Generation
RENT
Marta Dinsmore, Realtor
Intero Real Estate Services
DinsmoreThePowerOfTwo.com
408.840.7420
DRE #01352339
Sean Dinsmore, Realtor
Intero Real Estate Services
DinsmoreThePowerOfTwo.com
408.840.7327
DRE #01966405
14
T
he lack of inventory has made it more
difficult to buy a home. That’s due in
part to people being less likely to sell as
a result of low equity. However, the bigger issue
is production, which is falling short of housing
needs. The California Association of Realtors
CEO, Joel Singer, said that the construction
industry’s recovery has been slow and has
missed building 165,000 new units per year
in the state.
Make no mistake about it — Californians
do want to own single-family homes. Real
estate continues to be considered a top
investment, with a 2015 Gallup poll finding
that most Americans consider real estate to be
a better investment than stocks, gold or savings
accounts. Millennials (ages 16 and 39) with
jobs began saving earlier than Gen X (ages 40
and 51) and
Boomers (ages
52 and 70); they
too seek to purchase
homes in the suburbs,
according to New
Geography, a publication
focused on demographic
research and analysis
in California.
However, there is
a concern that Gen Y,
who are between the
ages of 25 and 35 and
presently make-up the largest share of first-time
buyers, aren’t flocking to buy homes despite
near record-low interest rates. A mere 37.9
percent of Generation Rent have purchased
homes, according to 2012 data from consumer
research company CoreLogic. Compared to the
same age bracket in 1980, where nearly 52 per-
cent were buying homes, Gen Y is off to a dif-
ficult start despite wanting to be home owners.
“By 2025, California will have a middle
class of renters,” said Dr. John Husing, an
economist and vice president of Economics
& Politics, Inc., while Singer stressed the
organization’s concern over the increase in
renting throughout California due to low
housing inventory and unaffordable housing.
Countless articles have been written about
how Millennials are delaying milestone life
events, including getting married, having chil-
dren and buying a home. A 2014 report from
Demand Institute, a non-partisan and non-
profit think tank, fell in line with other Gen Y
surveys, finding that Generation Rent doesn’t
want to rent or live with their parents at all.
In fact, they’ve nearly been priced out of the
market, survey results showed. Furthermore,
nowhere else besides Hawaii and California
are median housing costs so high, according to
the National Association Of Realtors®. The
concern is a trend of middle-class Americans,
GILROY • MORGAN HILL • SAN MARTIN
JANUARY/FEBRUARY 2016
including would-be buyers in the Gen Y
bracket, being unable to afford housing.
Furthermore, the impact of the last
recession (2007- 2009) was tremendous on
Gen Y. A Pew Research survey from 2014
found that the recession, along with the
longer-term effects of globalization and
rapid technological change of the American
workforce, are responsible in part for Gen
Y’s slow start to forming their own house-
holds. Consider, that household income in
the U.S. today remains below its 1999 peak.
That makes it the longest period of wage
stagnation in modern times. For Millennials
who were just entering the workforce in
2007, these macro-economic trends were
devastating. A January report from the U.S.
Census Bureau shows that Millennials today
are earning $2,000 less than their parents did
when they were the same age. Perhaps the
most startling item in the Census report is
the fact that adults are more likely to have a
college degree, but also more likely to live
in poverty, due in part to the high cost
of living.
Buying a home may not be the wish of
every middle class Californian, however,
with the difficulty of buying a home, more
people are renting than ever before. This
boom has created an industry behemoth–a
grossly expensive renter market. Data from
the U.S. Department of Housing and Urban
Development indicates that California’s
average 2015 fair market rent is between
24 percent and 34 percent more than the
national average, depending on the unit
type. One recent study from the California
Housing Partnership suggests that the state’s
lowest-income households are spending two-
thirds of their income on renting properties,
leaving them with little money for other
basic necessities, including food, healthcare
and transportation. While buying is not
always the best solution, California residents
could save 32 percent per month by buying a
property in many urban and suburban areas,
according to C.A.R. data.
The state’s housing situation is solvable.
The non-partisan Legislative Analyst’s Office
called on California to build “as many as
100,000 additional units annually… to
seriously mitigate its problems with housing
affordability.” This would mean doubling
the housing supply annually. California has
long been seen as the land of opportunity
— and with that comes the ability to own
one’s home. C.A.R. analysts, as well as the
state’s LAO, have pointed to long-term solu-
tions that could help mitigate the state’s low
housing supply — thereby putting California
back on the map for reluctant renters looking
to grab a piece of the homeownership dream.
gmhtoday.com