Just six years since the last housing bubble, California is blowing up another. This may seem like good news to homeowners and speculators alike but it could further accelerate the demise of the state’s middle class and push more businesses out of the state.

On its face, a real estate turnaround should be a strong sign of an economic recovery. In Southern California, home sales have jumped 14 percent over last year and the median price is up 16 percent, some 25 percent in Orange County. We may not quite be at 2007 super-bubble levels but we’re getting there, particularly in the more desirable areas.

Yet, before opening the champagne, we need to look at some of the downsides of this asset recovery. We are not seeing much new construction, particularly of single-family homes, so the supply is not being replenished as inventory sinks. Meanwhile, many of the homebuyers are not families seeking residences, but flippers, Wall Street types and foreign investors. A remarkable one-in-three Southern California home purchasers paid with cash, up from 27 percent from last year.

It’s clear that this increase is not being fueled primarily by income growth among middle-class Californians; these “prices are rising disconnected from household incomes,” notes one analyst. Indeed, California incomes have been dropping somewhat more rapidly, down $2,600 per household from 2007-11, according to the American Community Survey, compared with a $200 drop nationwide. California incomes are still 13 percent higher than the national average, but a lot less so than in the past, particularly given the much higher costs and taxation.

This leads to what is becoming the biggest problem facing the state – a decline in the rates of affordability. The previous bubble left us a legacy of more-affordable housing, an advantage we may now be losing. Historically, and in much of the country, the median multiple, which compares the median-price home to median household income, was in the three range. At the height of the previous bubble, the median multiple for the Los Angeles-Orange County metropolitan area, reached 11.5 in 2007, then fell to a still-elevated 5.7 in 2009, notes demographer Wendell Cox. It remained steady in 2011, but in just the past year the measurement has shot up to 6.2. A few more years at this rate, and housing affordability could worsen materially.

The new bubble can be seen elsewhere in the state. The most prominent inflation in housing values can be seen in the San Francisco Bay Area, which has enjoyed the most buoyant recovery from the recession. Never a cheap area, in 2006, San Francisco reached a median multiple of10.8 and Silicon Valley (San Jose) rose to 9.3. When the bubble imploded, the median multiple fell to 6.7 in both metropolitan areas, still well above any level recorded before the housing bubble. But now, amidst a concentrated boom in the western side of the Bay, the median multiple rose the equivalent of 1.1 years of income in San Francisco (to 7.8) and 1.0 years of income in San Jose (7.9) in a single year.

Of course, you can argue that the higher prices in the Bay Area are explainable at least in part by a growth in employment and wealth generated by tech start-ups. But what about soaring prices in places like the Inland Empire (Riverside-San Bernardino), Sacramento or Fresno, where economic growth has been torpid, and unemployment remains well north of 10 percent? Over the past year, Sacramento’s median multiple has risen from an affordable 2.9 to 3.2, the Inland Empire from 3.2 to 3.7 while Fresno’s has gone from 3.1 to 3.5.

As these prices rises, the California dream, already increasingly off-limits in the coastal areas, begins to become less achievable even in the inland areas. Already, barely 55 percent of Californians own their own home, down from the bubble-period high of 60 percent in 2005 and compared with upward of 65 percent nationally.

Traditionally, the pent-up demand for houses would be met in the marketplace, but California’s Draconian planning laws make this very difficult. In the first 11 months of 2012, the Census Bureau reports that the Los Angeles-Orange County metropolitan area had half as many construction permits than much smaller Dallas-Fort Worth, 60 percent of Houston’s permits and fewer even than the relatively tiny Austin, Texas, metropolitan area. More to the point, more than 70 percent of L.A.’s construction was in multifamily units while the majority in most areas, (except for such areas as New York, San Francisco, San Jose and San Diego) was in single-family homes.

Given the state’s planning preference for high-density housing, even in suburban and exurban areas, there’s little hope that California single-family home buyers can expect much relief. As millennials age, and seek out this form of housing as they start families, they will likely look increasingly elsewhere, for example, in Dallas-Fort Worth, Houston, Phoenix or Atlanta. The great California exodus, which slowed during the housing bust, will likely pick up, joining up with the continued movement of employers to more business-friendly states.

In the short run, of course, not everyone loses from a new bubble. Owners of homes, particularly along the coast, will see a big increase in their net worth. There could be good times ahead again for what author Bob Bruegmann calls “the incumbent’s club.” With projected new units running at one-half their 2007 level until 2015, scarcity will help the state’s graying gentry. These same citizens also enjoy a double bonus, since most are protected by Proposition 13 from paying higher property taxes on their rising property values.

The bubble may also have short-term positive impact on local governments, which may benefit from high property taxes if more homes change hands at higher prices. The “wealth effect” could also bring new capital-gains income to a state government whose revenue stream increasingly depends on the upper-class taxpayer, particularly after the passage of Proposition 30, which increased the state’s reliance on high-income earners. In this sense, the asset inflation could help Gov. Jerry Brown enjoy his much-trumpeted surplus, and he may even avoid the deficit projected next year by the Legislative Analyst.

These positive effects may be outweighed by bigger concerns. The pushback against single-family homes will restrain the growth of the construction industry, still down 400,000 jobs from its 2006 peak. This is particularly critical for working-class Californians, many of whom previous made decent livings in this industry.

But workers and homebuilders won’t be the only ones affected; so, too, will consumers. Without a loosening of regulatory constraints, pent-up demand for housing, particularly the single-family variety, will remain largely unaddressed. This will further inflate the bubble even in unfashionable areas. We may soon see a surplus of rental apartments, but not enough single-family homes; the ownership market, as evidenced by the rising median multiples, will continue to tighten, and prices could rise even more, even in a mediocre economy.

The groups hit hardest by this scenario will be middle- and working-class Californians, particularly above the age of 30-35, most of whom desire to own their own home. Unable to qualify, or unwilling to overleverage, many will be forced either to give up their dreams or look elsewhere, taking their talents and, eventually, their offspring, with them.

Crossposted on New Geography