Affordability Still Counts
Recent San Fernando Valley home buyers must be getting a crick in the neck watching their equity go up. Valley home prices rose 4.3% from April to May, according to a report last week from a Realtor trade group. The median price of a single-family Valley home is up 17% from a year ago. Even the sale of million-dollar homes is up, with a Valley twist: million-dollar tract homes.
Alas, such leaps in price mean would-be first-time homeowners trying to scrape together a down payment now need to scrape even more. At the same time, they’re likely to face a rise in the rent on their apartment. Some of the same forces that are driving up the price of houses--more demand than supply--are driving up rental rates, as an investment brokerage reported recently. Valley rental vacancies are at the lowest level on record.
Homeowners (and apartment owners) happy with their good fortune may grump at our linking the good news with the bad. Far from getting rich, some homeowners are just now building back lost equity. After the recession of the early 1990s and especially after what the 1994 Northridge earthquake did to Valley housing prices, aren’t Valley homeowners entitled to a little guilt-free celebration?
Absolutely. But a community is only as fortunate as its least fortunate members, and not just for humanitarian reasons.
When home prices shut out entry-level buyers, the lack of new buyers can prevent existing homeowners from trading up to bigger, more expensive houses. That’s one way the less and the more fortunate are joined.
And if the workers who are fueling the current economic boom can’t find affordable housing, the boom could soon turn to bust. That’s another.
Of course, in the volatile California housing market, a boom could turn to bust for any number of reasons, as longtime homeowners know all too well. That’s all the more reason to keep affordability in mind, even in good times, and to urge City Council and other government officials to do likewise. By considering innovative techniques such as density bonuses that allow developers to build more apartments if they provide some units at below-market rates, city leaders can help bring the good times to more members of the community.
