The median household income of California households took a negative 2.2 percent dip between 2015 and 2016 from the first quarter of 2014, the University of California’s Institute for Research on Labor and Employment reported recently. The drop came after five consecutive quarters of an increase in median household income, which means income fell faster than wealth, or net worth.
That has been reflected in home prices, which are down slightly nationally from their 2016 peak. By June, the national median price for a new home was down $6,711 from the year earlier, according to the U.S. Census Bureau. But California’s median home price, at $487,000, was up $37,700 year over year, though California’s economy is well diversified and many counties had modest year-over-year declines.
Nevertheless, the downward trend in income suggests a shift in the market for rental housing, at least if state and local rents remain high. According to the California Apartment Association, California households are on average paying more than 24 percent of their income on housing. A June National Low Income Housing Coalition report found the average rental market rents in California at $1,224 a month for a one-bedroom apartment, up from $1,166 a year earlier.
In San Francisco, which is recovering from a dramatic tech boom that created a huge demand for housing, rents rose about 9 percent year over year in July.
The greater New York area, which has many young, highly educated workers, has experienced an unusually large “jobless recovery,” meaning even strong job growth has not boosted home ownership. In some counties, home ownership is in decline even as home prices rise. In some markets, particularly in New York City, home ownership is still robust.
But in California, where the migration of young, educated workers has long served as a buffer against a weak or stagnant housing market, a shift in income reflects a decline in home ownership. And rental rates are rising while homeownership rates are dropping, and the disparity grows as California’s stock of newly built homes is relatively meager and its young population grows. With incomes down, and the cost of renting rising faster than income, renters, whether renters in California or around the country, will be squeezed.
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