Home Prices Surpass Savings, Locking Out Many Renters
Renters like Douglas Hart get nothing for something in the overheated Orange County housing market: no break from high rents and little chance for ownership as home prices outpace savings.
So what if the 34-year-old executive has saved for 12 years and earns more than $55,000 a year--along with a bonus and a company car?
The median-priced Orange County home still costs $211,038, Hart still spends more than $900 a month on housing, and he still has nothing to show for it but landlord-tenant friction and a desire to move very far away.
How far, you ask? Not to San Bernardino, or Riverside, or Moreno Valley. But to Dallas, land of the $94,820 median-priced home and a potential drastic change of life styles for his wife and two daughters.
“We’re not giving up on buying a house by any means,” Hart says. “But we may give up on Orange County.”
Locked Out of Dream
Locked out of their dream homes--or any homes for that matter--Orange County’s renters are finding little but frustration and financial strain in one of the most frenzied of real estate markets.
Renting is way of life for one-third of the population in Orange County, and a poll conducted for The Times Orange County Edition by Mark Baldassare & Associates found that it can be a difficult one.
Among the reasons:
- The median monthly rental payment of $715 is equal to the median monthly mortgage payment, and 70% of all renters pay between $501 and $1,000 to live in their current homes. Yet renters make significantly less money--a median household income of $34,000 compared to $52,000 for owners.
- More than half of all Orange County renters need more than one salary to pay their housing costs.
- 40% cut back on luxuries such as vacations.
- 29% cut back on necessities such as clothing, food and health care.
- 19% say they are financially overextended.
Today, with record home prices and intense demand, the only alternative for many renters is to leave Orange County, say real estate watchers, for renting here with a yen to own can be an exercise in futility.
With the price of a typical home increasing by 24% in the past year, it can be nearly impossible to stay in the game.
“I’ll probably die before I get” a home in Orange County, said Brenda Batchelor, a Huntington Beach renter. “The down, the cost of them, it’s just too outrageous.”
But there is little recourse, for nearly 60% rent simply because they cannot afford to buy, the poll found. And they want to buy. Many scrimp and save, but this year in particular local housing prices have risen faster than their incomes or their savings account balances.
“I almost wish I went to Vietnam, so I could get a VA (Veteran’s Administration, no down payment) loan,” said Hart, who forgoes luxuries such as flashy vacations so he can save for a house and pay the rent on his home in Orange at the same time. “But I didn’t turn 18 until 1972. . . . Vietnam was not a nice place to go, but they (veterans) can get a house.”
The San Bernardino-Riverside area is usually considered the closest seat of stability outside Orange County, but Mary and Dee Robinson decided to go just a little farther to realize their dream.
Early in July, they quit their jobs, packed up their toddler and moved from Fullerton to Idaho.
“Orange County was definitely the desired place to live,” Dee said, but “it seemed like . . . the houses would go up faster than our salaries.”
Dee was making $30,000 a year as a warehouse manager, he said. Mary earned $22,000 as a teacher, and “we had to survive on both incomes, just barely making it with the car payments and rent.”
In Idaho Falls, Idaho, however, they can pretty much manage on Mary’s salary alone--even after the $2,000 pay cut she took to relocate. Dee is looking for work, and a house sits squarely on their horizon.
“The houses here, you can get into a fixer-upper for $35,000 to $40,000,” he said by telephone. “That’s the total price.”
Unlike the Robinsons, Peter and Cathy Dugan were not prepared to give up on Orange County when they started looking at homes in 1986. But after their first timid forays to Sunday open houses, they almost gave up on ownership.
“We started looking two years ago and got sick,” said Peter, a 37-year-old electrician and father of two. “We just couldn’t afford it. . . . I felt like the American Dream is shrinking at an ever-increasing rate, and there isn’t enough to go around.”
Money Rapidly Spent
The shock was even more profound, because as a bachelor in the early 1970s, Peter had twice saved--and rapidly spent--lump sums of $10,000, more than enough for a down payment when houses were selling for $30,000 to $60,000.
The 1980s, however, have been much different.
“For the last 10 years, I’ve felt that we’d missed the boat and we’d never catch up to the escalating housing costs,” Peter said. “We could never seem to make enough money, to save enough money to catch up. Last September, we had no savings account at all. Then in eight months, we put together a down payment, $18,000.”
It took a large measure of intestinal fortitude for the Dugans to scratch together such a large amount, in part because they spent nine months eating spaghetti and chili, chili and spaghetti and when that ran out, more chili.
Made Spaghetti
“We made pots of spaghetti and my gourmet sauce on Sundays and then ate it for six days,” Peter said. “We were not frivolous at all. I’d buy four or five pairs of Levis a year, six to 10 shirts. My total clothing bill for the year was under $200.”
All that starch paid off at the beginning of July, when the Dugan family moved into a $178,000, 1,580-square-foot townhouse in Costa Mesa with three bedrooms, 2 1/2 baths, a laundry room, a back yard and a two-car garage.
But their problems may not be over yet, according to The Times housing poll, even though Cathy’s secretarial service and Peter’s electrical work should give the family an income of about $55,000 in 1988.
For despite incomes topping $50,000, nearly half of all recent home buyers say that more than one adult in the household has to work to make the monthly mortgage payment, the poll found.
Cutbacks on Vacation
One in five from this group says the expense of housing has forced a cutback on vacations and going out. And one in 10 says the household has to scrimp on food, clothing and health care to stay in the newly purchased home.
The reason is the size of the median mortgage payment--a number that differs dramatically among long-term owners, short-term owners and those in between. Owners of more than a decade have a median monthly payment of $352. For those who have owned for three to 10 years, it is $890. More recent buyers must pay a monthly $1,039 for the privilege of owning a home.
The Dugan’s monthly payment is about $1,400, but for that, Peter said, they get “a toehold in the economy of the U.S. . . . a tiny piece of what will hopefully be a future of financial security instead of insecurity.”
And to the Dugans, it’s worth it.
RENTING IN ORANGE COUNTY “Are you renting because you cannot afford to buy a home?”
Yes No All Renters 58% 42%
Homeowners vs. Renters
Own Rent By Age 18-34 33% 58% 35-54 39 30 55 or older 28 12 Annual Household Income Under $20,000 8 18 $20,000-39,000 22 46 $40,000-60,000 31 23 Over $60,000 39 13
Average Rental Payment
North Central South All County County County Areas Studio $505 $560 $587 $565 One-Bedroom 578 604 714 644 Two-Bedroom/One-Bath 678 677 815 708 Two-Bedroom/Two-Bath 757 756 921 831 Three-Bedroom 849 835 1,035 932 Four-Bedroom N/A* 918 900 911 All Apartments 650 672 811 725
* Not available Source: The Research Network Ltd. Rent Control “Local governments should control the amount of money that landlords can raise housing rents each year.”
Agree Disagree Don’t Know All Residents 61% 30% 9% Homeowners 55 34 11 Renters 74 24 4 By Age 18-34 78 19 3 35-54 47 41 12 55 or older 52 34 14 By Yearly Income Under $20,000 72 15 13 $20,000-39,000 68 24 8 $40,000-60,000 66 26 8 $60,000-80,000 57 37 6 Over $80,000 35 54 11 By Region North County 64 25 11 South County 58 35 7
NOTE: Percentages may not add up to 100% because of rounding. Source: Times Orange County Poll, June, 1988
