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Factors That Affect California’s Housing Prices

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California is the dream state for thousands of Americans out there who have a burning desire to pick up all of their things and start a new life. The state is known for its beautiful climate, stunning ocean beaches, and wealth of job opportunities. However, the cost of housing is something that always needs to be considered when deciding to move somewhere new.

As it’s the most populous US state by a margin of nearly ten million inhabitants, finding housing that ticks all of your boxes can be a difficult task to fulfill. What’s in your price range might not be close enough to your place of work or local schools, just to name one common issue. Apartments in large cities are becoming increasingly unaffordable to the middle class, which is contributing to significant urban sprawl throughout the entire state. A lot goes into what makes California’s housing market so unique, which will be explained now.

source: ejournalz.com

New houses aren’t being built fast enough.

There’s a near constant influx of people coming to California to live both from within the United States and abroad. That’s not to say the housing industry has kept up with this constant pace, however. It’s estimated that for prices to remain stable, around 180,000 new houses need to be built every year, while right now, California scratches at just under half of that. Another problem is a lot of those houses that are being built aren’t being built along the coastal regions where a majority of the population is concentrated.

Red tape hinders construction.

Throughout the majority of the state, it can be difficult for developers to navigate all of the legal bureaucracy and actually get new homes built. For any new development to be greenlit, it has to first be vetted thoroughly by many different government agencies that sometimes have different criteria that make it difficult to satisfy everyone. On top of that, locals have a say in the review process, and many are apprehensive about any newcomers to their idyllic neighborhoods. Simply put, even socal home buyers with money to burn are having difficulty acquiring property because a property isn’t simple to build in California.

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Cost of building materials is high.

Even if you’re able to get your housing development greenlit by the government, it can be difficult to actually get through the building process without spending a significant amount of money that will later have to be factored into the final selling price. Over the past few years, the costs of labor and raw materials have been steadily increasing. This is on top of the fact that it has already been more expensive to build in California than in other parts of the country for some time now. Since there’s a lack of skilled construction workers, the ones that remain charge a high premium for their services. All of this ends up driving up the price of housing at the end of the day.


These three factors are the biggest driving forces behind California’s rising housing prices. When there aren’t enough houses to go around and building new ones is cost-prohibitive, the price of existing homes is going to jump up significantly. Things may change over time, but currently, the price of housing in the Golden State is in an upward trend.

source: facilitiesmagazine.com