CNBC has published an interesting report on the large number of Californians that are leaving the state due to crippling housing costs:
It’s not hard to see why Californians are leaving. The below chart plots the Median Multiple (i.e. median house price vs median household income) across the major Californian metropolitan areas against the New York metropolitan area, as well as against the various major Texan, Nevada, and Arizona metropolitan areas, and the national average:
As you can see, California – especially the cities near the coast – is way out in front on housing costs.
Apart from being a desirable place to live due to its pleasant climate and proximity to the coast, California has operated strict growth management (“smart growth”) policies since the 1970s, whereas Los Angeles and San Francisco are also hemmed in to a degree by the ocean, mountains and in the case of Los Angeles / San Diego the Mexican border to the south. This has cause housing supply to be unresponsive to changes in demand, with frequent boom and bust cycles and unaffordable housing the result.
As long as California continues to restrict land/housing supply, property prices will remain prohibitively expensive (and volatile), and residents will continue to flee the state.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also Chief Economist and co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
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