Article from CIBA (California
Building Industry Association) re: why CA Home prices will continue to
go up.
1) Government population growth projections, both states have explosive
growth projections. See tables and quotes below. California's population
grew by 599,000 people in 2004 - it grew by even more in 2003. To verify
this visit the CA Dept of Finance census data. Click to verify The
Census Bureau projects California's population will reach nearly 50
million by 2025. Their previous estimate was too low by several million.
2) Construction of new homes is lower than the marketplace requires,
This quote is from the conclusion of the CA govt report published May
25th, 2000, entitled Raising The Roof: California Housing Development
Projections and Constraints, 1997-2020.“To meet the housing needs of
California's growing population, homebuilders and developers will have
to build an average of 220,000 housing units each year between now and
2020. Achieving this level of production will be difficult.” Click to
verify Go to Chapter 1 of the Report.
3) Changing weather (read Hurricanes in the Gulf states from Florida to
Texas) that have made California much more attractive. Do you get any
anxiety thinking about buying a home in New Orleans, Florida or Texas,
do you think others would feel the same anxiety?
Most (88 percent) of America's population growth between 2000 and 2030
will occur in the South and West, which would be home to the 10
fastest-growing states over the period. The share of the population
living in the South and West would increase from 58 percent in 2000 to
65 percent in 2030, while the share in the Northeast and Midwest would
decline from 42 percent to 35 percent
Population Division using U.S. census projections (March 2004).
4) The percentage of more affluent households is increasing. Look at the
tables below showing the relative percentage of different age and income
groups. It is clear that those groups that can best afford California
real estate are increasing as a percentage of the population.
5) California is one of the largest economies in the world. It remains a
magnet for those that dream or aspire to make it big. Click to verify.
6) American baby boomers will inherit over $41 trillion (that is
41,000,000 million dollars) in wealth by the year 2052. This is the
largest wealth transfer in history. Click here to verify. Published by
The National Committee on Planned Giving's The Journal of Gift Planning.
Vol. 7, no. 1, 1st Quarter 2003. pp. 11-15, 47-50.]
Baby boomers have a different value system and when they inherit their
millions they chose to move to Nevada or California. Think about it -
would you like to live with snow, rain, tornadoes, hurricanes or
overcast skies or with sunny clear skies and close ocean access?
Tables providing Insight into the nature of California's Population
Growth
The table below uses data from the CA Department of Finance shows the
projected population growth of California from 2000 to 2015.
Projected Population Growth by Region, 2000-2015
Tables providing Insight into the nature of California's Population Growth
The table below uses data from the CA Department of Finance shows the projected population growth of California from 2000 to 2015.
Projected Population Growth by Region, 2000-2015
Region
2000 Population
2015 Population
% Change
Bay Area
7,199,291
8,308,080
15.4%
Central Coast
1,874,448
2,370,148
26.4%
Central Valley/Sierra
1,149,033
1,591,237
38.5%
Inland Empire
3,298,337
4,859,820
47.3%
Los Angeles
8,838,861
10,978,502
11.6%
North Valley/Sierra
2,085,706
2,736,248
31.2%
Northern California
904,963
1,149,853
27.1%
Orange County
2,833,190
3,277,959
15.7%
San Diego
3,097,190
3,900,304
25.9%
South Valley/Sierra
2,372,133
3,198,748
34.9%
Total
34,653,395
42,370,899
22.3%
Source: California Department of Finance
So how does this impact on housing prices? Population growth is not the same over different age groups. The age groups with the most wealth and ability to buy homes are moving to California and those people starting in life are moving out. Those moving in have families and children. What is particularly interesting is that when you look at which age groups are growing the fastest you notice that it is the 45 to 64 year olds and the 65 to 74 year olds. These are key age groups for buying a home - they have had time to acquire wealth and savings. Contrast that with the 25 to 44 year olds - they are heading out of state in large numbers because they cannot get ahead in California - housing is too expensive for them. Look at the 18 to 24 year olds - college age people - they like the excellent California school system .
Strictly, from the perspective of encouraging the age groups that would out the maximum upward pressure on housing it be the very groups that are coming to California.
Projected Population Change by Age Group, 2000-2015
Age Group
Population Change
% Change
Under 5 Years
653,131
23.5%
5 to 17 Years
1,040,259
14.9%
18 to 24 Years
1,394,232
43.7%
25 to 44 Years
- 117,247
- 1.0%
45 to 64 Years
3,188,320
44.1%
65 to 74 Years
1,144,704
58.5%
75 to 84 Years
195,247
15.0%
85 Years and Over
218,858
48.7%
Total
7,717,504
22.3%
Source: California Department of Finance
When you look at the racial and ethnic composition of California by 2015 - only 10 years from now there will almost be as many Hispanics and Latinos as Whites. Hispanics generally earn less and have larger families. It is quite common for population density (the number of people in a home) to be higher in Hispanic owned homes since more than one couple can share in the mortgage payment. This will create a greater demand for starter homes. We have a Hispanic staff that is completely bilingual and fully functional in all aspects of selling to Hispanics.
Racial/Ethnic Composition of California: 1990, 2000, and 2015
Racial or Ethnic Group
1990
2000
2015
White (non-Hispanic)
57.2%
50.3%
42.4%
African American/Black (non Hispanic)
7.0%
6.7%
6.4%
Asian/Pacific Islander (non Hispanic)
9.2%
11.5%
13.7%
Native American/Alaskan Native (non-Hispanic)
0.6%
0.6%
0.6%
Hispanic/Latino
26.0%
30.8%
36.9%
Source: California Department of Finance
The percentage of households in California that earn $50,000 and more is 46%. These are the very income levels that can afford to become a California home owner.
All California Household Income, 2000 (1999 Income)
Number of
Total Households
Percent of
Total Households
$50,000 - $74,999
2,202,873
19 %
$75,000 - $99,999
1,326,569
11 %
$100,000 - $149,999
1,192,618
10 %
$150,000 - $199,999
385,248
3 %
$200,00 and above
409,551
3 %
Total
5,516,859
46 %
Source: California Department of Finance
San Jose, CA Household Income, 2000 (1999 Income)
The home of Silicon Valley has much greater affluence than the rest of California. The percentage of those earning over $100,000 is almost double the rest of California for all 3 categories across the board. This is just San Jose - it does not include the rest of the Bay Area. 68% earn over $50,000 and over 40% earn over $75,000.
