With California on track in 2008 to have the lowest number of housing permits (79,000) issued since statewide records have been kept (1954), and while California continues to grow by nearly a half-million new residents per year, the housing affordability crisis in California will continue to worsen.
Yes, we know that home prices are down as much as 20-30% in many parts of the state, but that will be short-lived. Why, you ask?
Well, there is an alignment of many unfortunate factors. Even though some land ready for development in the fastest growing parts of the state is virtually worthless today, there is not enough land identified for housing to really meet our growth needs, so in the not-too-distant future that land will again be producing $200,000 building lots.
Combine that with impact fees imposed by local governments that range from $50,000 to over $100,000 per new home, and you will have spent around $300,000 before a foundation has been poured.
That kind of expenditure demands a decent size home with nice amenities, so it won’t be long until we’re again looking at $500,000 for a basic new home. Probably about 20% of the households in the state can afford that.
Another factor is that we need at least 220,000 new housing units each year to meet our growing population’s needs. As mentioned above, we will be below 80,000 starts this year. While California’s housing inventory deficit has not been accurately quantified, it is believed to be between 500,000 and 1,000,000 units. That definitely is a shortage!
Add one other phenomenon – new home prices pull existing home prices up like a magnet, so as new home prices rise, especially in light of an inadequate supply, there will once again be upward pressure on the price of existing homes.
Even with all that, many legislators are trying to pass bills that will make the land development process more time consuming and costly and the building of a home more expensive.
Do they truly want the American Dream of a home of their own for their fellow Californians? It sure doesn’t look like it.