Your Real Estate Advocacy Resource - October 3, 2016
San Diego Union Tribune Editorial
September 14, 2016

Really good U.S. economic news has been rare the past decade. While unemployment has dropped steadily from its Great Recession peak of 10 percent in 2009 to roughly 5 percent for the past year, a measure that evaluates how many people want to work full time but can’t find such jobs shows the rate to be about 10 percent for the past year. “Underemployment” seems the new normal. Fewer adults are working than at any time since the 1970s, when more married women stayed home.

That’s why so many people were elated by the U.S. Census Bureau report Tuesday showing that 2015 was the best year for median-income wage gains for middle-income and lower-income households in decades. Even with the 5.2 percent increase in median wages, wages are still below what they were before the Great Recession hit, once adjusted for inflation. But the 2015 gain was bigger than expected, and the trends are strong. The American Dream looks more resilient than many feared.

Which brings us to California, where the good news on wage growth was tempered by a troubling reality. Census Bureau statistics released Tuesday showed that overall U.S. poverty was at its lowest level since 2008. But an alternative measure that includes the cost of living shows California has the highest poverty rate of any state. Nearly 8 million residents— 20.6 percent of the total population— are stuck in financial desperation. The biggest reason is the extreme cost of housing.

What did the state Legislature do about this crisis during its just-concluded session? It passed measures that make it easier to add housing units to properties with already-built homes, and it renewed its support for affordable housing programs that amount to lotteries benefiting a limited number of families. Yet a common-sense proposal by Gov.
Jerry Brown to increase housing stock and bring down the cost of homes and rent died in the Senate last month after winning Assembly approval in May. Brown proposed to remove local review of any residential project that complies with local zoning and sets aside some units as affordable. But in the Sacramento pecking order, the housing needs of the poor and the middle class weren’t deemed as important as the desires of influential environmentalists, who love laws letting them block local projects. Nor are the needs of the poor and the middle class as important as construction unions, which demanded that all projects built under Brown’s proposal pay union-level wages.
So expect your children to keep moving away.

Expect more homelessness and more emotional tales of professionals and even high school students relocating to far-away homes. This is California, the capital of poverty— and political callousness.

NAR Identifies Top 10 Markets in Dire Need of
More Single-family Housing Starts - San Diego is on the List

WASHINGTON (September 19, 2016) – Single-family home construction is currently lacking in 80 percent of measured metro areas despite steady job creation and the low activity is creating a housing shortage crisis that is curtailing affordability and threatening to hold back prospective buyers in many of the largest cities in the country, according to new research from the National Association of Realtors®.

NAR’s study reviewed new home construction relative to job gains over a three-year period (2013-2015) in 171 metropolitan statistical areas1 (MSAs) throughout the U.S. to determine the markets with the greatest shortage of single-family housing starts. The findings reveal that single-family construction is startlingly underperforming in most of the U.S., with markets in the West making up half of the top ten areas with the largest deficit of newly built homes.  

Lawrence Yun, NAR chief economist, says a large swath of the country continues to be plagued by inventory shortages exasperated by critically low homebuilding activity. “Inadequate single-family home construction since the Great Recession has had a detrimental impact on the housing market by accelerating price growth and making it very difficult for prospective buyers to find an affordable home – especially young adults,” he said. “Without the expected pick-up in building as job gains rose in recent years, new and existing inventory has shrunk, prices have shot up and affordability has eroded despite mortgage rates at or near historic lows.”

NAR analyzed employment growth in relation to single-family housing starts in the three-year period from 2012 through 2015. Historically, the average ratio for the annual change in total jobs to permits is 1.6 for single-family homes. The research found that 80 percent of measured markets had a ratio above 1.6, which indicates inadequate new construction in most of the country. The average ratio for areas examined was 3.4.
Using each metro area’s jobs-to-permits ratio, NAR then calculated the amount of permits needed in each metro area to balance the ratio back to its historical average of 1.6. The higher the number of permits required, the more severe the shortage was in each market.

The top 10 metro areas with the biggest need for more single-family housing starts to get back to the historical average ratio are:
•    New York (218,541 permits required)
•    Dallas (132,482 permits required)
•    San Francisco (127,412 permits required)
•    Miami (118,937 permits required)
•    Chicago (94,457 permits required)
•    Atlanta (93,627 permits required)
•    Seattle (73,135 permits required)
•    San Jose, California (69,042 permits required)
•    Denver (67,403 permits required)
•    San Diego (55,825 permits required)

According to Yun, most of the metro areas with the biggest need for increased construction have strong appetites for buying, home-price growth that outpaces incomes and common instances where homes sell very quickly. Their healthy job markets continue to attract an influx of potential homeowners, only fueling the need for more housing.

“Although a few small cities with high ratios did not make the national rank for absolute permit shortages, their supply shortages are still meaningful at the local level and could become a bigger issue if job gains hold steady and the current pace of construction remains at its nearly non-existent level,” adds Yun. 

Single-family housing starts are seen as adequate to local job growth (at a ratio of 1.6) in Pensacola, Florida; Huntsville, Alabama; Columbia, South Carolina; and Virginia Beach, Virginia.

“The limited number of listings in several markets means that many available homes are receiving multiple offers and going under contract rather quickly,” says NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida. “It’s important in this situation to remain patient and not get caught up offering more than your budget allows. Find a Realtor® with experience serving clients in your desired area and rely on them to deploy a negotiation strategy that ensures success while sticking within budget.”

Looking ahead, Yun says the good news is that the ratio in many areas slightly moved downward in 2015 compared to 2014 as builders started to respond accordingly to local supply shortages. However, it’ll likely be multiple years before inventory rebounds in many of the markets because homebuilders continue to face a plethora of hurdles, including permit delays, higher construction, regulatory and labor costs, difficulty finding skilled workers and the exhausting process many smaller builders go through to obtain financing.

Recent NAR survey data show an overwhelming consumer preference towards single-family homes, including among millennials, who are increasingly buying them in suburban areas,” concludes Yun. “A mix of new starter-homes for first-time buyers and larger homes for families looking to trade up is needed at this moment to ensure homeownership opportunities remain in reach to qualified prospective buyers at all ages and income levels.”


“The Beacon” is a regular publication of the North San Diego County Association of REALTORS® designed to keep you aware of important issues and to help members understand the power of the REALTOR® Voice and the value of the REALTOR® Advocacy program.  
North San Diego County
Association of REALTORS®