Many of us can’t seem to find enough ways to explain how wildly expensive California housing is.
Look at what my trusty spreadsheet found when it compared Zillow’s March reports on recent home values and monthly rents for 50 large metropolitan areas, plus a national benchmark. We’ll think about typical California costs as the average of expenses from the six California metros in the data.
A simple comparison shows California’s median home value is $828,700, compared with $365,500 nationally – that’s 127% higher.
Looking at Golden State metros, San Jose was $1.61 million – No. 1 among the 50. Next came San Francisco at $1.14 million (No. 2), Los Angeles-Orange County at $962,900 (No. 3), San Diego County at $939,100 (No. 4), the Inland Empire at $584,000 (No. 8), and Sacramento at $577,2003 (No. 10).
Next, ponder the alternative: renting.
California tenants typically pay $2,759 per month, compared with $1,910 nationally. Relatively speaking, that’s a “bargain” at just 44% more.
By metro, San Jose rent was $3,470 (No. 1 among the 50), San Francisco at $3,161 (No. 3), L.A.-Orange County at $2,895 (No. 5), San Diego County at $2,890 (No. 6), Inland Empire at $2,493 (No. 8) and Sacramento at $2,225 (No. 10).
Finally, ponder an odd yardstick from the spreadsheet that melds these two housing cost metrics.
Contemplate local median home values – the overall price a typical buyer might pay – in terms of how many years of what a monthly rental costs.
Now both home values and rents are tied to local incomes. But thanks to how the financing used in purchases can amplify incomes, the ratio of values to rents varies wildly across the nation.
This math shows that the price a California homebuyer might have paid in March was equal to 27 years of their metro’s common rent.
However, the typical American house hunter faces a purchase-price-to-rental ratio of only 16 years.
So, according to this metric, California homes cost roughly three-quarters more than the national burden.
By metro, San Jose homes costing 39 years of rent were, again, the costliest among the 50 metros. San Francisco’s 30 was No. 2.
Then came L.A.-Orange County at 28 years (No. 5), San Diego County at 27 (No. 6), then Sacramento at 22 (No. 11), and the Inland Empire at 20 (No. 18).
This ratio is just another number that helps explain why California’s 55% homeownership is third-lowest in the nation.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
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