March 2021: California Median Home Price Soars to All-time High of $758,990

[Pedestrian]

Originally Posted by dimondpark

The only solution I think works is the federal government to build and keep on building(and then figure out a way to get a return by letting qualified renters buy their units)---the free market doesnt care if people are housed and we are seeing that unfold before our eyes and that's the prerogative of the free market, but the government has to care imo.
.

You don't just build and forget. If it's rental housing, somebody's got to manage it. If you sell it to the residents, you may still want an HOA to try to keep it nice for the majority in spite the certainty that there will be people who let theirs go to h*ll.

This, of course, has always been the story of "public housing". The authorities that manage it are routinely incompetent (and often get taken over by HUD which also does a poor job of managing housing in CA from DC). It's why the "higher power" gave us market rate developments with a minority of "affordable" units. That way, the market rate buyers/renters, who want what they paid for and want to preserve it like they are paying to have it, make sure the people getting a bargain don't ruin it for everybody. Or, alternatively, as San Francisco does it, you provide funding to non-profits who build or convert it but keep ownership and manage it (and lose if it deteriorates).

But all the problems with government building housing is why they came up with "Section 8" vouchers: Let the government pay the rent but incentivize private developers to do the building and managing. If the rent the government is willing to pay is fair, it will be an adequate incentive for private developers. The trouble with such programs is usually that the rent the government will pay is niggardly and not worth the trouble to developers and landlords.

As for government-funded "affordable" for-sale units, in CA that's a mirage. Even "affordable" properties are hardly that to the middle and working class (which is, of course, why CA cities have so many renters). I suppose you could propose a massive wealth redistribution in which the federal government builds millions of homes and gives them away to the lower middle and working classes at truly bargain prices which, in CA, would have to be well below the cost of construction. I doubt the hard-working folks paying their own mortgages in some far-flung suburb would go for that.

[chris08876]

This is not good and the troubles continue swirling around the drain with no solution in sight. Which is sad, considering it's the U.S..

The State and even Federal Government really need to jam their foots up these issues and fix it.

I mean if they are fine with the continued wealth divide, so it is... but a bit f'd up if you ask me.

Must be cheaper in some cases to just build a house versus just buying in some of these areas. At least you'll get something new and not a beat up home that's really not worth the asking price. Maybe not in Cali, because they make building anything a hassle but in other states.

[chris08876]

Originally Posted by dimondpark

Utah price increases have been crazy, I've been casually following the market there over the years and what's happened there in the past 5 years or so has been just jawdropping.

The idea of supply and demand is a simple one to understand but I just do not understand why housing costs are not up at the top of the priority list of things to fix. It should at least be the key issue demanding 110% out of everyone working to fix it on the legislation level.

Because ultimately, the less the masses struggle, the better for the economy and well being of the nation.

Mass housing is needed, and affordable housing and rezoning.

[Centropolis]

http://aflixionado.com/my-favorite-film-of-2013-her/

[Crawford]

Originally Posted by chris08876

The idea of supply and demand is a simple one to understand but I just do not understand why housing costs are not up at the top of the priority list of things to fix. It should at least be the key issue demanding 110% out of everyone working to fix it on the legislation level.

Because high housing prices are good for most people. Most people are homeowners, so obviously they benefit.

I've never heard any CA homeowner complain about high housing prices, ever. My aunt is thrilled, and has set up her grandchildren in enviable situations, entirely due to her (absurd) housing value. Why would someone complain about millions in added wealth?

But her grandchildren aren't being raised in CA, they're being raised in Oregon and Montana, and coastal CA's high housing prices may be a factor. The younger folks are negatively affected, in theory, but they vote less, some leave, and those that stay eventually get the wealth transferred to them.

Southern OC is full of youngish teachers, nurses, contractors and cops living in homes valued over $1 million (sometimes way over $1 million). It feels like a West Coast version of the South Shore of LI. I don't think they bought these homes absent intergenerational wealth transfers.

[MonkeyRonin]

Originally Posted by Crawford

Because high housing prices are good for most people. Most people are homeowners, so obviously they benefit.

I've never heard any CA homeowner complain about high housing prices, ever. My aunt is thrilled, and has set up her grandchildren in enviable situations, entirely due to her (absurd) housing value. Why would someone complain about millions in added wealth?

Of course you'd never hear complaints if the only people you talk to are older, wealthier land owners. Higher property values are great for them. They're just not so great for the young, the working class, and anyone who isn't already an incumbent landowner.

And that's why these people are voting with their feet and leaving California and other high-cost jurisdictions. That harms the state's competitiveness, labour diversity, and future growth prospects. Real estate is incredibly unproductive, and if all of one's available income is being spent on housing, that's money that can't instead be invested in more innovative sectors or spent as disposable income.

