February 06, 2018
If you're a millennial living in California, buying homes doesn't come any harder. California ranked as the toughest state in the
nation for first-time home buyers, who typically would be in the
millennial age bracket of 18 to 34, according to a recent report by
Claes Bell, an analyst with Bankrate.com. There are several reasons the
Golden State placed last in the report, including the relatively high
cost of housing, the tight market for available entry-level homes and
the struggle that millennials face in saving for a down payment. In
Southern California, the median home price for new and resale homes hit
$460,000 in February, up 7% from a year earlier and the latest gain in
nearly five years of steady price increases, real estate firm CoreLogic
reported recently.
We asked Bell to walk us through the
reasons that California is the nation's hardest state for buying that
first house and how — despite the hurdles — it's still possible for
millennials to get into the market. Here's an edited excerpt: California
consumes one of the highest percentages of people's income for housing.
Folks in that typical first-time home buyer age range, anywhere from
the mid-20s to early 40s, are going to have a difficult time in many
cases finding room in their budget for a California-sized mortgage
payment. Not only do homes cost so much but they cost so much relative
to people's incomes. In California, people are going to be earning more
than the average state, but because the houses are just that much more
expensive, affordability becomes a real problem. Home builders are not
keeping up with demand for homes in California. There just aren't enough
homes being built relative to the growing number of households in
California. I looked at the growth of the housing stock and the growth
in the number of households from 2010 to 2015.
You would want
that growth spread to be getting wider, because that would show an
increase in housing relative to the number of people there.
Unfortunately, it's going the wrong way in California. The spread
basically is negative there. I've seen a lot of research in recent years
that the starter home that was kind of mainstay of the home-building
market has sort of fallen out of favor and they're just building more
homes at the top of the market for folks rolling over their equity from
another home. They're kind of leaving that bottom of the market
unsupplied. It's a huge issue, and it's going to be more of an issue as
more millennials grow into this prime first-time home buyer range and
it's going to have all kinds of problems down the line.
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