Unaffordable Housing Sweeping California Markets
As home prices increase disproportionately to incomes, a trickling cascade of markets nationwide moves from affordable to unaffordable. This lesson was learned intensely on the brink of the housing bubble and subsequent downturn a few years back and it looks like we’re at it again.
Signs are pointing back to a similar trend as California coastal cities are reading unaffordable according to recent calculations. Cities hit the hardest? All coastal cities and outflows into cities like San Jose, Orange County, Oakland and LA are seeing home price gains of at least 30 percent.
Another reason for the inequality is the lack of income growth and rising mortgage rates that has made housing prices even more unaffordable. The lack of wage recovery has led to high unemployment rates and lower median family income. California coastal metros saw a median family income lower at the end of 2012 than its peak in 2007.
Locally, our very own San Francisco and San Jose, the epicenters of the recent tech boom, have seen incomes fall 3.3% and 2.1%, respectively, from their 2007 peak. Additionally, mortgage rates have risen greatly in recent months, making home purchases difficult for many.
A solution? The healthiest resolve would be for the economy to kick it up a gear, closing the gap in the labor market and prompting wage growth. In the end, the hopeful mindset is that this issue will take a back seat and we will finally see some economic expansion. One can only be optimistic.