land in desirable areas. We have a lot of hills and mountains that you just can’t build on,” he explained. “(Secondly), you have a lot of restrictions on building. It is much more costly to get permits. It’s easier to build when you get to the desert areas, but not a lot of people have moved there.”
One interesting statistic that was recently pointed out was the disconnect in terms of the ratio of new housing permits to a market’s population, when comparing the Houston metropolitan area with all of California.
According to The Economist, Houston issued permits for 64,000 new homes in 2014, while the entire state of California issued 83,000. One has to remember, however, that Houston’s population is approximately 6.2 million, as to California’s population of about 39 million.
Going back to the interview with Johnston, the chief economist said, that Houston has an advantage because it doesn’t have a zoning code, hence the huge discrepancy in permit-to-population ratio between Houston and California. “Ideally, builders will start building more affordable housing, but why would they build affordable housing when they could build more costly housing,” he added, also noting that there have been no initiatives to loosen zoning regulations in California.
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