Far from the days when houses in every neighborhood in sunny Southern California were going for pennies on the dollar, affordable housing is becoming as rare as hen’s teeth. Pedro and Yadira Torres finally decided to start looking for a home of their own in February complete with a pre-approved VA mortgage. They thought finding the perfect affordable home would be easy since they already had all of their ducks in a row.
Imagine their surprise when they found out that not only was the supply of available houses was extremely limited, but also that competition for those that were available was stiffer than that for an opening in the passing lane on the 110. Worse yet, every time they would put an offer in on a house, someone with a bigger deposit would usurp them since VA loans are made with no down payment.
A Steep Housing Crunch
By any standards, the region’s housing crunch is ridiculously steep. According to a recently released report regarding housing affordability from the Associated Press, Los Angeles/Orange County and the Inland Empire consistently sit at the top of the list of regions where homeowner and renter budgets are stretched to the breaking point.
To add insult to injury, Los Angeles and Orange County have one of the lowest rates of home ownership in the country. At the same time, the area has the highest number of over-stressed homeowners and top the list of middle-aged renters. No matter how you look at it, the severe lack of housing options has forced the cost of homeownership and rental far out of the reach of most middle-class households, forcing many to flee the area in search of affordable housing.
Continuing on with the Torres’s story, we find that they had put in bids on at least seven homes in the area only to be outbid by those with significant down payments. After several months, they finally decided to extend their search outside of the region. One of the homes they had looked at was originally listed for $788,000, it finally sold to the highest bidder for $815,000. This is only the tip of the iceberg; many homes they looked at had as many as ten other people bidding to buy it.
The Great Recession
While the “Great Recession” pushed home values down significantly, it had the opposite effect on rental units whose demand soared and continues to do so today. Home prices dropped by as much as 10 percent from 2010 to 2014. During this same time frame, rental rates increased by 3 percent or more in the area.
What about new homes, aren’t there any being built? The answer to this is that yes a certain number of new homes, both single family, and multi-family housing units are being built. The problem here is that many builders are loath to make huge investments following major financial losses during the recession and far stricter lending practices by banks and other mortgage lenders.
Any time there is an increase in demand, there will always be an increase in cost. This region is expected to see steadily increasing prices that will continue to put a strain on middle-class homeowners resulting in more 2 and 3 income families just to keep a roof over their heads. This is not expected to change at any point in the near future.