In this blog, we will cover California facing housing shortage with no promising forecast of more homes in sight. Is California Facing Housing Shortage in 2023 Going into 2024? All indications say yes despite the coronavirus outbreak. California is the third-largest state in the nation in terms of size. Dale Elenteny, a senior loan officer at GCA Mortgage Group, explains his opinions on California Facing Housing Shortage:
California is the most populous state in the United States, with over 40 million people calling the Golden State home. California’s home prices for middle-tier homes are just under $640,000, double the national median average home prices. Thousands of Californians and small businesses are fleeing California to other low-taxed states with affordable housing and lower cost of living.
Recent media networks often air about Californians fleeing to other low-taxed states due to the high cost of living, high taxes, and expensive housing. This statement holds. However, there is plenty of in-migration to California from immigrants due to the major tech companies headquartered in the state. California has the world’s fifth-largest economy and the fifth-largest population. In the following paragraphs, we will cover the main reasons California facing housing shortage.
High Rents Spiking California Facing Housing Shortage
The California Facing Housing Shortage is more serious than people realize. The state has a major housing shortage throughout the state. Part of the reason California’s home prices are double the national average is due to the demand versus housing inventory.
The state has the largest immigration numbers from Asian countries than any other state. California’s Housing Market is booming, and the state has been experiencing a severe housing shortage.
According to The California Department of Housing and Community Development, the state needs 180,000 new housing units yearly. However, homebuilders and developers are building 80,000 housing units per year. This is a substantial shortage that keeps on compounding every year. Politicians and lawmakers must address California’s Facing Housing Shortage before it becomes a major crisis.
Reasons Why California Facing Housing Shortage
Homebuilders can build more homes throughout the state of California. However, for homebuilders and developers, there are more hurdles in California than in any other state. The scarcity of buildable land presents the biggest problem for developers and homebuilders. Tracts of buildable land are normally too far from where homebuyers want to purchase a home. Large-scale home developments need to be close to major cities. Due to the housing shortage, home prices in California are double the national median home price.
The construction cost in California is substantially higher than in other parts of the country. Wages are higher for workers in the state because housing and the cost of living are higher. Due to tight environmental regulations and the red tape in getting a construction permit to build new homes, it takes longer to build a home in California than in any other state.
The cost of land is higher, and the cost of building a home is higher. Everything is higher in California than in the rest of the nation. The housing shortage stumps the state’s economy. Tens of thousands of taxpayers and businesses are relocating to other lower-taxed states with affordable housing and lower cost of living. The out-migration is costing billions of dollars each year in tax revenue.
Environmental and Red Tape Adds To The California Facing Housing Shortage
Another setback for developers and homebuilders is the California Environmental Quality Act. The state’s environmental guidelines are slowing housing development. Even environmentalists are calling the red tape in environmental guidelines ridiculous and making fun of politicians who created them, says Alex Carlucci, a senior loan officer at Gustan Cho Associates:
California state regulation mandates municipal, county, and state governments to identify the impacts construction and development projects would have on the environment. Once identified, homebuilders and developers need to avoid the negative impacts and mitigate them however possible not to impact the environment.
California has one of the toughest environmental rules and guidelines than any other state in the U.S. A housing development project can take years. By the time a housing development project gets approved, new homeowners could have done, sold, and occupied the entire development.
Politics In Stumping Growth and Top Reason For California Facing Housing Shortage
California is a blue state which means Democrats control it. Democrats are all for the New Green Deal. Democrats will do anything to protect the environment. This holds true even if new development hinders advancement and hurts Californians. California is a beautiful state that can be the best in the nation with great leadership. Unfortunately, a team of incompetent Democrats like Gavin Newsom is at the helm, which is deteriorating the state economy and growth shares Alex Carlucci:
Governor Gavin Newson and state Democrats are even thinking about outlawing gas cars for the state. They are considering making electric cars the only available in the state.
Many homebuilders and real estate developers are steering away from California due to the massive environmental regulations and the lengthy red tape in building new housing projects. Although California home prices are double the national median home prices, most builders say their profit margin in California is 35% less than in other states with fewer regulations and lower-priced buildable land.
California Facing Housing Shortage Despite High Rates and Soaring Inflation
Home values are priced on recent comparable sales. If comparable sales keep dropping in value, homes in nearby areas will also drop. However, if comparable sales prices keep increasing, so will home prices. John Strange answers the frequently asked question on California facing housing shortage despite skyrocketing mortgage rates and out-of-control inflation:
Homes are priced based on demand versus inventory. The higher the demand and lower the housing inventory, the higher the price of homes. The lower the inventory of homes and more homebuyers, the more likely the home will be higher priced and chances of multiple offers.
