Blood is thicker than jobs, climate and quality of life when it comes to moving decisions. Family is the most important factor when choosing where to live for many Californians, especially those with lower incomes and those who are retirement aged, according to Zillow.
Retirees have a much higher desire to be near family than young adults. For consideration, 26% of low-income young adults aged 18-34 choose to live near family, compared to 38% of low-income retirees aged 65 and older. The percentage declines for those with higher incomes, but the trend is still the same.
For more evidence: of all the (former) Californians who moved out of state in 2016, 24% cited family as the main reason for moving. This was followed by 19% moving out of California to retire, according to a United Van Lines survey.
Another contributing factor: lower-income individuals give more priority to living closer to family than higher-income residents. 32% of those in the bottom fifth of income earners said proximity to income completely decides where they live. In contrast, only 22% in the top income quintile base their moving decisions completely on family.
Of each metro area’s low-income residents in California’s major metros:
- in San Francisco, 45% said family proximity completely impacts where they live;
- in San Diego, 36% said family proximity completely impacts where they live;
- in San Jose, 30% said family proximity completely impacts where they live; and
- in Los Angeles, 20% said family proximity completely impacts where they live.
Dependence on family
These two factors — age and income — show us residents rely on family to help meet needs, including financial help and elder care. This is completely sensible, but can be problematic for real estate agents.
But the real problem for real estate professionals occurs when an increasing number of residents become dependent on family and end up moving less. This stifles inventory and drags down home sales volume.
California residents find it difficult to scrape together enough money to make ends meet in most major metros. In places like Los Angeles and San Francisco, the average renter spends 50% of their paycheck on housing costs. Forget saving for a down payment, many of these renters rely on family to pay for basic living expenses.
This high cost of living is partly to blame for California’s consistently low homeownership rate, which averaged just 53.8% in mid-2017. Compare this to the national average of 63.7%.
How to increase California’s homeownership rate and produce more home sales? It starts with more residential construction, preferably concentrated near the state’s centers of employment.
Multi-family construction reports showed a 4% decrease in 2016 from 2015 and single family residential (SFR) construction turned in a meager 12% increase. However, vacancy rates are at historic lows in 2017, meaning construction will need to rise considerably, and soon.
Expect demand for more housing spurred from young adult housing formations and retiring Baby Boomers to propel the next peak in construction, occurring around 2020. The years 2019-2021 will be years of high sales volume and prices for California real estate agents. Until then, slow sales volume in 2017 will likely see home prices stall by year’s end.