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California's housing supply still inadequate

October 24th, 2011 7:37 AM by Lehel S.

Housing prices in California have declined significantly, but the state's inventory of homes is still failing to meet the needs of its population.

That's the conclusion of a new report from the state Department of Housing and Community Development.

"The State of Housing in California 2011: Supply and Affordability Problems Remain" reveals that California lacks an adequate supply of housing in the right locations that is affordable to families, California's work force and its special-needs populations.

The state was already grappling with decades of undersupply before the most recent foreclosure crisis and economic downturn, the report said, ultimately fueling a significant price escalation and an affordability crisis.

Meanwhile, the state's population continued to swell. Despite the recession of the early 1990s and the more recent downturn, California has continued to add about 340,000 people a year.

In the last decade, new residential construction has averaged less than 150,000 permits a year, falling well below the annual average needed to meet the state's housing needs.

"We are dramatically undersupplied for housing," said Steve Johnson, who oversees the Southern California office of Metrostudy, a real estate information and consulting firm. "I think housing has already been stretched. Appreciation in the rental markets is up and rental occupancy rates are high. It's at about 94 percent in the Inland Empire."

Overcrowding also remains an issue, according to the report.

The 2000 Census showed that California had 1.7 million overcrowded households. Ten years later, the 2010 Census showed no significant sign of improvement.

Johnson doesn't dispute that.

"It's a tough time out there," he said. "Many people have doubled up or moved in with friends or family. We're on the road quite bit on the weekends and you see a lot of cars parked in and around neighborhood houses. I saw about eight cars parked at one home. Everyone likes to think that this is a socioeconomic thing and that it just happens with poor people. But I've seen the same thing happening in gated communities."

The housing report also notes that the decline in housing production has had a severe impact on California's economy.

From 2005 to 2009, the decline in annual building permits accounted for much of the 60 percent reduction in construction spending over that span, dropping from nearly $100 billion in 2005 to less than $40 billion in 2009.

Four major demographic groups will be driving the housing market over the next decade, the report said. They include:

Older baby boomers, who will live longer than previous generations and constitute a senior population unprecedented in size

Younger baby boomers, many of whom may be unable to sell their current suburban homes to move to new jobs

Generation Y, which will be renting housing far longer than their predecessors in past generations, partly because of high college debt

Immigrants and their children, many of whom will want to move to the suburbs but may find housing there too expensive, even after the current drop in prices

Posted in:General
Posted by Lehel S. on October 24th, 2011 7:37 AM

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