Multiple offers on a home often turn into bidding wars. This is what has been going on with the California housing market. The shortage of housing in California has skyrocketed home prices. Purchasing a home is no longer affordable for many Californians with high, stable incomes with families. Many potential homebuyers have given up becoming homeowners in California.
What Experts Are Saying About California Facing Housing Shortage
California’s housing shortage is costing billions of dollars in the economy. The housing shortage in California costs the state $143 billion to $233 billion in lost economic output. The revenue loss is primarily from consumption crowded out by high housing costs and lost construction activity. The alarming increase in home prices in California is alarming, says John Strange, a senior loan officer at Gustan Cho Associates:
Home prices keep on getting more expensive year after year. For example, Azusa, California’s median home price for September was $649,250, up nearly 20 percent from the year-ago price of $575,000. But bigger year-over-year increases were seen in such cities as Foothill Ranch (26.9 percent), Westlake Village (25 percent), La Cañada Flintridge (22.3 percent), and Chino Hills (20.4 percent), among others.
High prices and a lack of inventory have also led to overcrowding in homes and increased homelessness, disproportionately affecting seniors, low-paid farm workers, and people with disabilities. On any night in 2020, more than 198,000 people experienced homelessness in California. That accounted for 28 percent of the nation’s entire homeless population.
Is Buying a House in California a Good Investment?
California has experienced a major housing shortage throughout the state. This holds, especially in Los Angeles County and surrounding areas. Ronda Butts, the director of One Solution Real Estate and senior associate contributing editor at Gustan Cho Associates, says the following:
If a home is listed at or under the median price for the area, it is not uncommon to see five to seven other offers for the same property.
This eventually leads to a bidding war where the sellers make out. Due to the demand for housing in major cities and surrounding suburbs, more and more people are looking to purchase homes further out of city limits. Homes out of the city limits are more affordable. This means a longer commute time. Some homebuyers go as far out as the commute time is a two-hour one-way trip to their workplace.
Californians Fleeing To Other States With Affordable Housing
The average worker in California makes more money than workers in other parts of the country. However, the cost of living is substantially higher in California than in other states.
Incompetent politicians are the biggest problem in the growth California can have to become a world economic powerhouse. Rising home prices are a major problem in California. Shortage of housing inventory is the main cause of skyrocketing home prices. A one-million-dollar home in San Francisco and its surrounding area will only get you 900 square feet home.
California has some of the nation’s top colleges and universities. The University of California system, Southern California University, and Stanford University are all top-rated world-renowned universities. California housing prices are more than double the average house in other states. The main reason California is losing tens of thousands of residents daily is due to the high cost of housing. Many Californians will never be able to afford a home in California.
How To Achieve The Dream of Home Ownership In California
Homeownership is hands down the most important achievable American dream for every hard-working American. High home prices are the main driving factor workers are fleeing the state. This holds especially true for lower-income and middle-income wage earners. Cameron LeClair, a wholesale account representative with The Lender, blames the dumb Democrat leadership in California for driving the state into the ground:
California is one of the states where employment is booming but has a major housing shortage with unattainable home prices for lower to middle-class wage earners. Affordable housing and the shortage of home inventory remain major problems with no solution in sight.
Politicians and lawmakers need to change their priorities fast. The state needs to get rid of incompetent politicians with no outside business experience and get competent politicians with common sense. Most politicians are career politicians who talk out of their asses, have no clue about how to state government, and have never run a business.
California Facing Housing Shortage Solution is Eliminating Tough Environmental Regulations Permitting Process
There are many solutions to the housing shortage problem California is facing. One of the problems facing the housing shortage in California is incompetent politicians. The solution is for voters to elect politicians with common sense with business experience. The red tape created by Democrat politicians and lawmakers is steering home builders and developers away to other states.
The state needs to lighten up with its environmental regulations, which restrict construction and development projects throughout the state. State, county, and municipal governments must streamline permitting with strong public engagement and early environmental reviews.
Government agencies need to increase regional coordination in land-use planning. State, county, and local governments need to promote and ease regulations on housing developments and incentivize home builders and developers to build more homes, especially affordable homes. If the state promotes affordable housing and eases up on environmental red tape and regulations, it will rocket boost California’s economy to historic levels. The housing shortage in the state is hindering California from becoming a world power player.