The challenges of first time home buying in California Read more: San Diego Community News Group – The challenges of first time home buying in California

The challenges of first time home buying in California


home buyers

People, especially young people, are leaving California. It’s not that they don’t appreciate California’s year-round sunshine and temperate weather or its access to beaches, desert, redwood forests, and mountains. They haven’t lost interest in the state’s vibrant metropolitan areas filled with museums, theaters, major sporting venues, and countless restaurants and shops. Rather, it’s precisely what makes the state so great that also makes it challenging for young people in the first third of their careers to buy property.

Because the large majority of jobs, schools, and housing are in or close to the state’s major metropolitan hubs (the Bay Area, Los Angeles/Orange County, and San Diego), many in-state residents are faced with trying to buy homes in these expensive areas. This explains why “California ranked as the toughest state in the nation for first-time home buyers, who typically would be in the millennial age bracket of 18 to 34.”

That’s why it’s important to be aware of what the housing situation currently looks like in the major metropolitan areas of California, especially if you have plans to buy a home in the near or not-so-near future. In order to get a sense of what buying a home is like in one of California’s major cities, we honed in on our own place of residence: San Diego. We asked Lynn Reaser, Ph.D., Point Loma Nazarene University professor of economics and the chief economist at the Fermanian Business & Economic Institute, to share her insight and experience on purchasing a home in California’s fourth most expensive city.

Where do you see the housing marketing shifting in the next few years?

“The housing market will be challenging over the next few years for prospective buyers even as the economy slows. New homeowners should plan on spending up to 40 percent of their income on housing,” Reaser explained, which provides a helpful guide when thinking through what the monthly costs of a house might entail. “Low-income and high-income new housing will be built, but not much for the middle class. Prices could dip if there is a recession but are likely to trend higher over time.”

What are some of the reasons why it’s difficult to purchase a home in a place like San Diego?

“Government regulations and local resistance to more housing are the major reasons why not enough homes are being built and housing has become so expensive. Our research indicates that various regulations, including the time to receive final approval for construction, contribute an average of 40 percent of the cost of a new home. Current residents also protest more housing, fearing that it will cause more congestion,” Reaser said.

What is a good first step for someone preparing to purchase a home?

“Check your credit score and take steps to improve it, such as by ensuring that you make all credit card and other payments on time,” Reaser shared. “Increase your saving each month towards the down payment you will need. Start looking for smaller and older homes to buy. Then as you build equity, you will be able to move up to bigger and better homes over time.

Obviously, the need to start saving as early as possible for a house is a must. However, it’s also important to be aware of what the market looks like and, at least to some degree, start to familiarize yourself with it even if purchasing a home might be a couple of years away or more. While simply having enough money to actually buy a home is the most important factor, becoming knowledgeable about the process can ensure that you’re aware early of what is actually within your budget and what is actually a feasible purchase. Reaser advised to meet with your banker to understand and consider various financing options.

Although great weather and employment opportunities abound in the state, not being able to purchase a home and begin acquiring equity earlier in life (which can have major financial implications on future purchases or retirement) may not be worth the tradeoff. That’s why people are either leaving the state to try their luck at more affordable out-of-state housing markets, or simply moving back in with their parents in order to save money. One article mentions that, “While 30-year-olds were twice as likely to own a home as they were to live with their parents in 2003, we find that they were equally likely to own a home or live with their parents in 2013.” The obvious reason for this is because millennials are having to save much more money in order to make their first home purchase. And since California also does not boast of cheap rental rates, their best option is sometimes to pay no rent at all (or very little) by crashing in mom and dad’s guest room.

According to Zillow, the medium value of a home in San Diego is $632,700. This means that a 20 percent down payment of $126,540 would be required to purchase an average home. Of course, this medium value is greatly skewed because of the large number of extremely expensive houses in San Diego. However, even a house in the $300,000 range will command a roughly $60,000 down payment. And this doesn’t account for other leasing and service fees that are accrued during the home buying process. In other words, buying a home in California is a major expense and not something to be taken lightly without major foresight and planning.

This piece was originally published in PLNU’s The Viewpoint Online. Read the full story and more at