Housing prices in California

[MARIO]

Who can afford it?
Thomas Sowell


June 1, 2005


"Who can afford to buy a house in this place?" my wife asked, when I read her the average prices of homes in various northern California communities.

"We certainly can't," I said. Our home has more than doubled in value since we bought it 11 years ago. We couldn't live here if we had to pay today's prices. This is not unusual on the peninsula stretching from San Francisco to Silicon Valley.

Home prices can be very misleading in this area because many -- if not most -- of the people living here never paid those prices. These are the prices of current home sales. They are the prices that newcomers moving in have to pay.

That fact has a lot to do with skyrocketing home prices. The people who vote on the laws which severely restrict building, create costly bureaucratic delays, and impose arbitrary planning commission notions will not have to pay a dime toward the huge costs being imposed on anyone trying to build anything in the San Francisco Bay area. Newcomers get stuck with those costs.

The biggest of these costs is the cost of the land rather than the cost of the houses themselves. The average price of homes is a million dollars in some San Francisco Bay area communities where it would be hard to find a single house that anyone would call a mansion.

Nor are there many new homes being built in these communities. Old homes are simply being bid up in price, precisely because it is either impossible or ruinously expensive to build new homes.

Unlike other places, where people trying to sell their houses usually have an asking price that they bring down somewhat in the course of negotiations with a prospective buyer, in the San Francisco Bay area the asking price is usually bid up during the competition among people who want to buy.

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[dustdevil28]

I saw CNN recently list the states whose housing prices raised the most over the last couple of years. All of the top states were West coast with Nevada at number 1 followed by California.

When I lived in San Diego people talked about how much the prices had gone up in the 90's and how much money they would have made if they bought some POS property there back in the eighies.

It's kind of wierd to compare Nevada and California though and try to single out one factor that is causing the dramatic price jumps. In Nevada the prices mostly deal with the N.Western and S.Western part of the state. It seems like we've had a California run off for quite some time over there the sudden influx of people let me see a lot of the desert I played in leveled down to build dozens and dozens of new houses. Even when I go home today they are still expanding and building more houses for all the new people that continue to flood the state. In the 90's alone my home town's population tripled! Albiet just to 5000 .

In California I never rarely saw this anywhere. Whenever I got out side the city to other smaller towns they were always just little bunched township with no sign at all of building and expanding. As Mr. Sowell mentions some idiot lawmakers there think a friggin shrub is more important than builing a housing area and selling it to people at a affordable price.

Back to Nevada though. In the East the towns and the housing prices have remained much the same as they were about 25 years ago. My father owns a small three bedroom home on a 2.5 acre piece of land that he's struggled for years to rent for a small price of $300 a month. Man what I'd give to find that price in Reno. The local economy over there still relies heavily on how many people are employed at the local mines and other private businesses. In any case I imagine the flow of Californians will continue East and sooner of later these towns will see a influx in prices as well. Maybe My father's property will turn out to make a bundle