CALIFORNIA
FOCUS
FOR RELEASE: FRIDAY, APRIL 14, 2017, OR THEREAFTER
FOR RELEASE: FRIDAY, APRIL 14, 2017, OR THEREAFTER
BY THOMAS D.
ELIAS
“REAL ESTATE PRICES DRIVING MOVES FROM
STATE”
If you’re a millennial, now aged 18 to
35, there’s a good chance the only major city in California you’re very much
interested in moving to is San Francisco. That’s because it’s largely walkable,
with plenty of amenities like singles bars and gorgeous parks. And also a lot
of high-paying, high-tech jobs if you qualify.
Millenials may be willing to double-
and triple-up so they can live where they like despite high rents, but that
same cost factor is driving an unprecedented share of them away from
California, says a new study from the Apartment List website (https://www.apartmentlist.com/rentonomics/millennial-population-trends/).
When they get ready to buy, those same
millennials are forced out of high-priced cities like San Francisco, Santa
Barbara and the coastal parts of Los Angeles, adds the CoreLogic data analysis
firm (http://www.corelogic.com/blog/authors/archana-pradhan/2016/11/where-are-households-in-high-cost-markets-buying-homes.aspx#.WDx2TVwl3mc).
This scene is not unique to
California’s higher-priced cities, but also occurs in New York, Chicago’s
tonier areas, Boston and Washington, D.C. But it could lead to serious problems
for California companies wanting to hire or retain the brightest members of the
young-adult generation.
In San Francisco and the Silicon
Valley, where prices have skied in the last three years, 50 out of every 100
households that apply for new home mortgages are buying in nearby counties like
Alameda and Contra Costa, where prices are significantly lower. Contra Costa’s
median sales price over the last year, for example, was less than half San Francisco’s
for comparable properties.
Now this problem is spreading to
nearby Alameda County, home to cities like Oakland and Berkeley, where 34
percent of home loan applications are
for areas even farther from the Bay Area’s urban core.
In Los Angeles, meanwhile, the millennial population decreased by
7.4 percent between 2005 and 2015, with many 18-to-35s decamping to places like
Austin, Tex., Charlotte and Houston. The technology industry is strong in those
places, but real estate prices and rents are half or less than for comparable
properties in the most trendy parts of Los Angeles.
Overall, says CoreLogic, home prices
were up 71 percent in California in that time, with the median statewide home
price in mid-2016 reaching $428,000.
There is no backlash yet, mostly
because of foreign buyers, who tend to be among their countries’ affluent,
seeking a safe place to invest their riches. The leading buyers of this type
have lately been mainland Chinese.
“This makes it harder for the average
person to make a living (in California),” said Sam Khater, a CoreLogic
economist. “That means less teachers, fire fighters, retail workers and more.
It’s causing the entire state to be more expensive.”
Or, as a Silicon Valley executive
complained earlier this year, “I pay some of my people with master’s degrees
$70,000 and $80,000 a year and they still have no hope of buying a house
anywhere near where they work.”
Some locales are trying to compensate
for this by subsidizing teacher housing, from kindergarten to the college
level. For sure, real estate prices are a recruiting barrier when companies and
schools seek to hire top talent from places like Texas and Arizona, where
median home prices are barely half California’s level.
Some places are trying to solve the
problem with affordable housing, generally apartments or condominium units that
builders are required to include in new developments along with market-rate
housing. This kind of affordable property usually bears a resale price limit,
with city and school employees often getting priority on the long waiting lists
for them.
But those same new developments, when
placed in already crowded urban areas, add to traffic volume which is not
notably reduced even by new public transit that has opened in parts of Los
Angeles and other areas.
It’s a real quandary for California:
The state needs talented young workers to fuel its innovative industries, but
even those who earn more than $200,000 yearly have difficulty qualifying for
mortgages on homes selling for more than $1 million, increasingly common in
this state.
But acting to artificially reduce real
estate prices would impact the resources of millions of Californians who have
lived here for a generation or two.
So far, there is no answer to this
dilemma, which sees more and more companies forced to open satellite facilities
in more affordable states.
-30-
Elias is author of the current book “The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government's Campaign to Squelch It,” now available in an updated third edition. His email address is tdelias@aol.com. For more Elias columns, go to www.californiafocus.net
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