Hence why even if the majority of home owners support policy that will see their home values rise, it's still bad policy.

[llamaorama]

Originally Posted by chris08876

The idea of supply and demand is a simple one to understand but I just do not understand why housing costs are not up at the top of the priority list of things to fix. It should at least be the key issue demanding 110% out of everyone working to fix it on the legislation level.

Because ultimately, the less the masses struggle, the better for the economy and well being of the nation.

Mass housing is needed, and affordable housing and rezoning.

I agree with your solution about upzoning and I agree that supply and demand is the fundamental root of the problem, but maybe its not the only thing?

Interest rates are really low and have been for a long time. Also the incomes of a portion of the population have gone up like crazy while for others they've stagnated. It's not just that there aren't enough houses, it's also that its now possible for some people to pay vastly more for them and bid up the price in a way that wasn't conceivable 20 years ago. So now, disruptions like a lumber shortage can cause home prices to spike in a way that hints at a bubble.

Also at the local level, maybe gentrification is actually a case of induced demand? For the past 30 years urban planners have promoted the idea of creating great places for people to live, work, and play, and to attract the creative class and people with high incomes. Basic economic theory says that constructing a 300-unit apartment high rise in a low income area increases the supply of housing. Even if it is "luxury" housing, it will eventually age and become cheaper. What this logic misses is that the luxury mixed use development also raises the desirability of the neighborhood as a whole, causing a localized increase in prices. Even if that property gets a little cheaper, well it won't, because some parts of town are deemed nice and people will pay $$$ for crap and other parts of town are not nice. And maybe we could just not sweat this, except that over the decades we've put a lot of money into things like mass transit and civic infrastructure into areas that are now bedroom communities for people who don't use those things.

IMO we should also think outside the box to lessen how much demand there is to live or commute to places where fixes are expensive and fix how much money spend on housing in the first place. It would be easy to overspend on subsidized housing in downtown LA or build things like new subway lines or commuter rail hubs in NYC and get no discernable effect for the majority of Americans.

I would like to see the Fed reconsider what they are doing, maybe find a new way to subsidize mortgages that doesn't subsidize big ones, and increase the amount of money spent on things like CDBG's and other federal stuff across the country at large. Stop inflating the housing bubble while making forgotten parts of the country healthier and better places to live so people relocate to places where there is a surplus of housing or unused infrastructure just sitting there.

[iheartthed]

Originally Posted by llamaorama

Maybe supply and demand fails to explain the entire situation? Not to say it isn't the fundamental root of the problem in California or doesn't have an effect but maybe it's not the only thing?

Interest rates are really low and have been for a long time. Also the incomes of a portion of the population have gone up like crazy while for others they've stagnated. It's not just that there aren't enough houses, it's also that its now possible for some people to pay vastly more for them and bid up the price in a way that wasn't conceivable 20 years ago. So now, disruptions like a lumber shortage can cause home prices to spike in a way that hints at a bubble.

Also at the local level, maybe gentrification is actually a case of induced demand? For the past 30 years urban planners have promoted the idea of creating great places for people to live, work, and play, and to attract the creative class and people with high incomes. Basic economic theory says that constructing a 300-unit apartment high rise in a low income area increases the supply of housing. Even if it is "luxury" housing, it will eventually age and become cheaper. What this logic misses is that the luxury mixed use development also raises the desirability of the neighborhood as a whole, causing a localized increase in prices. Even if that property gets a little cheaper, well it won't, because the geography of class is a thing - some parts of town are deemed nice and people will pay $$$ for crap and other parts of town are not nice. And maybe we could just not sweat this, except that over the decades we've put a lot of money into things like mass transit and civic infrastructure into areas that are now bedroom communities for people who don't use those things.

Pretty sure the issue is that California's zoning laws do not allow the market to respond as it would otherwise. In a market with no restrictions, increasing in housing demand would translate to building more housing units on a smaller footprint. But if the law mandates that a quarter acre lot can only have one house X feet from the curb then builders can't respond by building more housing.

[llamaorama]

I agree about California and I edited my comment.

I was thinking about places where gentrification is largely focused in certain areas though. Like in Austin. Greater Austin is of course in Texas, with no real restrictions on sprawl. Tens of thousands of new homes are built each year. Supply keeps up with demand. You can buy a new starter home for $200,000 in Taylor or Buda.

