Monday, December 13, 2004

Housing boom helps and hurts

Fresno Bee


There is no more accurate reflection of California's complex socioeconomic matrix than the good news-bad news story of housing the state's 36 million-and-still-growing population.

With 500,000-plus new Californians each year, the good news, at least for some, is that we're currently building the 200,000-plus units of housing needed to keep pace. But there's a shortage for families in the lower economic strata and the new housing tracts are consuming thousands of acres of open space, which is bad news to environmentalists, even though today's building lots are tiny by historic standards. It's not uncommon for six two-story houses to be packed onto an acre of ground, but critics say that even denser development is needed to slow sprawl and support mass transit.

Denser development, even condominiums, however, runs counter to the prevailing desire among Californians — irrational in the minds of urban planners, but strong nonetheless — to own single-family homes surrounded by dirt they can call their own.

That desire may also defy economic reality. Despite the burst of construction activity, and blessedly low interest rates, home ownership is becoming a more elusive dream in California. We have the second lowest level of home ownership of any state and dramatic price inflation — the current median price approaches $500,000 — means that ever-fewer Californians can afford to buy. The California Association of Realtors estimates that just 19% of California families have the $108,000 annual incomes needed to buy the median-priced home, down from a 24% qualification rate a year earlier.

A recent statewide survey by the Public Policy Institute of California confirms that home ownership is a deepening social dividing line. While strong majorities of white and Asian-American families are homeowners, most Latinos and blacks are renters, and that 24% of those polled said they are being forced to consider moving out of California to realize their ownership dreams. Home value inflation is certainly bad news to would-be buyers, but it's very good news to those already holding deeds, or at least mortgages. Indeed, while 49% of Californians in the PPIC survey characterized the run-up of home prices as a bad thing, 41% said it was a good thing.

Those owning homes are seeing an unprecedented expansion of their personal wealth, at least on paper, and as their equity numbers mount, homeowners increase spending on consumer goods and services, which buoys the overall economy. Housing itself — construction, home improvement, appliances, furniture, etc. — has become an important economic component, as the crowds packing Home Depot and other housing-centered retail businesses attest. We Californians are borrowing and spending many billions of dollars to put and maintain roofs over our heads and it percolates throughout the economy.

Government is a very important player in the housing story. Where, when and how much housing is built are largely governed by political decisions, including the Federal Reserve Board's decrees on interest rates, local governments' land use policies and the state's enforcement of housing construction goals.

1 Comments:

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