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Why Housing Remains a Challenge for Californians

Construction MaterialIncreased construction needed to ease the ongoing affordability and housing supply crisis in California is not happening any time soon. According to a report by the Los Angeles Times (LA Times), home builders are doing the exact opposite.

LA Times said that builders gained approval for 51,178 new homes in the Golden State in the first six months of 2019. This is nearly 20% lesser than the same period last year. Citing data from the Census Bureau, the report stated that while single-family permits dropped 18.5% in the region, multifamily permits fell 28.6%.

One of the key reasons for this fall in construction activity, the article stated, was because it was becoming "harder to make money building homes."

According to the California Association of Realtors' (C.A.R.'s) latest data on home affordability in the Golden State, The percentage of homebuyers who could afford to purchase a median-priced, existing single-family home in Q2 2019 dipped to 30% from 32% in Q1.

Housing affordability for condominiums and townhomes also slipped in Q1 2019 compared to the previous quarter, with 40% of households earning the minimum income to qualify for the purchase of a $475,000 median-priced condominium/townhome, down from 41% in the previous quarter.

Additionally, builders have cited challenges such as high costs of labor, land, materials, and government fees that are deterring them from constructing more homes in the region, which only adds to the high prices of homes for buyers. “You can’t wish yourself into high rents and make a project feasible,” Kevin Farrell, CEO at Century West Partners, told LA Times.

Citing data from John Burns Real Estate Consulting the LA Times report stated, "costs for labor and materials rose 7.2% in June in Northern California compared with a year earlier, while home prices were essentially flat. In Southern California, costs rose 2.1% while prices increased by 2%. In March, costs rose 4.1% while prices were flat."

About Author: Radhika Ojha

Radhika Ojha is an independent writer and editor. A former Online Editor and currently a reporter for MReport, she is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her master’s degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Houston, Texas.
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