Are California’s rising home prices related to the state’s plummeting birth rate?

In California and across the nation, the birth rate has dropped more quickly in areas where home prices have increased the fastest. But are rising home values the cause of falling birth rates, or is this just a correlation?

Nationally, the birth rate for women 25-29 years old fell about 7% from 2010 to 2016, according to Zillow.

Here in California, from 2010 to 2016, the fertility rate for women aged 25-to-29 declined:

Zillow’s model suggests 19% of the decline in fertility can be explained by rising home values. Put another way, each 10% rise in home values correlates with a 1.5% drop in fertility across metros. Other reasons families are delaying having children, or else not having children altogether, include:

  • financial uncertainty;
  • the desire to get ahead in a career;
  • high childcare costs; and
  • personal reasons.

In California’s high-cost metros, these financial struggles are magnified, as is the declining birth rate.

The hidden costs of high home prices

The possibility of fewer children is just one of the many side-effects of California’s high housing costs.

Other effects include:

  • a reduced homeownership rate;
  • less money to spend on goods and services in the local economy;
  • less money available to put towards savings;
  • longer commute times;
  • over-crowding as renters are forced to take on roommates; and
  • the difficulty employers face attracting employees from other states, according to California’s Legislative Analyst’s Office.

The main reason our state has accumulated these high home values and housing costs is a lack of construction sufficient to meet demand.

Residential construction has lagged behind population growth for years, so it’s little surprise California’s young adult population is making up for the difference by delaying having children and lowering the birth rate.

More construction is needed to meet our growing housing demands and alleviate the problems caused by high housing costs.

The good news: legislation went into effect in 2018 to encourage more housing — specifically to help buyers and renters operating in the low- and mid-tier.

Expect to see construction starts grow in the coming years, which will dampen price increases and refresh the housing stock.

Related article:

Legislative steps toward more affordable housing