California Housing is Expensive

An excellent report from New Geography reveals just how expensive it really is, but almost everybody still wants to live here.

An excerpt.

A reader comment on a feature by John Sanphillipo (“Finally! Great New Affordable Bay Area Housing! Caught my eye.”). The comment (“You shouldn’t have to go to Nashville“) expressed an understandable frustration about the sad reality that firms leaving coastal California often skip right over the Central Valley “where the housing costs are reasonable, there are some lovely old homes on tree lined streets, the humidity is less, the mountains are nearby, and you can drive there in 2-3 hours rather than fly.”

Would that it were true. In fact, as this article will show, housing costs are anything but reasonable, given the median income, in the Central Valley, which along with the rest of the non-coastal portion of the state, will be referred to as Outer California in this article.

California Housing Affordability: Into the Abyss

California’s severely unaffordable housing is legendary, having escalated from approximately the average national price to income ratio in 1970. This is most evident in the four largest coastal metropolitan areas, Los Angeles, San Francisco, San Diego and San Jose. Out of the 87 major markets (over 1 million population) in nine nations, these markets ranked fourth, seventh and in a ninth place tie for the least affordable 8n the 12th Annual Demographia International Housing Affordability Survey. Their median multiples (median house price divided by median household income) required from 8.1 to 9.8 years income to purchase the median priced house. This compares to the affordability of these and other California markets which had median multiples of approximately 3.0 or less in 1970 and in prior years.

Housing Affordability in Outer California

A few examples will make the point. Riverside-San Bernardino, and exurban metropolitan area adjacent to Los Angeles had a severely unaffordable median multiple of 5.2 in 2015. Sacramento, had a seriously unaffordable median multiple of 4.7. Both of these major metropolitan areas reached far higher median multiples in the run-up to the housing bust, with Riverside San Bernardino reaching 7.6 and Sacramento reaching 6.6.

But the problem is by no means limited to the largest metropolitan areas. Stockton, now officially a part of the larger San Jose-San Francisco combined statistical area as a result of a housing cost driven exodus of commuters from the Bay Area has a severely unaffordable median multiple of 5.3. Things were much worse in the run-up to the bust, at 8.6. Even long depressed Fresno, far from either the Bay Area or Los Angeles, is nearing severe unaffordability, with a median multiple of 5.0 and reached 7.2 during the bubble. More remote Chico, one of the smallest US markets in the Demographia survey also has a median multiple of 5.0 (see Central Valley map at the top).

Modesto, a 2020 candidate for addition to the San Jose – San Francisco combined statistical area due to the overspill of households seeking houses they can afford, also has a seriously unaffordable median multiple of 4.5. Modesto reached 7.6 during the bubble.

Among the 29 markets rated in California, the most affordable was Bakersfield, which in a few years is likely to follow Fresno into the over 1 million category. During the bubble, Bakersfield reached a median multiple of 6.6. Small town Visalia, nestled against the Sierra foothills, tied Bakersfield’s most affordable 4.3 median multiple, and reached an astounding 5.8 during the bubble. Hanford also tied for the most affordable.

About David H Lukenbill

I am a native of Sacramento, as are my wife and daughter. I am a consultant to nonprofit organizations, and have a Bachelor of Science degree in Organizational Behavior and a Master of Public Administration degree, both from the University of San Francisco. We live along the American River with two cats and all the wild critters we can feed. I am the founding president of the American River Parkway Preservation Society and currently serve as the CFO and Senior Policy Director. I also volunteer as the President of The Lampstand Foundation, a nonprofit organization I founded in 2003.
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