But in the city of Austin proper, there are neighborhoods which somewhat arbitrarily went from working class to expensive very quickly, due to the intentional siting of anchors and catalytic projects by people motivated by urbanist visions and theories. Like the Oracle campus on Riverside, which nuked almost all the workforce housing and poor UT student housing in the city center overnight. They could have built that in Round Rock and it would not have had the same effect. Also, there are parts of Austin that were always upper middle class professional turf, like the northwest, where suddenly now that people are taking home Apple and Google paychecks they are paying Cupertino and Mountain View prices for frumpy Hank Hill ranch-style ramblers I tell ya whut.

Since the region as a whole is still affordable this may not be a problem. Except it kind of is because things like the transit system no longer serve the people who actually need transit. Also the outlying region may not be prepared for the new diversity its about to get and react badly. The east side out by SH-130 in Manor reminds me a lot of what Beltway 8 going past Alief in Houston looked like in the 1990s. Substitute Tesla for the old KBR campus that was the first thing out there. There's going to be a weird phase of white flight and public school anxiety and probably a crime wave in apartment complexes until initiatives are taken to deal with it.

[Pedestrian]

Originally Posted by chris08876

The idea of supply and demand is a simple one to understand but I just do not understand why housing costs are not up at the top of the priority list of things to fix. It should at least be the key issue demanding 110% out of everyone working to fix it on the legislation level.

Because ultimately, the less the masses struggle, the better for the economy and well being of the nation.

Mass housing is needed, and affordable housing and rezoning.

I believe you just bought a new home in PA. Do you want "mass housing" next door to it?

There may be no "fix" for this problem. The majority of people who own a home do not want "mass housing" in their neighborhoods and they don't want to be taxed to build it.

I also disagree that the solution for the "masses" is to build them housing. I see the solution as to create jobs that allow them to afford market rate housing and move into your neighborhood (and mine).

I do agree that some rezoning is needed. I keep referring to my town where there are plenty of commercial strips lined with 1 and 2-story retail buildings that could be 12-story housing with ground floor retail instead and no "mass housing" needs to be plopped into a single family neighborhood. In spite of "green belt" pretensions and other restrictions, CA has plenty of land on which housing, especially multifamily housing, could be built if the "community input" and "conditional use" requirements and other obstructions (e.g. requirements that projects with any input of state funds use union labor) were done away with--while leaving basic zoning in place.

[Comrade]

Originally Posted by Crawford

Because high housing prices are good for most people. Most people are homeowners, so obviously they benefit.

I've never heard any CA homeowner complain about high housing prices, ever. My aunt is thrilled, and has set up her grandchildren in enviable situations, entirely due to her (absurd) housing value. Why would someone complain about millions in added wealth?

But her grandchildren aren't being raised in CA, they're being raised in Oregon and Montana, and coastal CA's high housing prices may be a factor. The younger folks are negatively affected, in theory, but they vote less, some leave, and those that stay eventually get the wealth transferred to them.

Southern OC is full of youngish teachers, nurses, contractors and cops living in homes valued over $1 million (sometimes way over $1 million). It feels like a West Coast version of the South Shore of LI. I don't think they bought these homes absent intergenerational wealth transfers.

I outlined why it's not necessarily a good thing for homeowners. Many homes have artificially high prices - meaning, the price of the house is not due to the actual house but the neighborhood and how high prices are overall. The house shown in this thread is a great example of this: that house's quality isn't making it worth nearly $1 million.

That likely will mean the homeowner of that house is not going to be able to sell it for that much. Which isn't necessarily a bad thing, unless they aren't able to afford a new home because ... prices are ridiculous.

They probably also have a manageable mortgage payment because they certainly bought that house when housing prices were not nearly as high. Because of that, if they wanted to sell and move, their next option would likely need to have a payment similar to what they were paying, especially since they look fairly working/middle class based on the state of the house + the car in the driveway (yeah, assumptions on my end lmao). Certainly, if they can get what that the estimate is, they could probably put enough of a down payment down for it. But if that house comes in lower than the estimate? And most houses in the area, even metro or county or beyond, are going for that much, they may not be able to get enough of a down payment to make their mortgage payments work for them.

If I still owe $400,000 on my mortgage and I put my house on the market, knowing it needs maybe a new roof, new pipes and some electrical work, while the entire living area hasn't been renovated since 1984, I might only get $650,000 instead of $900,000.

So, that leaves $250,000 for a down payment after your mortgage is paid off.

Are you likely to find a home where that down payment brings your mortgage payment more in line with what you were paying at your old house? Knowing housing prices, especially in that region? Probably not. Maybe in some areas of the country - but not there.

Then you have to ask yourself if moving into a home that's basically the same as your current home is actually worth it? Most people move because they are relocating for work or want a bigger/newer/nicer home or need to downsize (maybe for money reasons).

