Homeownership Rises in U.S. as It Falls in State
Homeownership in America is reaching new highs, but the share of California families who own their dwellings is waning under the weight of higher interest rates, skyrocketing prices and a dearth of new construction.
Though two-thirds of the nation’s residents last year lived in homes they owned, only 55.7% of California’s residents held title to their homes, according to the latest report by the U.S. Census Bureau.
The ownership rate, a key measure of economic and social conditions, hasn’t budged in Los Angeles County and remains the lowest west of the Mississippi. Orange County’s ownership share has fallen sharply over the last two years, after it nearly closing the gap with the national rate in previous years.
The state, with its high-priced homes, has long lagged behind the nation, but last year’s gap is the largest since the early 1980s--and could get worse.
Preliminary Census Bureau statistics for the first quarter show the nation’s homeownership rate inching up to 67.1%. Reliable state figures were not available, but economists have little doubt that more Californians will be locked out as home buyers in the future.
“Home prices are increasing much faster than incomes . . . and in the long run, that could choke off potential growth,” said Esmael Adibi, a Chapman University economics professor and director of its Center for Economic Research.
The homeownership rate indicates how many people have tapped into the American dream, set down roots in a community and started generating personal wealth, which also contributes to the community’s well-being.
Ventura County suffered the area’s steepest drop in homeownership last year, with 63.3% of its residents owning homes, compared with 65.7% the previous year. In Orange County, the least-affordable county in Southern California, 60.9% of residents owned homes, down from 63.2% the previous year and 64.6% in 1997.
Homeownership in L.A. County was flat, year to year, at 48.1%.
“It’s hard to see how, given that in many places prices are setting records and mortgage rates are higher, we’ll make progress in the homeownership rate this year,” said Stephen Levy, who directs the Center for the Continuing Study of the California Economy in Palo Alto.
The state had three solid years of gains, peaking in 1998 when 56% of California residents owned their homes, according to the Census Bureau report. But the mix of economic measures has differed greatly with those nationwide.
In many parts of the country, income gains have outpaced housing prices, creating more homeowners despite median home prices of $133,400, according to the National Assn. of Realtors, a Washington trade group.
But California residents, especially those living in coastal areas, have found just the opposite. Home prices are growing by double-digit rates in the hottest markets, locking out tens of thousands of potential home buyers.
The gap in ownership rates is so wide that “even affluent people can’t buy homes there,” said Richard Green, a housing expert at the University of Wisconsin.
California has more metropolitan areas ranked among the least-affordable places to live than any other state, a condition that will most hurt the efforts of those trying to purchase their first home.
“First-time home buyers, in particular, will be curbed this year, and their limited ability to purchase will keep the [ownership] rate from going up,” said G.U. Krueger, an economist at the California Assn. of Realtors.
Consumers bid up housing prices because there was scant new construction statewide, analysts said.
About 250,000 new housing approvals are needed annually to absorb growth, economists said. But new-housing starts remain mired near all-time lows, they said, as the state’s largest urban counties have fewer suitable lots and impose tougher land-use restrictions, which makes it harder to create housing for a growing population.
New jobs in the most populous areas are being created at a faster pace than homes. In Los Angeles, job growth outnumbers home building by a 4-1 ratio, the state’s largest disparity, according to the Meyers Group, an Irvine firm that tracks home developments.
Moreover, economists said, despite record employment levels, the percentage of those able to buy homes has been declining statewide as incomes rise at a slower pace than home prices.
The average California household earns $40,600 and can afford to purchase a $110,000 home. But the median-priced house in California costs a record $238,870, requiring annual earnings of roughly $67,600, the state Realtors group said.
Meantime, interest rates have risen 1.75 percentage points since last June. For every one point rise, about 445,000 fewer Californians can afford to purchase a home.
