In a recent poll, readers were asked their thoughts on how California’s gradually decreasing population will affect the housing market. A majority 43% of respondents believe the impact will be negative.

The remaining responses were mixed – 29% of respondents viewed the decline of population growth as positive. A close 27% argued population changes do not affect the housing market.

In terms of the bigger picture, population growth is crucial for the housing market. California’s population trends illustrate that counties with the greatest costs of living have consecutively decreasing growth rates. The counties of Los Angeles, Santa Clara, Orange, and San Diego have all experienced decreases in growth, dropping by:

  • 7% in Los Angeles;
  • 5% in Santa Clara;
  • 3% in Orange County; and
  • 2% in San Diego.

Population growth trends in the last decade showcase California as below the national average. While the national average grew 7.4% over the last decade, California’s grew 6.1%.

This decreasing rate will only continue, as long as the following factors continue:

  • inventory remains constrained; and
  • costs of housing rise above the pace of income

Single family residential (SFR) construction starts in California were 26% below one year earlier in the six-month phase ending March 2021, accelerating a downward trend that began in 2019.

Multi-family construction experienced a 9% decrease in 2020 from the prior year.

On the bright side, there are reliable solutions present. Counties with lower costs of living have experienced growth. The counties of Riverside, Sacramento, Fresno and San Bernardino have produced an increase in population growth through less restrictive zoning. In turn, this allows for more residential construction, particularly in areas that require it most (read: low- and mid-tier residential neighborhoods).

California’s population is headed down a steady rate of decline. A good portion of respondents agreed this has a negative impact on the housing market. Accordingly, less restrictive zoning and an increase in residential construction are definitive steps in the right direction.