Buying a home in California is a dream increasingly out of reach for many residents. Only about half of the state’s residents currently own their own homes.
California’s homeownership rate is also lower than other large states. Only New York and Nevada have lower homeownership rates, according to the state’s housing department.
There may be more than one reason fort his trend. Millennials are a major part of the economy in Silicon Valley and LA and may have the cash to purchase homes if they’ve managed to pay off their student loans, but many of them are not particularly interested in the idea of owning stuff. A cultural shift is underway toward a more mobile, perhaps less settled lifestyle led by a generation who is waiting longer to get married and have kids, or forgoing that option altogether. (Kids are a definite driver for homeownership.)
Another reason Californians may be holding off on purchasing a home is fear of the market dropping. California is in a much-discussed housing “bubble.” If you buy now, speculators believe, your home may lose its value in the market but still be expensive for you while you pay off a high mortgage.
Culture bubbles and market bubbles play a role, but affordability is still the main factor influencing home buying. The fact is, it’s just really expensive to buy a home in California. The median home value in California is $485,800, according to Zillow. California home values have gone up 7.0% over the past year and Zillow predicts they will rise 2.5% within the next year.
Housing inventory dictates what you get
California’s Department of Housing put out a report in January of 2017 that sums up quite a few of the state’s housing challenges, including the fact that, “Production averaged less than 80,000 new homes annually over the last 10 years, and ongoing production continues to fall far below the projected need of 180,000 additional homes annually.”
It’s a simple case of supply and demand. In California, population is increasing and the housing inventory is short. As a result, many people who do purchase a home settle for what’s out there rather than what they really want. Tract homes are the largest available sector. Tract home and dream home rarely appear in the same sentence. Yet, in a place where homelessness and poverty are increasing dramatically, California’s leaders have found a need to focus on creating more affordable housing stock in all communities. Tract homes and multi-units homes will have an important place in producing more affordable housing stock.
Some Californians, unwilling or unable to settle for what they find on the market, are fleeing the state in search of a more affordable life and home elsewhere. If you are fortunate enough to be in a position to buy a home in California, should you settle for one you don’t really even like that may lose its value; buy a substandard home and remodel to get the configuration or amenities you want; or simply flee to the rust belt for a bigger better place and hope for a telecommute?
There is, actually, another choice: Build a custom home.
Buying a home in California: No you shouldn’t settle
In this market where your choices are limited, quality is sometimes suspect and prices are always high, a custom home may make the most sense. This is the largest investment you are likely to make in your entire life. Buy a quality home you can customize. If you want an extra bedroom, you can design it in. You pick the interiors. You pick the finishes. The majority of housing in California was built before 1980. These older homes tend to have greater rehabilitation needs, as well as lower energy efficiency, the state’s department of public housing has found. If you want to incorporate ideas like efficiency, graywater systems, or solar, a custom homebuilder is up for that, but a tract home developer has its own plan.
Custom homes are often called “luxury” homes. When owning anything bigger than an airstream is a luxury, you might as well go for quality, comfort and durability if you can. If and when the bubble bursts, your home will endure and hold its value when tract homes won’t.