Combine insane land use restrictions (zoning), influx of millions of immigrants from south of the border, a booming tech industry and super low interest rates from The Federal Reserve and we have “Perfektenschlag” for US affordable housing policy: the perfectly UNAFFORDABLE HOUSING MARKET (aka, coastal California).
(Bloomberg) – Homebuyers in the U.S. have plenty to grouse about these days. Prices have climbed steeply in many metro areas, mortgage rates are rising and inventory is thin. But for people looking to purchase their first home, it’s ugly out there.
It’s grim all over. American homes are at their least affordable in the report’s history. But the median listing price of available starter homes has risen 9.6 percent in the past year, easily beating out the trade-up and premium categories, while starter-home supply has fallen to a new low this quarter, Trulia reported.
Perhaps the most striking finding is that the very buyers who are typically least able to plunk down a lot of money are confronted with the least affordable homes. The share of income needed by those in the market for a premium home was 15 percent, and for a trade-up home 27 percent. For a starter it was 41 percent.
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Adding insult to injury, the homes aimed at first-time buyers are less likely to be ready for human habitation than others, with fixer-uppers accounting for 11.2 percent of the category. They’re about nine years older than they were in 2012, and 2 percent smaller.
On the bright side, 2 percent isn’t a whole lot smaller. Until you learn that homes overall are more than 8 percent bigger.
The markets that are the least affordable are concentrated in California with Boston being the sole market not located in the Golden State. In some of the most expensive places in the country like San Francisco, San Jose and Los Angeles, those income earners at the bottom third of the market would need to spend all their income and more (over 100%) to afford a median starter home. The starter home price among all ten of these markets has also increased since this time last year.
Combine California Governor Jerry “Moonbeam” Brown and former UC Berkeley economics professor Janet Yellen collaborating on affordable housing policy, and you get the median price of a starter home in San Francisco of $820,550.
Yes, throw in California’s tight land use controls, a legislature that encourages open borders, a Federal Reserve keeping interest rate extremely low for a decade and a booming technology sector and we have an AFFORDABLE HOUSING CRISIS in coastal cities.
Or as Dwight Schrute said, “Perfektenschlag.”
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