California Housing Problems - An Outsider Looking In

I belong to an online real estate group where many participants are from California. I’ve been thinking about California’s problems lately as it relates to housing. From my perspective, on the outside looking in, there seem to be many complicating factors, with one major factor being over-population. Go west, young person (PC version), go west! Well, they went west – now what.

If I read the statistics correctly, from various sources online, I surmise that population growth in California is mainly due to immigration, and if immigration is taken out of the equation, California is losing ground population-wise. As it relates to housing, it is doubtful the immigrants will be buying houses in large numbers and will most likely be renters. Looking at this logically, it would suggest pressure on rental prices to go upward, and it would suggest pressure on housing prices to fall.

A complicating factor in this simple logic is foreclosures and high inventory of unsold newly constructed homes. This would suggest that many of these homes will be transformed into rentals, thereby relieving pressure of increased numbers of renters looking for a home, thereby relieving the pressure on rental prices to go up.

It also seems these unsold houses will largely be homes outside the rental price most immigrants can afford, putting more pressure on home prices to fall and rental prices to fall. However, if you factor each foreclosure as a homeowner turned renter, then in the case of foreclosures you have somewhat of a wash with foreclosures put on the market as rentals, and it leaves an oversupply of new homes.

If these new homes are being built a good distance from culture, shopping and employment, and with traffic being awful and getting worse, will these new homes sell? Will anyone even rent them? Will the builders of these newly constructed homes rent their homes at prices renters can afford? Will they lower the prices enough that people will buy them and drive long distances to work? If the trend to move close to work and city activities continues, will this put pressure on prices close to the action to remain stable or rise while the distance burbs linger, depreciate and become rental villages?

It doesn’t look good for California, or any over-populated area. But, I hate to offer so many questions without suggesting possible solutions (not that my little voice in the internet wilderness will have world-changing effects, but it is interesting to study and pontificate). One possible solution is for citizens of California to demand that planners plan by common sense and not by politics and demands of special interest groups .

Somehow, zoning has to be a joint effort of gov. representatives, business and builders, so that diverse input can create planned communities where work and living combine to relieve stress of congestion and travel-time, especially with gas being high and likely to go higher. Proximity of cultural centers and shopping will be important, too. This may be taking place already, but I know of some growing, over-populated areas that have not planned well and are suffering from the results – Atlanta comes to mind.

Another solution, especially with hi-tech companies, is to ramp up the nascent movement from densely populated areas to smaller areas of better and less stressful living conditions. It’s not like we don’t have plenty of space in which to live across the country, it’s just that people have so far wanted to bunch up in a few particular areas. These are not original thoughts, Tom Peters and George Gilder and others wrote about this years ago, but I haven’t heard much reference to these problems in relation to the current “housing crises”. What I have heard is what Peter Senge refers to as symptomatic solutions to symptomatic problems rather than fundamental solutions to fundamental problems. It is time for fundamental solutions or the symptoms will reoccur, over and over.