California Housing Prices Easily Top Nationwide Poll
Seeking a California mortgage loan?
You may need to prepare yourself for a hefty price tag.
According to a Bizjournals study, the San Francisco-Oakland area is saddled with the nation’s costliest housing - and the situation is nearly as bad in Los Angeles, San Diego, Oxnard-Thousand Oaks and the San Jose housing market.
“California has a lot of strengths, but even so, we’re seeing more of our young people relocate out of state,” says Leslie Appleton-Young, chief economist of the California Association of Realtors. “And more and more, their decisions are based on housing prices. How can you even imagine a starter condo at $600,000?”
Bizjournals compared housing costs and income levels in the 95 U.S. metropolitan markets with populations above 500,000. The study used statistics from the 2005 American Community Survey, conducted by the U.S. Census Bureau. It identified the 10 most affordable markets in which to own a home and the 10 costliest markets to own a home.
The median owner-occupied home in the San Francisco-Oakland area was valued at $655,300 in 2005. A 6-percent mortgage loan on such a house, with a 10 percent down payment, would run $3,536 per month. Taxes would drive total expenses up to $3,815.
Such a bill would consume 70 percent of the San Francisco-Oakland area’s median household income of $5,449 per month. That’s more than two and a half times the national average of 27 percent.
Fifty-year mortgages are now available in some California markets in order to deal with such escalating costs. One-fifth of the state’s home buyers last year took out mortgages with no down payment, and two-fifths relied on a second mortgage, says the California Association of Realtors.
“Everyone talks about housing prices,” says Appleton-Young. “People who don’t own, they wonder if they should buy now, and whether they can afford it. On the other side of the divide, many homeowners are seeing great gains. They’re benefiting from high prices.”
Los Angeles and San Diego - where housing expenses respectively consume 69.8 percent and 67.8 percent of monthly income - were nearly as bad as San Francisco-Oakland. Even Bakersfield, the cheapest of the 10 California markets in the study, was 10 points above the U.S. average at 37 percent.
California home prices at these high levels could act as a drag on the state’s business climate, says Stephen Levy, director of the Center for Continuing Study of the California Economy.
“So far, we’ve been able to weather these great disparities, but I think that era is coming to an end,” he says. “Our analysis shows that high housing prices are increasingly going to be a competitive disadvantage.”
SOURCE: American City Business Journals