Here we are six full years into a recovery and yet somehow, young Americans are simply not buying homes as expected. This pent up demand is simply not materializing for a variety of reasons. Even the Federal Reserve, the engine of low interest rates acknowledges that younger Americans are having a tougher time buying because of wickedly large student debt and lower incomes. Taco Tuesday baby boomer parents think they have figured something out about college but many went to school during a time when college was ridiculously cheap. Some think they can send their kids to community college and then expect them to transfer into insanely competitive colleges. Good luck with that. In many cases, community colleges are over enrolled and many will take extra long to get general education courses completed. In California, you have 2.3 million young adults living at home and many already completed college. This is a big deal and even the National Association of Realtors (NAR) can’t deny the data. Take a look at the change in age for recent buyers.
A record 34.5 percent of Millennials live at home with their parents in California. This rate is higher than the national rate of 30.3 percent which is already incredibly high. There is ample evidence suggesting that Millennials simply do not want the same things as their Taco Tuesday baby boomer parents. And many simply don’t want the McMansion aspiration since many are going to have small families. This is an interesting shift. Boomers are trying to off load larger crap shacks to an audience that is more interested in smaller more centrally accessible properties. In California, those young adults that aren’t living at home are likely living in a rental and paying close to half their income on housing. Good luck saving that 20 percent down payment on a $700,000 crap shack (or $1 million crap shack in the Bay Area). So why do so many young adults live at home if the recession ended in 2009, more than half-a-decade ago?
California has a severe housing affordability problem and much of it is brought on by its own laws and regulation. The state suffers from a deep and profound form of NIMBYism. While it is clear that there is a rental crisis and buying a home is out of reach for many younger families, the status quo continues to march on because of entrenched NIMBYism. It is hard for some to imagine California home prices tracking nationwide trends but they did for an entire generation between 1940 and 1980. Then, thanks to wild speculation, regulations, and the introduction of mania inducing mortgages, California started marching to a different beat. The tech market and Hollywood like marketing of the perpetual sun made this a destination of choice. Now typically when demand arises supply is there to meet the need but not so much in California. But those who got in early were too busy protecting their plot of land with local building regulations, zoning restrictions, and things like Prop 13 that basically rewarded those who “got here first†yet provide little economic benefit moving forward. It also creates a dangerous boom and bust system where things are fine as long as the stock market is rolling along. Let us look at some figures here.
You know it was only a matter of time that the Bay Area real estate madness was going to be captured in a new documentary. The documentary seeks to highlight the plight the middle class in California is having in affording housing. Forget about buying a home, many are struggling to pay the sky-high rents that plaster the Bay Area market. The tech sector is making the epic gentrification accelerate and with 24/7 media coverage, we are seeing it happen in real-time. The Bay Area is home to the $1.2 million crap shack that is basically the standard piece of junk property. It is interesting to see this story being told through documentary format and it is a counter to all the house-humping TV shows that are out there plastering cable. What is interesting is the documentary looks at how the middle class is getting squeezed right out of the market.
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