Homes In California's Big Cities Cost 10 Times More Than Average Income
Authored by Jill McLaughlin via The Epoch Times,
Buying a home in California slid further out of reach for many residents in 2023, especially in larger metropolitan areas, according to a recent Harvard University housing study.
The report found some of the highest disparity between wages and housing prices in Northern California.
According to the report released June 20, the Silicon Valley cities of San Jose, Sunnyvale, and Santa Clara had a median home sales price 11 times higher than the area’s average annual wage of nearly $113,000 in 2023.
Median home sales prices are determined by finding the midpoint of all sales, where half sold for more and half for less.
The same was found at the coast in Santa Cruz and Watsonville, where 2023 housing prices were also 11 times higher than the average yearly wage of almost $68,000.
In Los Angeles County and Anaheim—in Orange County—the median home sales price was about 10 times more than the average wage of $98,200.
Further south in San Diego and Carlsbad, housing reached nearly nine times more than the average wage of $76,000 last year.
“Both homeowners and renters are struggling with high housing costs,” the authors of the report, called “The State of the Nation’s Housing 2024” wrote in its summary.
Millions of potential homebuyers across the U.S. have been priced out of the market by rising home prices and interest rates. The cost of owning a home is also increasing as insurance and property taxes continue to rise, according to the report.
And single-family home construction is likely limited by ongoing development hurdles and high construction costs, among other restrictions.
California has taken several steps in the past few years, though, to try to make owning a home easier.
San Francisco on Feb. 23, 2023. (John Fredricks/The Epoch Times)
State officials have relaxed permitting and environmental review requirements to make projects easier, quicker, and cheaper to build.
The state also rezoned land owned by religious institutions and colleges in 2023 to enable affordable housing development, resulting in 171,000 new developable acres.
California is also offering a new grant program that provides low-income earners with $40,000 in pre-construction costs, as well as down payments in the amount of 20 percent—up to $150,000—for some first-time homebuyers.
Still, the country is facing sharp price increases for rent and housing that started during the COVID-19 pandemic, according to Dan McCue, a senior research associate and one of the lead authors of the report.
Prices for homes nationwide are up 46 percent, and rental prices have jumped 26 percent since 2022, Mr. McCue said in a press conference on the report June 20.
“Not only are prices high, but they’re rising once again,” he said. “It’s really adding insult to injury.”
High-rise buildings in downtown San Diego, Calif., on Oct. 4, 2023. (John Fredricks/The Epoch Times)
The number of houses on the market nationally is about 30 percent below those available before the pandemic, Mr. McCue added.
Part of the reason for the shortage can be attributed to homeowners who are staying put and not selling while interest rates remain around 7 percent, he said. The combination of high prices and high interest rates has driven housing inventory to its lowest point in 20 years, he said.
Rental growth has also slowed because rents have remained high after the pandemic. Such is a problem for the record number of renters—over 12 million nationally—who pay more than half of their income on housing, which is most common among middle- and low-income earners, according to Mr. McCue.
Rising home insurance costs, which have gone up about 35 percent, are also hurting low-income homeowners, according to the report.
“We are also concerned that homeownership is increasingly out of reach for all but the highest income households,” Mr. McCue said.
“Access to homeownership has really been cut off in over half of the cities.”
The demand for rentals and single-family homes, however, continues to grow, with 1.7 million more households in the U.S. in 2023, according to the report.
Mr. McCue said he expects Gen Z, the generation that is now 12 to 27 years old, has added 8 million more households over the past four years.
Immigration has also put pressure on available housing.
“It’s a big increase, and it’s really propping up demand,” he said.