California Homeownership Grows Despite Soaring Prices
The percentage of Californians owning homes hit a record level last year even though prices surged to an all-time high and interest rates inched up slightly, according to a federal report released Monday.
Boosted by buyers in Orange County, San Diego and San Jose areas, the number of homeowners amounted to 57.1% of all households in the state, the highest rate since the Census Bureau began maintaining annual figures in 1984.
Nationwide, the homeownership rate rose to a record 67.4%, according to the Census Bureau. But homeownership, a key indicator of economic strength and social stability, rose at a faster pace in California than the nation as a whole.
In California, those holding a title to their homes grew by nearly 1.5 percentage points, or roughly 172,500 households. The jump in the state’s long-stagnant ownership level was greater than the 0.6-point increase nationwide.
Despite the improvement, figures show that California still has one of the nation’s lowest homeownership rates. Only New York’s and Hawaii’s are lower.
Some analysts were surprised by the results, given the 13% run-up in the median home price to $209,000 last year.
“It’s hard for me to imagine why the decline we saw in 1999 was reversed in 2000,” said Leslie Appleton-Young, chief economist at the California Assn. of Realtors trade group.
The trend reflected several economic and demographic changes in California that allowed more people to buy homes, analysts said.
Unemployment hit record lows and incomes rose, especially in the technology sector, where huge stock gains last year provided many people with down payments. Also, a larger number of immigrants have reached prime years for purchasing homes.
In addition, key mortgage investors Freddie Mac and Fannie Mae raised the limits on the sizes of loans they would buy. That pumped more mortgage money into the area and allowed more people, even first-time home buyers, to qualify for loans with lower down payments, the analysts said.
Those conditions outweighed concerns over home prices and boosted confidence in the economy enough that more renters became homeowners last year.
In coastal areas, where high-tech jobs make up a larger share of the local economy, incomes from stock gains also helped make purchases of new homes possible. In Orange County, San Diego and San Jose--three of the highest-priced metropolitan areas in California--homeownership rates rose sharply. San Diego’s jumped 3.1 percentage points.
“Stock options may have allowed people to accumulate a down payment, [people] who would not have been able to do so 10 years ago, particularly those under 35 years old,” said Cynthia Kroll, a UC Berkeley economist.
In addition, many landlords with only a few properties took advantage of higher prices to sell their rental units into the homeownership market, said Ted Gibson, an economist at the state Department of Finance.
“It may be that people are saying it’s time to cash in the rental and put the money somewhere else,” he said.
Although home prices have hit records in several metropolitan areas, some counties, such as Los Angeles, have only begun in the last six months to exceed levels from a decade ago. Higher prices in those areas have fueled more transactions. The ownership rate for Los Angeles-Long Beach rose to 49% last year from 48.1%.
Owners have amassed enough equity to sell their homes and move into larger ones, allowing room for new owners to enter the market. In addition, more buyers are heading inland, where single-family homes are being built at more affordable prices.
But for the state’s homeownership rate to improve greatly in the long run, more housing must be built to accommodate the huge demand, analysts said. Last year, the state produced 70,000 to 100,000 units fewer than what was needed to match growth, according to the state Finance Department.
Even so, widespread gains were made last year. Out of the state’s 10 metropolitan areas included in the census survey, only Oakland and San Francisco showed a drop in ownership rates last year. In the Southland, Ventura County improved 1.5 percentage points to 66.2%; Orange County jumped 1.4 points to 62.3%, and Riverside-San Bernardino increased by less than a point to 62.6%.
A more precise portrait of homeownership in the region and in the nation is expected later this year as the federal government releases results from the 2000 census.
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Place of Their Own
Homownership rose acros California and the Southland last year. The percentage of households holding title in selected cities.
