In Search of the American Dream

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Bay Area living is the dream of many residing in any of the four-seasons states. The glorification of California living is constant through television, movies and the Internet but living in the Bay Area holds realities that a four-seasons part of the country doesn’t realize. Real estate values are at the highest costs and lowest supply in history. Since the 2008 mortgage crisis, the cost of housing per square foot has doubled and in many metro markets has more than tripled. In comparison, the cost of health insurance benefits has risen sharply but the buying power of wages has been stagnant in all but the top 75th percentile of earners. Eighty percent of Bay Area households cannot afford homeownership.

Californians with locked in home values from 5 years ago or longer enjoy stabilized costs. What about the next generation and renters?Home affordability has declined to only 18% of Bay Area households down from 23% in the first quarter. This means that 82% cannot afford to lock in their housing costs while costs have been increasing at a multiplying pace. California Association of Realtors Affordability Survey in August of 2018, calculated an annual income of $219,380.00 needed for the $5,480.00 monthly payment on a $1.035 million home with 20% down and a mortgage of 4.7%.

San Francisco and San Mateo tied as the region’s least affordable counties. Only 14 % of households could afford a median-priced home down from 15% in the first quarter of this year.

Even with high paying tech jobs prevalent throughout the area almost any household that owns must have two working adults. It is not uncommon for working homeowners to spend three hours a day commuting to and from work. Leaving before dawn and returning after dark, limits the time many Bay Area homeowners can enjoy their home and increases stress related health concerns.

Most people in California would agree that the cost of living is most heavily impacted by housing expenses. Those anticipating retirement must also consider how to decrease their cost of living once they discontinue working. This dynamic is driving young people, renters and people who don’t earn high salaries out of California to find financial sanity in their lives. The beneficiaries are Boise ID, Reno and Las Vegas NV, and Salt Lake City, UT where jobs are plentiful, the economy is booming and housing costs are fractional or even half in price compared with California median home values and that is after over 7% housing cost growth this year in Washington State, Idaho, Nevada, Utah and Colorado. Boise, Idaho has experienced 85% of its growth from California and Californians have moved property values up 18% in just the last year.

Technology jobs surround Salt Lake City, Utah in what is now known as the Silicon Slopes. There are over 900 current open job listings in programing related jobs that pay twice or more than the cost of living. Utah has a desperate need for highly educated, skilled workers. Because there are few qualified applicants universities are holding six-month programing crash courses and seeing 100% of their graduates employed immediately afterward. The current amount of job openings in Utah has the CEO of one of the largest banks in the United States looking beyond Utah to find skilled employees. New homeowners in Utah can expect median home prices of $371,000.00, compared with Bay Area median home prices of $890,000.00.

With over 80% of Bay Area tech workers unable to afford a home in California we can expect supply to reach demand as more and more people exit California in search of the American Dream.

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