Skip Descant

The Desert Sun

The housing market in the region and the rest of the state will continue to be influenced by trends among the two largest generations: baby-boomers and millennials.

In simplest terms, the boomers aren’t moving, and the millennials are – out of the state – driven in part by high home prices in California, said Leslie Appleton-Young, chief economist for the California Association of Realtors.

“I think the major trend that you’re going to see is millennials leaving California,” Appleton-Young told the California Desert Association of Realtors during an annual forecast on Thursday in Palm Desert. “Unlike 20 or 30 years ago, there’s actually a lot of cool places to live today where there are jobs. Coupled with being able to be more mobile.”

Millennials priced out of Palm Springs rent

And don't think millennials have no interest in home-ownership. They do, economists say.

“They haven’t been homeowners because they haven’t had jobs,” said Appleton-Young, pointing to what may be one of the most robust housing neighborhoods in Southern California: downtown L.A.

“It’s finally there. And in a few years, it’ll be even more there,” she said.

“When we talk to people that are buying downtown and ask them, ‘Why would you buy in downtown L.A?’ They talk about short commutes. They talk about being where the action is. They talk about Staples (Center) and L.A. Live. You know what they don’t talk about? Schools. It’s the kid-thing. This is the ‘delayed adulthood’ -- partly because ‘I had to. I didn’t get a job.’ And partly because the baby-boomers are the most co-dependent parents that have ever existed.”

Boomers, on the other hand, are staying in their homes, rather than shopping for a retirement home in, say, the Coachella Valley.

“For the first time, we have not just a housing affordability problem for young households that want to start to move up the ladder, but for repeat buyers,” she explained. “And I think that’s very important for the value here, because so many people do want to come up here and get in ‘quote-unquote, get into an active retirement.’

“And I think the issue is not that people don’t want to be here. Who would not want to be here? But it’s like, ‘I’m stuck where I am.’ And I think this is something that’s going to impact the market for quite a long time,” Appleton-Young said.

Desert home sales slipped in January, but prices stable

So what’s keeping the boomer generation where they are? For some, it’s a great mortgage. Remember refinancing?Many – a majority, according to CAR surveys – are worried about the ability of their children to purchase a home. Roughly 43 percent want to help their children purchase a home, another factor preventing boomers from becoming buyers.

Also affecting the California housing market is the increasing unaffordability of homes, driven in part by low inventory. In 1970, the difference between California’s median home prices and those nationally was $10,000.

“Today, it’s $255,000,” Appleton-Young said.

“So that is the California premium. It’s the sunshine tax. It’s ‘not in my backyard.’ It’s ‘I don’t want high-density development,’ " she explained.

“It’s using CEQA to stop every major development in the courts for five to 10 years,” Appleton-Young said, making a reference to the California Environmental Quality Act, which requires real estate developments to go through an in-depth environmental analysis as part of their public approval process. “So this isn’t just, ‘I want to live in good weather.’ It’s ‘We are not expanding our housing supply because we don’t want to.’ ”

Today, 39 percent of households in Riverside County are able to purchase a median-priced home, which in February was $334,440 for a single-family home. That’s lower than the national average, which is 58 percent, but better than California overall, which is only 30 percent. In a number of counties like those along the coast, 25 percent or less of households are able to afford a median-priced home.

Indio affordable apartments to be renovated, preserved

“I think our market’s good. I don’t think it’s great. It is constrained by affordability and lack of inventory,” said Appleton-Young. “And those are two speed bumps that I don’t see going away anytime soon.”

The outlook for 2016 shows a state and national economy chugging along in reasonably good shape, even if low oil prices and turbulence in Europe and Asia are likely to inject some volatility into the U.S. markets.

And the housing market this year is expected to be mostly unchanged from 2015, which means fairly flat sales and pricing growth, said Appleton-Young.

“We’ve got good job growth. We’ve got households forming,” she said. “But it’s not an ambitious forecast. I think we’re still seeing a market that will continue to be constrained by this affordability issue.