Guest Post by Dr. Housing Bubble
Last year there was a report highlighting that LA and Orange County ranked number one in being the bubbliest housing markets in the US. The report essentially found that people in the area lagged in income relative to housing values compared to folks in New York or San Francisco and most in SoCal basically funneled a large portion of their net income into housing. LA and OC are also expensive to rent in. An article caught my eye stating that that the regular Angelino needed to make $33 an hour just to rent a basic apartment without eating Purina dog chow every night. This post came across my social media feed and I dug through the comments. I was impressed by how many people posted something along the lines of “me and my roommates split the rent in X area for an apartment” and how many other comments from those out of the area were stunned by the basic cost of an apartment. Hey, SoCal is expensive. I think most reading here have the means to buy but rent or own their home outright. Short of you buying a home with a suitcase full of cold hard green cash, you either pay rent to a landlord or a mortgage payment to a bank. The 2.3 million adults living at home with parents are probably not fretting about housing prices or rents. The issue with SoCal is that people are treading on razor thin budgets just to get by even in rentals.
The rent is so…hey, at least the weather is awesome!
The article that caught my eye had some interesting data points:
“(SCPR) You need to earn at least $33 an hour — $68,640 a year — to be able to afford the average apartment in Los Angeles County, according to Matt Schwartz, president and chief executive of the California Housing Partnership, which advocates for affordable housing.”
I should remind you that most households in LA County rent. That is simply a fact based on Census household data. And most people don’t make $33 an hour so you get many people tagging up with roommates. So is this the hidden group that is suddenly going to push the market up? No. You have folks thinking their local hood is going to be the next London but that is not likely. You still have to live in a $700,000 crap shack. You think having a Chipotle and a Whole Foods is suddenly going to push your home into the $1 million range? The big demand for the last few years has come from wealthy investors and big foreign money largely from China. Yet this money was surgically targeted at certain areas. You can still find good deals in other LA cities and I have shared a few with readers. If you truly believe in the “all of SoCal will gentrify” meme you will be on the ground floor for the next real estate renaissance.
Continue reading “The typical LA renter needs to earn $33 an hour just to afford a basic apartment”
