Foon Rhee puts his finger on the real Achilles Heel of the Golden State economy-high real estate prices. He draws on a Metrocosm.com cartography to highlight the extreme disparity in regional property values, with California ranked among the five most highly valued states, along with New York, Florida, Texas and Pennsylvania. These five account for “About 44 percent of the total property value of $33 trillion in the entire country.”
Although high property values are a boon to property owners, they also increase economic risks, hinder growth and exacerbate poverty.
According to Barron’s, California is home to six of the nation’s top 10 most overvalued housing markets in the nation: Sacramento (14.9 percent), Oakland (12.8), Anaheim (10.9), Riverside (10.6), San Francisco (7.7) and San Diego (6.6). According to Rhee “home construction isn’t a sustainable strategy for long-term prosperity” and “There are signs… that another bubble is starting to form” like the one that preceded “the housing crash that plunged us into the Great Recession.”
The Sacramento Bee’s Phillip Reese estimates that “about two-thirds of the [Sacramento] region’s households would be unable to afford the median-priced home at $320,000.”
The United Way’s study Struggling to Get By highlights the link between housing costs and poverty rates. Even though California’s official 17% poverty rate isn’t much higher than the nation’s 15.9% rate, if housing costs are factored in to calculate a “real cost measure” then “1 in 3 households in California, over 3.2 million families—including those with income well above the Federal Poverty Level—struggle every month to meet basic needs” with “most concentrated in the northern coastal region, the Central Valley, and in the southern metropolitan areas.” Regional rate by this measure range from 80% in inner-city Los Angeles to 9 percent in the affluent suburbs of Contra Costa County.
It’s chronic shortage of affordable housing continues to be the Golden State’s chief economic drag.