And that's why people aren't selling. So, you've got a lot of buyers and not a lot of sellers and it's creating this bubble that is not sustainable.

What good is sitting on all that value if you're unable to cash in on it?

And that doesn't even get into first-time home buyers. They're basically screwed because even small starter homes are going for ridiculous amounts now.

The only people who are buying those homes are likely flippers. They'll do a quick sale on a property for far less than the estimate, renovate the fuck out of that house so it can at least come close to equaling the outrageous price, and then sell it for a hefty profit.

[Crawford]

Originally Posted by MonkeyRonin

Of course you'd never hear complaints if the only people you talk to are older, wealthier land owners. Higher property values are great for them. They're just not so great for the young, the working class, and anyone who isn't already an incumbent landowner.

I agree. I'm not defending high property prices from a policy perspective, I'm responding to the "why isn't this a bigger priority" comments.

It isn't a big priority because most voters benefit, as the majority of households (and strong majority of voters) are homeowners. Politicians would be thrown out of office on an "I'm going to destroy your family's primary source of wealth" platform.

[Omaharocks]

Comrade, I agree with your overall argument, but I'm not seeing the mismatch between what houses are valued at on zillow etc, vs what they sell for.

Remember, the appraisal process (even with all its issues) is meant to prevent overpaying, and the online value estimators have become really good at incorporating a variety of factors - those values are pretty accurate as a conservative base estimate - as others have attested many or most places are getting well beyond asking price.

[plinko]

Living in Coastal California and working in the development market, this is not what I see at all here.

I'm not saying it's good. I'm not saying the houses are worth what they are actually selling for. But they are selling, quickly, and purchases by whomever is lucky enough to snag one. You do see the flipper market as you alluded to, but it isn't quite as prevalent here. And homeowners are getting what they ask for, and then some. It's a sellers market, needed repairs be damned.

My house likely needs a new roof (it isn't leaking, just really old) Would I put a new one on if I was going to put it on the market now? Not a chance. Why would I when I would likely get way over appraisal value right now?

Then again, like much of Coastal California, new houses and developments are in extremely short supply.

I was a first time buyer in 2012, when the market was cratered, which is the only reason I was able to get in (I don't have family help, which is quite common here).

Originally Posted by Comrade

I outlined why it's not necessarily a good thing for homeowners. Many homes have artificially high prices - meaning, the price of the house is not due to the actual house but the neighborhood and how high prices are overall. The house shown in this thread is a great example of this: that house's quality isn't making it worth nearly $1 million.

That likely will mean the homeowner of that house is not going to be able to sell it for that much. Which isn't necessarily a bad thing, unless they aren't able to afford a new home because ... prices are ridiculous.

They probably also have a manageable mortgage payment because they certainly bought that house when housing prices were not nearly as high. Because of that, if they wanted to sell and move, their next option would likely need to have a payment similar to what they were paying, especially since they look fairly working/middle class based on the state of the house + the car in the driveway (yeah, assumptions on my end lmao). Certainly, if they can get what that the estimate is, they could probably put enough of a down payment down for it. But if that house comes in lower than the estimate? And most houses in the area, even metro or county or beyond, are going for that much, they may not be able to get enough of a down payment to make their mortgage payments work for them.

If I still owe $400,000 on my mortgage and I put my house on the market, knowing it needs maybe a new roof, new pipes and some electrical work, while the entire living area hasn't been renovated since 1984, I might only get $650,000 instead of $900,000.

So, that leaves $250,000 for a down payment after your mortgage is paid off.

Are you likely to find a home where that down payment brings your mortgage payment more in line with what you were paying at your old house? Knowing housing prices, especially in that region? Probably not. Maybe in some areas of the country - but not there.

Then you have to ask yourself if moving into a home that's basically the same as your current home is actually worth it? Most people move because they are relocating for work or want a bigger/newer/nicer home or need to downsize (maybe for money reasons).

And that's why people aren't selling. So, you've got a lot of buyers and not a lot of sellers and it's creating this bubble that is not sustainable.

What good is sitting on all that value if you're unable to cash in on it?

And that doesn't even get into first-time home buyers. They're basically screwed because even small starter homes are going for ridiculous amounts now.

The only people who are buying those homes are likely flippers. They'll do a quick sale on a property for far less than the estimate, renovate the fuck out of that house so it can at least come close to equaling the outrageous price, and then sell it for a hefty profit.

[Pedestrian]

Originally Posted by plinko

Living in Coastal California and working in the development market, this is not what I see at all here.

