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Golden State Blues
California’s Housing Market is a Disaster for Millennials

California’s high-end housing market is one of the most attractive for America’s rich. The market for starter homes for young families looking to put down roots? Not so much. The Los Angeles Times reports:

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 a recent report by Claes Bell, an analyst with Bankrate.com.

There are several reasons the Golden State placed last in the report, including the relatively high cost of housing, the tight market for available entry-level homes and the struggle that millennials face in saving for a down payment. […]

The easiest states for first-time home buyers were Iowa and Utah, Bell found.

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. This is a key reason so many working class families have left the Golden State in the past 25 years.

Homeownership is the backbone of American prosperity, forcing families to accumulate wealth and feel they have a stake in the system. California’s low ranking for young home buyers is not an encouraging sign for a state once thought to be a model for America’s future.

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  • Suzy Dixon

    Well there are a lot of factors involved. Certainly, having Russian and Chinese officials sneaking out Adidas bags full of cash to buy property in the coastal states simply as a store of value or to hide dirty money doesn’t help. But millennials, or at least the smart ones, are leaving states with ridiculous costs of living for more sensible central and southern states, and they often have better job prospects too.

  • Beauceron

    Millennials, our snowflake generation, deserve every disaster they get.

    • RedWell

      Who is responsible for the snowflake: the thing itself or the massive, ill-formed, destructive and self-important storm that created it?

      • The latter but we’re past such gentle disbursements. We have grown foolish in plenty. We will grow wise in deprivation.

      • Boritz

        This is not the Soviet Union where reporting with a good measure of truth can only be heard as a static-filled partially jammed Voice of America broadcast on shortwave. This is not the DDR where neighbors in your apartment complex will report you to the Stasi for listening to broadcasts from the West if they hear it through the wall. The truth is out there and both free and risk-free to access.

  • James_Eric

    A much more sensible way of accumulating wealth than home
    ownership is to regularly invest in stocks by means of a low cost index fund.
    You will make more money, relocating to another part of the country or to another
    country is easy, and when you need cash, you can just sell the amount of stocks
    necessary. With a house you have to sell the whole thing to get cash. You can’t
    just sell a bedroom. Owning a house is
    stupid. Perhaps the millennials are intelligent enough to have figured this
    out.

    • Unelected Leader

      Investing is a great argument against a savings account. Between low interest rates and inflation eating away every year on your interest, saving just for the sake of saving makes little sense beyond a couple thousand for an emergency. But returns can easily exceed one or two percent, so investing is better sense.

      But you need a home to have a real asset that you can freely borrow against. And you need that real asset to buy more property or start a business. Getting a loan against your portfolio is much more difficult and much more heavily regulated.

      • RedWell

        I’d also add that, if you are in the same place for a number of years, owning means that you aren’t paying rent that permanently vanishes into someone else’s pocket.

    • Andrew Allison

      It depends. I bought a house for $100K in 1972, sold it for $1M in 1991, gave half to my ex, and bought another one for $456K which currently has a market value of $1.25M, a twelvefold increase. If I need cash, I can get a home equity loan.
      The Vanguard S&P500 index fund is also up twelvefold since 1972 (https://www.google.com/finance?q=INDEXSP%3A.INX&ei=AK7aWNjTIIGdmAHxu5voDw), but I haven’t paid rent for 45 years.

      • The only problem is, what on earth can the next generation do, when every home is $1 million?

        I know millennials are not doing great in their odd trendy fancies, but I have to sympathize with that kind of huge pain. It’s about as likely that they can beg, borrow or steal $1 million as it is for them to fly to the moon tomorrow. Actually, with Elon Musk on the task, they might be more likely to reach the moon than be able to afford a house.

    • At PEs > than 20, what is a buy? Past performance is no guarantee of future returns, not in real estate, not in anything.

  • vb

    I think zoning restrictions also play a role. Zuckerberg apparently doesn’t want people living too close to him.

