Why is California Real Estate So Expensive?

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Real Estate

The Root of the Problem

Nothing new right here. For a while there has been a lag with the supply of houses in California, especially the past 10 years! With over 2 million Californians living in a fire hazard zone, you might wonder why the prices of homes on average are much higher in California. Well, many homes in the past 3 years have been burned down due to wildfires , and with California already behind on pleasing the demand for homes, prices went up even more in the past 3 years. There is obviously more to it which I’ll get into but at the root of many price issues, supply and demand play a huge role. Another area where supply and demand play a role is with the amount of usable land. So much of California’s coastal land, if not unreasonably expensive to purchase or to build on, is not usable.

Fuel to the Fire

The views and weather of California contributes to the supply and demand issue. Not only is it more expensive to build homes with a gorgeous view on the coast or on rolling hills, but the coast goes up even more because of certain policies which increase the demand of those homes while the supply is consistently shy. California is also unique to other states in the sense that we have a little bit of every environment! Depending on the time of year and/or location in the state, you can start your day snowboarding, and if you’re up for it, end it surfing, or at one of the many beautiful wineries!

Because of some of the policies in California that make it impossible or more difficult to build in certain areas of the state, specifically the coast, the cost of land and the cost to build houses is more expensive. We also can’t forget the role current Californians play in the decisions of slowing or speeding up the process of building new homes. Since the benefits of new neighborhoods would go to the future residents, current homeowners might be more hesitant to allow a surge in home building. The value of their homes will certainly come down if there is a rise in supply.

There is some more to the cause of higher home prices, but at the heart of it all is an imbalance in supply and demand!

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New to the housing market? Don’t be scared, ask questions! Call Eric Taggesell, VP of Mortgage Lending at Guaranteed Rate Affinity for answers regarding the mortgage process! Office: 707-757-6195