First-time homebuyers just got some bad news: California was tied up as the toughest state in the U.S. to buy a home.
This report is from an analyst with Bankrate.com, Claes Bell. In an interview with the Los Angeles Times, Bell said the rank of California can be partly due to the high percentage of Californians' income spending on housing – at 35.2 percent, compared to the 19.4 percent national average. Bell said the cost of housing should generally be less than 28 percent of the gross income of an individual.
Gary Painter, a USC public policy professor focused on homeownership and housing markets, said the peculiar situation in California pushes home prices up, thus restricting development opportunities.
"[In California] there are environmental amenities – the beaches and the mountains – that actually make developing housing in every direction impossible, and also makes living in California a premium," Painter said. "So there's a lot of people from around the world who want to live here, either full-time or part-time, and that places extra demands on the housing market."
High housing prices could cause young people and even families to rent out residences instead of buying them outright. A recent study found that almost 54 percent of residents are renters in Los Angeles. It is the nation's fourth-highest average, and families occupy more than 60 per cent of those rented homes.
"In the Los Angeles region in particular, it is becoming more and more expensive to have close access to the amenities that everyone wants, such as access to jobs and cultural amenities," Painter said. "Young adults have to make some trade-offs. Their incomes are not as high when they first enter their career, so they either are going to have to buy less housing or they're going to have to decide to live further away from the kinds of amenities they prefer."
Some of the young people who can afford to purchase a house end up regretting it. NerdWallet, a website that provides free financial resources and advice, recently released its Home Buyer Reality Survey, which states that about 60 percent of millennial and Generation X homeowners expressed regret and "would do things differently the next time around in the home-buying process." Just 38 percent of baby boomers said they regretted doing the same thing.
Painter states that the problems facing young would-be homebuyers are not all that different from their older counterparts – in fact they all have to choose what they want, larger spaces or better places.
Real estate agent Andy May says millennials are more interested in living in good, walkable neighborhoods in smaller houses, rather than fancy homes with high-end fittings. However, in the areas they are searching for, such as Silver Lake, Echo Park and Los Feliz and similar communities, it is hard to find accessible properties that go for less than $500,000.
When inventory declines and rates increase, one of the most important variables in the home purchasing process may be the down payment on a home itself. So, May says, he's witnessed millennials purchasing condos as an alternative, because for young adults straight out of college, those prices are too hard to reach.
"If you want to put down for a house, the average home in Los Angeles County sells for about $550,000 so if you're going to put 20 percent down, that's almost $100,000," May said. "If you have student loans, that impacts your ability to purchase a home, so very few millennials are putting 20 percent down. You can still buy a house with as low as 3 percent, but loans are harder to get."
Anthony Amorelli used to live in Los Angeles but relocated to San Francisco only recently. Los Angeles also has more affordable housing, he said, than San Francisco, where there is a considerably more crowded housing market.
"It's kind of intimidating going out there and not being able to afford something," Amorelli said, "[especially in] an area that you think you should be able[to afford to] to live in."
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