HereÕ how to afford homeownership in California

Conquering one of the most expensive states

California is infamous for its outrageous housing market, making it nearly impossible for anyone to jump into homeownership.

So what’s the answer for people in California who are looking for more affordable housing?


While that might seem like common sense, Dwight Johnston, chief economist for the California Credit Union League, explained that California is not changing anytime soon.

In the old days, people didn’t need to put as great of an emphasis on saving, Johnston explained. However, now it really requires incomes to rise and people to save more.

It just isn’t the state of California to change, he explained, citing two reasons for why.

“First, lack of land in desirable areas. We have a lot of hills and mountains that you just can’t build on,” said Johnston.

Secondly, “You have a lot of restrictions on building. It is much more costly to get permits. It’s easier to build when you get to the dessert areas, but not a lot of people have moved there,” he said.

According to an article in The Economist that compared Houston’s housing market to California, last year authorities in the Houston metropolitan area, with a population of 6.2m, issued permits to build 64,000 homes. The entire state of California, with a population of 39m, issued just 83,000. 

Houston, unlike California, has no zoning code, so it is quick to respond to demand for housing and office space.

“Ideally, builders will start building more affordable housing, but why would they build affordable housing when they could build more costly housing,” Johnston said.

And California is not looking to change anytime in the near future. There is no movement to loosen zoning, and if anything, there are people who are restricting changes.

However, its not all a dim forecast for California. The state is improving.

A recent PropertyRadar found that February 2015 California single-family home and condominium sales were up 3.3% to 23,404 from 22,659 in January, the largest February increase since 2012.  

“Home sales picked up in February,” said Madeline Schnapp, Director of Economic Research for PropertyRadar.  “The acceleration is likely due to the mild winter weather but could also be a precursor of more robust sales this coming spring.”

While California may still be expensive, it’s getting better.

“As far as the overall apatite, we had good job growth and added over half a million jobs and that as a baseline should mean a good year for home sales,” Johnston said. “The appetite and jobs are there and the confidence is there. We just need to keep things moving that direction.” 

As an added bonus, Fannie Mae's first quarter 2015 Mortgage Lender Sentiment Survey suggests that mortgage lenders are optimistic and expect mortgage demand and their profit margin to grow over the next three months.

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