by James Poulos | April 13, 2017 9:06 am
Debate over California’s housing situation ratcheted up amid conflicting data and a flurry of new legislation designed to mitigate high prices and low supply.
Analysts have separated into two camps around Golden State real estate, one more bullish than the other. “Two recent reports — from Fitch Rating, a Wall Street credit reviewer, and Arch MI, a seller of mortgage insurance — attempt to gauge the stability of regional housing markets by tracking changes in real estate metrics vs. other economic measurements,” the Orange County Register reported. “Using a California prism, the studies draw wildly different conclusions. Fitch concludes California housing is among the most overvalued housing markets in the nation. Yet California is not on Arch MI’s list of riskiest places to own.”
“California was one of 10 states with overvalued housing by Fitch’s standards. Four states had the same pricing mismatch as California: Florida, Hawaii, Oregon and Utah. Next states on the dicier scale — 10 percent to 14 percent overvalued — were Arizona, North Dakota, Nevada and Texas […]. Idaho was in the worst shape at 15 percent to 19 percent overvalued. But Arch MI saw California with riskiness below the norm. California’s risk of falling home prices is ‘minimal’ or a 2 percent change of depreciation in the next two years. National risk by this math is 4 percent.”
Along with an analytical split surrounding a possible housing bubble, residential options in California have been opening a gulf of their own. “California is one of the most unequal states in the country, and its housing market is similarly bifurcated, offering both multimillion dollar houses and rent-controlled apartments, but less and less of a foothold for people in the middle,” the American Interest observed. “This is a key reason so many working class families have left the Golden State in the past 25 years.” In a recent report issued by Bankrate.com analyst Claes Bell, “California ranked as the toughest state in the nation for first-time home buyers, who typically would be in the millennial age bracket of 18 to 34,” according to the Los Angeles Times.
Policymakers grappling with the state’s compounded housing challenges have no shortage of plans to pore over — over 130 bills touching upon the issue, the Times noted. “Reams of statistics support the depth of the problem: California’s homeownership rate is at its lowest since World War II, a third of renters spend more than half of their income on housing costs and the state has nearly a quarter of the nation’s homeless residents — despite having 12% of the overall U.S. population,” the paper noted in a breakdown of some leading legislative contenders — which range from proposals to expand low-income rent-controlled units to increasing tax credits to pushing easier and less traditional permitting.
The push toward increased rent control has been spearheaded by Assemblyman Richard Bloom, D-Santa Monica. “Bloom wants to repeal the state law known as the Costa-Hawkins Rental Housing Act, named after a moderate-leaning Democratic former state senator from the Central Valley and a short-time Republican assemblyman from Orange County,” the Sacramento Bee recalled. “During 1995, Jim Costa, now in Congress, and Phil Hawkins, who served just two years in the state Assembly, became the face of a disputed political campaign lodged largely by landlords and real estate interests to weaken – statewide – the ability of cities to pass strong rent-control laws. It came nearly two decades after the rent-control movement, born in cities like Santa Monica, Los Angeles, San Francisco and Berkeley, was spreading across the state.”
In core metro areas across California, rents have risen dramatically — in part reflecting an influx of wealthier residents to downtown urban neighborhoods, but also fueling a domino effect of hikes further down the affordability chain. “Statewide, average rents have increased 60 percent over the past 20 years. In 2016, median rents in the Bay Area and Los Angeles area ranged from $2,427 to $4,508, according to a housing report from the California Department of Housing and Community Development,” the paper added. “Nearly half of California’s households rent, and 84 percent of them are considered ‘burdened,’ spending 30 percent to 50 percent or more of annual income on rent.”
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