California Cities Are Now ‘Impossibly Unaffordable, Leaving Families Struggling

2024-07-10

A new report by housing experts has revealed some harsh home truths for many American families..

Housing Affordability

Image Credit: Shutterstock / Sutthiphong Chandaeng

If you thought America’s real estate was pricey, you haven’t seen anything yet. 

California’s Unaffordable Housing Crisis

Image Credit: Shutterstock / kwanchai.c

According to a new study, four of the world’s top 11 most unaffordable housing markets are here in the U.S. – California, to be specific. The 2024 Demographia International Housing Affordability report has revealed how bad it’s gotten.

Cities on the “Impossibly Unaffordable” List

Image Credit: Shutterstock / Ryan DeBerardinis

The prices in California are making the dream of homeownership nearly impossible for many. San Jose, Los Angeles, San Francisco, and San Diego have all made it to the “impossibly unaffordable” list. 

San Jose: Leading the Affordability Crisis

Image Credit: Shutterstock / Sundry Photography

San Jose is streets ahead, with a median house price that’s 11.9 times the median household income

Los Angeles, San Francisco and San Diego

Image Credit: Shutterstock / Marek Masik

Los Angeles isn’t far behind at 10.9, with San Francisco and San Diego trailing at 9.7 and 9.5, respectively.

Affordability Challenges

Image Credit: Shutterstock / Krakenimages.com

In simpler terms, if your household brings in $100,000 a year, you’d need nearly $1.2 million to buy a home in San Jose – and over $900,000 in San Diego. Three decades ago, this kind of unaffordability was unheard of. So, what’s changed?

Causes of Unaffordable Housing

Image Credit: Shutterstock / Pressmaster

The people behind the report point the finger at strict land use policies. They argue that efforts to control urban sprawl – greenbelts, urban growth boundaries, and densification – are making land scarce. 

Land Use Policies

Image Credit: Shutterstock / Zerbor

Less land means higher prices, which trickles down to skyrocketing house prices.

Criticism of Urban Growth Boundaries

Image Credit: Shutterstock / BlueSkyImage

“The crisis stems principally from land use policies that artificially restrict housing supply,” the authors claim. Basically, government rules are making it harder for people to find affordable homes.

COVID-19’s Influence on Housing Costs

Image Credit: Shutterstock / Freedomz

The COVID-19 pandemic didn’t help matters. Massive government spending, rock-bottom interest rates, and supply chain disruptions sent inflation soaring to a 40-year high of over 9% in 2022. 

Federal Reserve’s Response to Inflation

Image Credit: Shutterstock / Doubletree Studio

To try and combat this the Federal Reserve jacked up interest rates to above 5%, which pushed mortgage rates from under 3% to around 7%.

Impact on Homeowners and Sellers

Image Credit: Shutterstock / Prostock-studio

Homeowners who locked in those low rates are reluctant to sell and are holding onto their houses, which is causing a shortage of homes for sale and driving prices even higher.

Beyond California

Image Credit: Shutterstock / V. Ben

California isn’t alone in this mess. The report also explores other North American cities facing serious affordability issues. Honolulu, Hawaii, for example, has a median price-to-income ratio of 10.5. Vancouver (12.3) and Toronto (9.3) in Canada aren’t doing much better. 

Global Comparison of Housing Markets

Image Credit: Shutterstock / A_stockphoto

These cities join the ranks of Australian and U.K. markets struggling with the same problem: homes are simply too expensive for the average earner.

Bright Spots In The Market

Image Credit: Pexels / Pavel Danilyuk

But it’s not all doom and gloom. The report does mention a few U.S. cities where housing is still somewhat affordable. 

A Model of Affordability

Image Credit: Shutterstock / SFIO CRACHO

Pittsburgh tops this list with a median price-to-income ratio of 3.1, followed closely by Rochester and St. Louis at 3.4 and Cleveland at 3.5. If you’ve been dreaming of owning a home, these might be the places for you.

The Toll of Unaffordable Housing

Image Credit: Shutterstock / Motortion Films

The main issue with “impossibly unaffordable” cities is the massive toll it takes on people’s lives. Soaring home prices and rising living costs are squeezing household budgets. 

Financial Strain on Households

Image Credit: Shutterstock / christinarosepix

Many families are now struggling with higher monthly payments for credit cards, car loans, and other debts because of those interest rate hikes. This financial pinch is making it even harder to save up for a home, pushing the idea of homeownership further out of reach for many.

Barriers to Homeownership

Image Credit: Shutterstock / Andrey_Popov

As the Demographia report lays it out, we’re in a housing affordability crisis, especially in California. Whether it’s restrictive land use policies, the pandemic’s economic fallout, or a mix of both, the result is clear: homeownership is becoming impossible for many. 

Call for Creative Solutions in Policy Making

Image Credit: Shutterstock / photobyphotoboy

California’s housing market is a tough nut to crack. Policymakers need to get creative and find ways to increase housing supply and affordability before the dream of owning a home slips away for good.

23 Steep Taxes Adding to California Residents’ Burden

Image Credit: Shutterstock / Alex Millauer

California: a place of sunshine, innovation, and, unfortunately, some of the nation’s highest taxes. From LA’s beaches to Silicon Valley’s tech hubs, residents grapple with a maze of state taxes. Here’s a glance at 23 taxes that might surprise both Californians and outsiders. 23 Steep Taxes Adding to California Residents’ Burden

Cash in on Nostalgia: 21 Toys Now Worth a Fortune

Image Credit: Shutterstock / Kostikova Natalia

Time to dust off the boxes and find that once-cherished toy from your childhood. For collectors and enthusiasts, these items have become valued objects, and they can be worth big bucks – are there any of these in your attic? Cash in on Nostalgia: 21 Toys Now Worth a Fortune

Millennials Don’t Buy These 19 Products Anymore

Image Credit: Shutterstock / mariakray

Millennials are changing consumer habits, quietly replacing once-staple products and traditions. Often criticized for their disruptive preferences, this generation is reshaping the marketplace with digital expertise, ethical buying, and a taste for the unconventional. Millennials Don’t Buy These 19 Products Anymore

The post California Cities Are Now ‘Impossibly Unaffordable, Leaving Families Struggling first appeared on Thrift My Life.

Featured Image Credit: Shutterstock / fritz16.

The content of this article is for informational purposes only and does not constitute or replace professional financial advice.