Welcome to our Real Estate news roundup! Today, we have a collection of articles covering various aspects of the housing market, with a focus on California. Discover why new homes in California are not solving the affordability problem, how the state’s chronic housing shortage is impacting lower-income families, and the challenges faced by prospective homebuyers. Explore predictions for the housing market in 2024 and learn about California’s innovative approach to retaining teachers through affordable housing initiatives. Dive into these articles to gain insights into the current state of the real estate market and its impact on different sectors. Happy reading!
New Homes Don’t Cure Affordability in California
Freshly built houses in California, especially in San Jose, come with a hefty price tag. According to a study, new home construction has done little to make housing more affordable. In fact, most newly built homes are larger and pricier compared to older homes on the market.
Zillow conducted a study comparing the sales of new and existing homes in 46 U.S. metropolitan areas. The results showed that new homes in cities like San Jose, New York, and Miami were typically 40% larger and 80% more expensive than older homes.
In California, buyers paid an average of $1.14 million for new homes, which is 22% more expensive than existing ones. The main reason behind this price gap is that builders tend to sell larger homes, with an average size of 2,020 square feet compared to 1,585 square feet for existing homes.
Nationally, buyers of new homes paid a median price of $418,000, 15% higher than the typical price for older homes. The size difference was also significant, with new homes being 16% larger.
The affordability gap is particularly noticeable in San Jose, where a typical newly built home costs $2.87 million, while an existing home is 79% cheaper and 48% smaller. A similar trend can be seen in Los Angeles, Orange County, and the Inland Empire.
While new supply helps ease inventory imbalances, it takes time for affordability improvements to reach house hunters seeking more modest homes. The development of high-end homes is often favored due to policy and marketplace conditions, catering to wealthier buyers and investors.
For more information, read the full article here.
Eye-popping costs intensify California’s housing shortage | Opinion
California’s chronic shortage of housing, particularly for lower-income families, is a pressing economic, social, and political issue. The demand-supply gap in urban areas drives up costs, discourages investment, and contributes to the state’s high poverty rates and homelessness.
The state has set a goal of constructing 2.5 million new housing units over an eight-year planning cycle, with a focus on meeting the needs of lower-income households. However, developers are falling short of this goal, with residential permits declining and multifamily unit construction expected to contract.
High interest rates, inflation, and bureaucratic hurdles further contribute to the stagnant housing situation. Examples like the transformation of the Sequoia Hotel in downtown Sacramento into tiny housing units for the homeless highlight the exorbitant costs of low-income housing projects.
Similar projects in San Francisco also reveal skyrocketing costs, prompting the need to find solutions to bring down expenses. Private projects utilizing modular construction methods offer potential cost savings, but face opposition from construction unions.
Efforts such as the $50 million housing fund created by Apple and private philanthropists aim to finance projects within strict cost limits. However, California must find ways to maximize the impact of its housing investments to effectively address the crisis.
For more information, read the full article here.
Average New Construction Value in California at $249K
Despite home price growth stabilizing, homeownership remains largely unattainable for many Americans. A recent Cato Institute housing affordability survey found that 87% of Americans are concerned about housing costs, and 55% of homeowners cannot afford to buy their current homes at today’s prices.
The shortage of available homes is a result of low inventory caused by underinvestment in building new affordable housing. The National Association of Realtors estimates a national shortage of at least 5.5 million homes due to decades of low residential construction levels. The COVID-19 pandemic further increased demand, while record-low mortgage rates made competition for homes even more intense.
Although the housing market has cooled slightly since the peak of the pandemic, home prices are still around 40% higher than pre-pandemic levels. Additionally, residential construction spending has decreased, exacerbating the problem of limited housing inventory.
While some states and cities manage to build more affordable housing units, California faces an average new construction value of $249,000 per unit. This figure excludes land value and contributes to the challenges faced by prospective homebuyers in the state.
For more information, read the full article here.
New homes won’t cure housing affordability problems – Orange County Register
A study by Zillow reveals that the construction of new homes does not provide a quick fix for housing affordability issues. The majority of newly built homes are larger and more expensive compared to existing homes on the market.
In California, buyers paid 22% more for new homes than existing ones, with a median price of $1.14 million. This price difference is primarily due to builders selling larger homes, averaging 2,020 square feet compared to 1,585 square feet for existing homes.
The pricing gaps between new and existing homes are not exclusive to California. Across the nation, new homes had a median sales price of $418,000, 15% higher than existing homes. Additionally, new homes were typically 16% larger.
While there is a continuous demand for housing, the focus on building larger, more expensive homes contributes to the affordability challenge. Policy and marketplace conditions often favor high-end housing development, catering to wealthier buyers and investors.
For more information, read the full article here.
Housing Market Predictions For 2024: When Will Home Prices Be Affordable Again? – Forbes Advisor
The spring home-buying season proved to be a challenge for many prospective buyers, with elevated mortgage rates and home prices dampening the market. However, there is a silver lining as more resale inventory enters the market, putting some downward pressure on home price growth.
Despite the challenges, experts believe that the housing market will improve once mortgage rates drop enough to ease affordability obstacles. The hope is that lower rates will incentivize homeowners locked in at low rates to move, increasing inventory levels.
However, several ongoing headwinds, including inflation and high mortgage rates, continue to impact the housing market. The decline in new home construction exacerbates the inventory shortage, particularly in the entry-level home segment.
While experts anticipate a housing recovery, they emphasize the need for increased inventories and a gradual decline in mortgage rates to ensure a sustainable market. They caution against rapid rate reductions that could lead to a surge in demand and subsequent rebound in home prices.
Despite the challenges, the housing market remains resilient, with homeowners having substantial equity and foreclosure activity remaining low. Experts expect that as inflation eases and interest rates decline, home sales activity will pick up.
For more insights and expert tips on navigating the housing market, read the full article here.
California Schools Keep Losing Teachers. The State Wants to Help Build Homes for Them | KQED
To address the outflow of teachers from schools across the state, California’s Department of Education is encouraging districts to venture into a different business: housing. Superintendent Tony Thurmond announced an initiative that aims to establish the department as a resource for districts looking to build homes for teachers on their property.
The move comes as California faces a housing affordability crisis and a shortage of approximately 2.5 million homes. On average, school districts lose 12% of their staff each year due to retirements and turnover. The initiative aims to help retain the workforce by providing affordable housing options.
With nearly 11,000 school districts controlling more than 151,000 acres of property across the state, there is potential to develop enough parcels to support 2.3 million new homes. However, despite additional tax credit funding and legislation, only a few districts have completed educator housing projects. Many districts lack the knowledge and resources to navigate the housing development process.
The new initiative seeks to create a blueprint for districts to develop housing and explore potential legislation that allows school bond funds to be used for housing. By providing affordable housing options, districts can improve staff retention and ensure educators can afford to live where they work.
For more information, read the full article here.