A recent Harvard University housing study has revealed that buying a home in California became increasingly unattainable for many residents in 2o23 due to growing disparities between wages and housing prices.
The study, titled "The State of the Nation's Housing 2024," found that Bay Area cities of San Jose, Sunnyvale and Santa Clara, right in the middle of Silicon Valley, had a median home sales price 11 times higher than the area's average annual wage of nearly $113,000 in 2023. This ratio underscores the severe imbalance between income and housing costs in the country's main tech hub.
Similarly, coastal areas like Santa Cruz and Watsonville in the Monterey Bay Area also saw housing prices 11 times higher than the area's average yearly wage of nearly $68,000.
In Southern California, cities like Anaheim and places like Orange and Los Angeles counties saw home prices at 10 times higher than the average income of $98,200. Further south, in San Diego and Carlsbad, housing costs were almost nine times the average salary of $76,000 last year. (Related: Homelessness in California’s state capital has risen by almost 70% since 2019.)
This growing disparity is not only affecting potential homeowners but renters as well. Potential homebuyers across the United States are being priced out of the market due to rising costs and interest rates, with insurance and property taxes also contributing to the increased costs that come with homeownership.
The Harvard study stressed that single-family home construction is likely constrained by ongoing development hurdles and high construction costs, among other restrictions.
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Dan McCue, a senior research associate and lead author of the study, stated that housing prices nationwide have increased by 46 percent and rental prices by 26 percent since 2022.
"Not only are prices high, but they’re rising once again. It’s really adding insult to injury," McCue stated at a news conference on June 20.
Housing market remains tight despite attempts to address housing shortage
California has made several attempts to address the housing shortage in recent years.
State officials have eased environmental review and permit procedures to facilitate quicker, more affordable construction projects. In 2023, the state rezoned 171,000 additional developable acres, previously controlled by colleges and religious institutions, for affordable housing. A new grant program was also launched, covering pre-construction costs for low-income workers and requiring a down payment for certain first-time homeowners.
California even introduced a grant program providing low-income earners with $40,000 in pre-construction costs and up to $150,000 (20 percent) for down payments for some first-time homebuyers.
But despite all this, the housing market remains tight as homeowners hold onto their properties due to high mortgage rates of around seven percent. This combination of high prices and interest rates has driven housing inventory to its lowest point in 20 years.
Additionally, rental growth has also slowed as rents have remained high post-pandemic. This presents a significant challenge for the record number of renters – over 12 million nationally – who spend more than half of their income on housing, a burden most acutely felt by middle- and low-income earners.
The report also points out that the rising property insurance premiums, which have increased by almost 35 percent, further impacted low-income homeowners.
In other words, homeownership is becoming increasingly unattainable for all but the wealthiest households.
"We are also concerned that homeownership is increasingly out of reach for all but the highest income households," McCue said. "Access to homeownership has really been cut off in over half of the cities."
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HOMELESSNESS in the U.S. reaches RECORD HIGH amid worsening economic downturn post-pandemic.
Nearly 20 years of MASSIVE federal spending fails to curb rising homelessness in Washington state.
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