California’s housing market is booming and shows no signs of slowing down. Instead, the supply remains limited while the demand continues to grow.
The question remains, will there be a burst bubble any time soon? Will prices fall? What about the tax reform bill that was signed and passed?
Influencing Factors of the 2018 California Housing Market
The tax reform bill that passed in late 2017 has the potential to have lasting ramifications as a result of its passing. Removal of deductions for state and local tax in a high housing cost place like California could actually push people to need to move to more affordable locations.
Interestingly enough, Nashville, Tennessee is becoming a prime location for people that are moving across state lines.
Some of the other issues that people are facing in California include required amounts of time in a purchased home. Before the tax reform, sellers needed to live in a property for two years, and now the requirement means they have to live on-site for at least five out of the previous eight years before they can sell it.
What to Expect in California
As a result of the tax reform, buyers can expect to find an increased shortage of inventory inside of California. It is expected that the deficit in supply is going to result in homes selling even faster in the California housing market over the rest of 2018.
Higher home prices mean higher mortgage payments along with an expected increase in interest rates over the course of 2018. Even though the California housing market anticipates higher prices, it doesn’t mean that a bubble is getting ready to burst.
In fact, a bubble bursting couldn’t be further from the truth because homebuyer debt is actually on the decline. This translates as an indicator that predicts price growth will go forward at a steady rate.
Simply put, California is a seller’s market even with the tax reform in place, and will remain favorable for those interested in purchasing single-family homes to be lived in.
For investment purposes, the tax reform presents some issues due to the living requirements, so investment properties may not be the way to go as of right now.
Three Places to Live in California
People are on the constant lookout for affordable housing in California because it is the third most expensive state in the entire country. The price point locks a lot of people out of being able to move to the Sunshine State, but there are plenty of other places in California that are more affordable.
Eureka used to be a prime location for those that followed the traffic to the Gold Rush. While that’s not the case anymore, the location is perfect for nature lovers that enjoy the coast, nearby national forests, and historic buildings.
Employment may be difficult to come by, but there are jobs available in specific industries like tourism and health care.
The California housing market here also averages around $238k for home buyers, which is considerably more affordable than many of its California counterparts.
SoCal is synonymous with beautiful beaches and Los Angeles, so Oxnard is often forgotten. Oxnard is located approximately an hour north of LA and has miles of Pacific coastline available to its residents.
For those that enjoy being active, kayaking, and surfing, Oxnard is a great place to live. Jobs can be found in various industries like oil, commercial fishing, agriculture, and others.
The median home value is around $345k, which is still less than much of the inventory in the California housing market.
The nearest metropolitan area is Sacramento. Chico is 90 miles north of there. With regularly fantastic weather and plenty of hiking opportunities nearby, this town makes a great location to consider when buying a home.
Chico State University is also located here, which makes for convenient college access. Agriculture also has the most significant industrial presence in the area.
Housing costs average around $263k currently, making living in California much closer to reality.
Housing Statistics in California
According to the California Department of Housing and Community Development, 39 million people live in 13 million households with the largest concentration of people in Southern California.
The state is racially diverse and is expected to continue to diversify over time. There is also a significant portion of the population that is considered vulnerable by cost of living standards.
Vulnerable populations include homeless people, senior citizens, disabled people, tribal communities, and farmworkers.
It is expected that the number of older Californians is growing quickly with projections expecting an increase by several million people, which means a need for an increase in affordable housing options.
Similar expectations exist for all vulnerable populations.