East County Housing Affordability Heading into 2017

November 26, 2016

C.A.R.'s Center for California Real Estate (CCRE) recently convened about 100 participants, including economists, state and local officials, academics, and other housing experts to discuss housing affordability and California's future. C.A.R. CEO Joel Singer and C.A.R. Chief Economist Leslie Appleton-Young set the stage with some sobering statistics: California ranks 49th in the nation in home ownership rate and last in affordability. If these trends continue, California will become a state where renters are the majority instead of homeowners.

Keynote speaker Carol Galante, faculty director at UC Berkeley’s Terner Center for Housing Innovation, discussed some of the key factors causing the affordability crisis and cited possible solutions. She indicated that job growth and a housing imbalance, population growth and demographic shifts in cities, climate change challenges, and stagnant incomes in the face of rising costs of living were some of the causes. Among solutions, Galante suggested expanding the supply and lowering the cost of housing by streamlining the development approvals process and addressing regulatory barriers to housing production, expanding access by giving renters a tax credit and developing new mortgage products to increase access to home ownership.

The Summit also had three round tables with panelists comprised of industry leaders, who addressed policy solutions, the economics of affordability, and land use, supply and zoning in the development of residential real estate.
CCRE will have a complete wrap-up report and videos in the coming weeks, so please keep your eyes open. 

New Housing Costs as New Buyers Enter the Market in 2017
In 2017, recent trends will reverse course as the housing market's economic recovery enters a new stage, according to an analysis by Zillow. Renting will become more affordable, more Americans will drive to work, and the home ownership rate will bounce back from historical lows.

Millennial's will play a significant role in increasing the home ownership rate. Nearly half of all buyers in 2016 were first-time buyers, and millennial's made up over half of this group of buyers.

Zillow's 2017 housing market predictions

  • Cities will focus on denser development of smaller homes close to public transit and urban centers.
  • More millennial's will become homeowners, driving up the home ownership rate. Millennial's are also more racially diverse, so more homeowners will be people of color, reflecting the changing demographics of the United States.
  • Rental affordability will improve as incomes rise and growth in rents slows.
  • Buyers of new homes will have to spend more as builders cover the cost of rising construction wages, driven even higher in 2017 by continued labor shortages, which could be worsened by tougher immigration policies under President-elect Trump.
  • The percentage of people who drive to work will rise for the first time in a decade as homeowners move further into the suburbs seeking affordable housing – putting them further from adequate public transit options.
  • Home values will grow 3.6 percent in 2017, according to more than 100 economic and housing experts surveyed in the latest Zillow Home Price Expectations Survey. National home values have risen 4.8 percent so far in 2016.