In California, the majority of homeowners who have pondered selling in the past year haven’t because they can’t find a replacement home.
You’ve heard about inventory constraints and those obviously affect existing homeowners as well unless they make the odd choice to rent after selling.
I actually don’t have problem with renting if you can sell your home for a tidy profit and lie low until the next downturn, or least until home prices cool off, but it’s probably not a common way of thinking.
35% of Californians Have Pondered a Sale
Per the inaugural 2015 Survey of California Homeowners conducted by the California Association of Realtors, some 35% of homeowners have considered selling this year.
But of those folks who have, 64% are reluctant to do so because the home they want to buy next isn’t affordable.
Typically, homeowners will sell and move up to a bigger and better property thanks to the equity they accrue while living in their first home.
They can use the money for the down payment and generally take on a larger monthly payment because of wage increases and so forth. The larger home should also accommodate their growing family.
This is how the housing ecosystem works – they move up and first-time buyers come along and purchase their old homes.
But because homes are so expensive (again), the system is completely out of whack.
California Real Estate Isn’t Affordable
The problem is pretty clear – home prices in the Golden State are silly expensive. In fact, CAR even admitted this last week in a separate report, noting that only seven of 32 counties in the state had properties the typical median-income household could afford.
And the affordable counties aren’t on the coast or necessarily near bigger cities either. Think central and inland.
Consider the fact that in the first quarter of 2012, a median income of just $56,324 was needed to purchase a median-priced home in California.
Fast-forward to the second quarter of 2015 and that figure surged to $96,160, thanks to unhealthy home price appreciation. How many people do you think doubled their income over the past three years?
For the record, 99% of that required income increase was directly attributed to home price increases.
Amazingly, the home price increases over the past few years still don’t seem to be adequate, as 56% of survey respondents said they would sell if their home value increased.
So apparently home prices, as bloated as they are, aren’t even high enough yet to get some people on the move. And it’s unclear whether these people would be able to buy after home prices climbed that high.
Move Out of State?
One option is to sell your California home and get out of town, like way out of town. A different state actually.
Some 45% of California homeowners have considered packing up and leaving, with Texas the top destination at 15%.
It was followed by Oregon (11%), New York (9%), and Arizona and Nevada both tied at eight percent.
The obvious issue with moving out of state is that you might not have a job lined up in another state, and even if you do, it might complicate your ability to qualify for a mortgage.
There’s also the issue of moving kids to different schools and away from their friends (and your friends if you care?), and perhaps less home price appreciation to look forward to in those aforementioned states.
Ultimately what this tells us is home prices in California have far outpaced wage growth and are probably at unhealthy levels. But this was all deemed necessary to get underwater borrowers back above water.