I'm not saying it's good. I'm not saying the houses are worth what they are actually selling for. But they are selling, quickly, and purchases by whomever is lucky enough to snag one. You do see the flipper market as you alluded to, but it isn't quite as prevalent here. And homeowners are getting what they ask for, and then some. It's a sellers market, needed repairs be damned.

My house likely needs a new roof (it isn't leaking, just really old) Would I put a new one on if I was going to put it on the market now? Not a chance. Why would I when I would likely get way over appraisal value right now?

Then again, like much of Coastal California, new houses and developments are in extremely short supply.

I was a first time buyer in 2012, when the market was cratered, which is the only reason I was able to get in (I don't have family help, which is quite common here).

I think you are talking largely about single family homes which is a different market than the multifamily housing most of the others are talking about. There's no doubt that single family houses on reasonably sized lots in urban or close-in suburban locations are scarce in CA, especially new ones. On my recent trip back to SF from AZ, the closest new development of single family housing at significant scale I saw to downtown SF was about 75 miles away, east of the Altamonte Pass near where I-580 splits off from I-5. If you lived there and worked in SF, that would be a heck of a daily commute and many people have worse (they live farther out, in Stockton or Manteca).

But there are plenty of multifamily projects going up much closer to and even in downtown.

[Crawford]

This goes to another issue - the disconnect between the market shortages and the prescriptions for the market shortages. For example, everyone agrees that SFHs on the Peninsula are absurdly priced and in great demand. However, multifamily housing on the Peninsula is much cheaper and often takes a while to sell.

This suggests that CA doesn't have a housing shortage, it has a SFH shortage, in desirable areas. So it appears to be an unfixable issue, unless you wish to make CA less desirable. Households aren't screaming for midrise condos up and down the El Camino Real, they want SFHs, and there's no way to add them.

[eschaton]

While I understand the historic roots of the belief that allowing multi-family zoning lowers property values, I am not sure there's any evidence to suggest this is the case - when talking about market-rate development anyway.

I mean, look at it this way: Real estate is an asset, and zoning constrains what can be done with that asset. If the square footage your home is on could also be used to build a wider number of things (a larger home, a mini-apartment building with 6 renters, consolidated as part of a larger acquisition for a new mixed-rate development, etc.) you will come out with more money in the end. Indeed, typically when developers are assembling a parcel for development they will buy out owners at many multiples of market prices.

I'd also say that the fact that the bay area has a sizable number of unrelated/not dating people co-renting a home (like, individuals with near six-figure salaries each renting a single bedroom in a common home) shows the market is distorted. Typically you only see things like this in college towns, where it is - once again - a sign that the market is distorted and not enough multi-family is being built.

[Crawford]

Originally Posted by eschaton

While I understand the historic roots of the belief that allowing multi-family zoning lowers property values, I am not sure there's any evidence to suggest this is the case - when talking about market-rate development anyway.

I'm not saying multifamily lowers property values, but rather the only way you could make SFH cheaper is by making CA less desirable. And I don't think the housing shortage can really be fixed via multifamily, as that doesn't appear to be in short supply.

Yeah, obviously in SF and the like, urban-style multifamily holds great appeal. But I'm not sure that the same people bidding up $2 million ranches in Cupertino will be persuaded to live in multifamily.

[eschaton]

Originally Posted by Crawford

Yeah, obviously in SF and the like, urban-style multifamily holds great appeal. But I'm not sure that the same people bidding up $2 million ranches in Cupertino will be persuaded to live in multifamily.

Again though, I remember a few years back reading a story where someone who worked as the city manager in one of the peninsula towns had to leave due to housing costs. She was in one of those three bedroom homes with her husband and two other couples - each renting a single bedroom despite all of them making around $100,000.

People like that should not be renting bedrooms in ranches. They should be renting one-bedroom apartments. Hell, they almost certainly would be if there was sufficient supply, because no one over the age of 30 wants to willingly live with strangers if they have a chance of having private space - even if it means the total square footage is smaller.

[sopas ej]

Speaking of single-family homes...

From SFGate:

Photos show dramatic difference between $299,000 home in San Antonio and San Francisco



This San Francisco studio, located in SoMA, has with one bath and starts at $299,000. This San Antonio home at 185 Elisabeth Run is listed for $297,000 and has five bedrooms and three full baths and it even has a yard.

[...]

Link: https://www.sfgate.com/real-estate/a...Sa6qTmBr__c7M0

Yeah, you COULD plunk down 300 grand for the house on the right (bwahahhaha!), but, then you'd be buying into this awful neighborhood with no amenities:
https://www.google.com/maps/place/18...!4d-98.8084783

This would be your everyday view when you leave to go run errands or whatever:
https://www.google.com/maps/@29.4310...7i16384!8i8192