    • Jim__L

      *No one* wants to be crammed together cheek-by-jowl.

      The only thing that makes sense is for us to use today’s technology to distribute jobs more uniformly across the country.

      If the executive class doesn’t like it, that’s too d*** bad for them.

      These people — these executives — are nasty, nasty people. Back in 2008 there was actually a proposal moving forward to buy an old aircraft carrier, put it in international waters right outside San Francisco Bay (to avoid legal entanglements), and cram it full of Filipinos working in a call center. Why couldn’t they just site the call center in Manila you ask? Well, the executives that ran the business from San Francisco wanted their workers to be close by, and the Bay Area is simply unaffordable.

      These executives need to be put in their place… that of a human being, that has no right to treat other human beings this way.

      The only real solution is to break out the trust-busting legislation again, so that executives can’t have this much power.

  • CaliforniaStark

    In the Bay Area, the one area of California that is economically thriving, a six figure salary cannot buy you a home. As a life-long Californian, my best advise to any millenial is leave California, especially if you plan to raise a family.

    https://www.theguardian.com/technology/2017/feb/27/silicon-aa-cost-of-living-crisis-has-americas-highest-paid-feeling-poor

  • But they have a bullet train! Or will. One day.

    • But will it ever go anywhere anyone wants to go? Last time I checked, the initial route was from Fresno to a place even more obscure. I don’t understand why anyone would want to fund a useless train. I guess it’s all graft, as Glenn would say …

      • Jim__L

        Fresno Area Rapid Transit… Jerry Brown’s legacy.

        It’s appropriate enough. I just wish I didn’t have to pay for it.

        • Ha! Okay, that was hilarious.

          I wish none of us had to pay for it. Didn’t the Feds break off a few billion bucks for it?

          It’s probably $3 for each American but still, it’s pretty pathetic to pay that for the stupidest idea ever.

          I’d rather they give the money to Elon Musk, who at least has an interesting plan. (Elon Musk is the only person I know who gives crony capitalism a halfway decent name.)

  • Publius Houstoniensis

    Socialists are the same all over the world. The Democrat Party in America and the Congress Party in India both serve the same electorate – – Brahmins and untouchables.

    In California progressive government serves the super-rich who are already established, and the dependents who vote for a living from taxpayers. The middle class, entrepreneurs and working people (like the merchant and laboring classes in India) are ignored.

  • I wouldn’t say forcing. I would say enabling, a more positive word I think. Enabling people to build wealth through real estate is a cornerstone of our nation. When that gets shaken, as it was around 2008, things go sour badly. We saw this in Florida too. Right now, Miami’s housing market is abysmal for buyers, too. It’s not as outrageously expensive as California, and at least we have no state income tax, but incomes in Miami are a lot lower than they are in the pricey parts of California.

    Honestly, I don’t think anyone deserves such an unfavorable real estate market, but unfortunately it’s pretty much impossible to roll back because of demand. If you want to live in hip places, you have to pay hip prices. Laughable looking tract homes in trendy Wynwood, which was a horrible slum 10 years ago, are going for nearly $1 million today. And you probably wouldn’t want to live in one thanks to horrific traffic and parking shortages. Unless you are trendy. You couldn’t give those homes away 10 years ago, now they are $1 million. Ouch.

  • Mastro63

    I have three nieces that grew up in California-

    One lives outside Philly and plans to move to Florida in a few years. One just got into a prestigious eastern university- I wonder if she will stay east.

    Their parents are wealthy- but still- they are drawn East. If you are lower middle class trying to move up in life- California is NOT the place to do it-

    • Jim__L

      If you’re a programmer who’s willing to live like a monk, you can do VERY well in California.

      The East really doesn’t have much to offer, I mean, isn’t it more built-up than the Bay Area, but without the jobs or technical chops (outside of MIT)? The South, Midwest, or Southwest are probably better bets.

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