11/18/2018

A generation plans an exodus from California

Our analysis? California is in danger of pricing itself out for moderate wage earners, and particularly families. Taxes, poor educational performance, congestion and signs of slowing growth are no doubt contributing factors. But the big enchilada in California — by far the largest source of distortion in living costs — is housing. Over 90 percent of the difference in costs between California’s coastal metropolises and the country derives from housing. Coastal California is affordable for roughly 15 percent of residents, down from 30 percent in 2000 and 30 percent in the interior, from nearly 60 percent in 2000. In the country as a whole, affordability hovers at roughly 60 percent.

High housing prices hurt most young, middle-class and aspiring, often minority, working-class families. California’s prices are particularly bloated, over 161 percent higher, in comparison with national averages, in the lower-end “starter home” category. In Los Angeles and the Bay Area, a monthly mortgage takes, on average, close to 40 percent of income, compared to 15 percent nationally.

Over time these factors — along with prospects of reduced immigration — will impact severely the state’s future. California is already seeing its population aged 6 to 17 decline. This reflects a continued drop in fertility in comparison to less regulated, and less costly, states such as Utah, Texas and Tennessee. These areas are generally those experiencing the biggest surge in millennial populations.

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