SF Bay Area’s & California’s Housing Conundrum
*This will be a 2 part series on SF Bay Area’s housing climate
Oh Bay Area, you’re a dream. Unless you’re looking to buy a house, that is…
Let’s face it, California is crazy expensive. Want to afford a home in the SF Bay Area? Unless you have a high paying dual income, forget it. Hell, even a small cup of coffee here costs an arm and a leg.
But should it have to be this way? Let’s take a look at how much housing costs in the San Francisco metropolitan area, and more broadly, California’s current housing price (I promise you’ll pull your hair out).
So, what gives?
San Francisco is home to a diverse population and a thriving tech scene (more on the tech thing later), but it’s now arguably the most expensive place to buy a single-family home in the USA.
A graph from The New York Times Upshot, a while ago, took a look at how much housing costs in various cities in the United States in relation to how much economists think it should really cost. And, the results, will freak some people out…
As the chart shows, housing in San Francisco should really cost about $300,000 — presently, however, they’re averaging around a steep price of $800,000 (based on 2013 figures). I would only imagine that price to have gone up even more, as the years went by.
Next, came cities and counties in the Southern California Area — basically expensive real estate stretching from Ventura County to the San Diego border.
I get it, people flock to California for a multitude of reasons: the state has a temperate climate, its beaches are golden & beautiful, and has endless opportunities. These 3 golden factors make California the place to be.
Which is a damn shame that these other factors are what’s driving up housing prices.
It’s the competition stupid.
As more and more outsiders and even Californians are looking for a place to call their own, here in the Bay Area, the combination of lack of housing and fierce bidding wars overall lead to a competitive climate in which housing prices overall gets bumped up.
One of the main reason why the landscape to buy housing got so competitive is due to the fact that we have limited housing, to begin with. Experts who study this particular issue can cry about a lot of things, but the majority of them agree on this glaring issue: California hasn’t built enough homes to keep up with the demand from potential homeowners.
The state’s housing department estimates that California needs to build 180,000 new housing units a year to keep prices stable. But over the past 10 years, we’ve averaged less than half of that. In the SF Bay Area, this number gets even more miserable.
Even when new construction was booming in the early and mid-2000s, new homes and apartment buildings weren’t being built in coastal cities where the vast majority of Californians work. While places like the Inland Empire and Central Valley saw a building craze, places like San Francisco and Los Angeles basically flatlined.
We’re also not keeping up with other states, as places like New York and Massachusetts have built a lot more housing per capita than we have in recent years. That hasn’t made those places exactly cheap, but it has helped to alleviate some cost pressures.
Yes, I’m looking at you tech companies…
Over the last decade, Californians have increasingly tried to cram themselves into major urban centers that are already just packed with local residents. The Bay Area is definitely the poster child here.
Between 2000 and 2007, Bay Area cities accounted for only 4 percent of the state’s total population growth. Between 2010 and 2017, nearly 20 percent of all new Californians were either being born in or moving to the Bay. And tech companies have, in some part, exacerbated the housing problem.
Often times, people come to the SF Bay Area in search of good jobs and opportunities in the tech sector. But, with limited land & housing, and people getting paid crazy high salaries for certain types of jobs, it created a clusterfuck in which only stipulated more and more competition. One, in which everyone outbids each other, therefore, driving up the housing price(s).
And if you’re part of a hot and new tech startup that recently IPO’d, and now are just sitting on a newfound pile of cash, thanks to you getting enough equity, you’ll most likely turn that cash into a roof over your head, and will have a massive war chest to back you up in that endeavor.
While the rich outbid for SF Bay Area homes, and the locals and middle/lower income classes get pushed out of the city, the area is becoming an area that only the rich can play.
All for one & One for nothing
Single-family homes occupied by renters grew by more than 400,000 over the last 10 years, while the number of owner-occupied units dropped during the Great Recession of 2008 and has yet to recover.
So who owns these houses? The vast majority are investors and wealthy individuals buying one or two additional properties. Chinese foreign buyers, have also been jumping into this moshpit of California real estate. Last year, nearly one out of four California single-family homes were sold in all-cash transactions, an indication of a hungry appetite for California’s real estate market.
Overall, investors are a relatively small part of the housing market, when they’re viewed from a statewide lens. But in certain local markets, investors compete directly with California families for homes.
And what happens if you lose out on your dream home to some investor or an overpaying competitor, and desperately needs a place to live. Well, you rent.
It’s easy to see why: with housing prices unreachable for so many people, how on earth are they expected to save up enough money to buy a home, with their meager salaries?
All in all
Yes, we have tremendous problems that face us. But by no means will this be easy to solve this expensive housing crisis.
However, if we fail to take any action, then SF Bay Area’s, and on a broader sense, California’s economy will sputter to a halt.
Stay tuned for what the good folks at BuzzyBee think that will help solve this problem, in the next article.
Here is part 2: https://medium.com/@buzzybee.io/sf-bay-area-californias-housing-conundrum-solution-part-2-c0deb8bea906
As always, if you’d like to learn more about us, click on this link http://www.buzzybee.io/
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