Land values in these states growing faster than in California

Across the country, the price of land occupied by single-family
homes ticked up from 2012 to 2017. But despite soaring housing
costs in California, the Golden State didn’t rise to the top of
the list.

According to a recent report from the Joint Center for Housing
Studies of Harvard University, both Nevada and Colorado actually
outpaced California when it comes to the increase in land values
per acre.

The finding is part of a broader look at the state of the
nation’s housing market, which revealed that while the number of
new households created each year has ticked back up to a healthy
1.2 million, housing construction remains weak, meaning apartments
and homes remain out of reach for many people, particularly in
expensive markets like the Bay Area.

Land prices spiked by 158 percent in Nevada and 96 percent in
Colorado, compared to 88 percent in California. But while the price
of land here may be rising more slowly than elsewhere, it remains
high overall compared to neighboring states.

Land in the Las Vegas-Henderson-Paradise metro area was just shy
of $140,000 per acre in 2012 and more than $360,000 by 2017, a
nearly 158 percent increase. The Reno area saw a similar 140
percent increase.

But in the San Jose-Sunnyvale-Santa Clara metro area, land
prices were already more than $2.6 million per acre in 2012 and
jumped to around $5.2 million, a roughly 98 percent uptick. Prices
in the San Francisco-Oakland-Hayward metro area rose from a little
more than $1.3 million to north of $3 million, a 124 percent
increase.

There’s “much more room to grow” in places like Nevada,
said Alex Hermann, a research analyst with the Harvard center.

One reason California isn’t keeping pace with Nevada and
Colorado is that the increase in land values in some less populous
counties have been more modest.  Prices in Humboldt County, for
instance, ticked up only around 9 percent between 2012 and 2017. In
Calaveras County, they went up just 23.5 percent.

According to the report, high land prices may help explain a
lack of middle-market housing. Rising land costs and labor
shortages, the report says, are prompting growing concern from
developers, who are reluctant to build homes affordable to
lower-income residents.

In San Jose and the surrounding area, Hermann pointed out, even
with relatively high income levels, the median sale price is more
than 10 times the median household income. Nationally, homes are
selling for closer to four times income levels.

“I think it’s just a confluence of events in this housing
tragedy,” said Bob Staedler, principal executive with Silicon
Valley Synergy, a land use and planning consultancy.

Wages for many local service workers and others, such as
teachers and nurses, he pointed out, haven’t kept pace with the
cost of housing.

“That’s really been a kind of silent killer as far as
affordability,” Staedler said.

As prices have risen, more families of even moderate- to
mid-income levels are burdened by housing costs. The burden is
especially intense in extremely expensive markets.
In the San Francisco-Oakland-Hayward metro area, nearly a quarter
of renter households are severely rent burdened, meaning they spend
more than half their income on housing.

“That has pretty profound effects,” Hermann said, pointing
out that when families spend so much on housing, they may not have
enough to cover other essentials like childcare and
transportation.

In nine metro areas — all of them in California, and including
San Jose and San Francisco — a median-income household could
afford less than 25 percent of homes sold in 2017. Nationally, a
median-income household could afford more than 60 percent of homes
sold that year.

And, the report notes, where the good economy and aging
millennial generation should fuel demand for starter homes, few
developers are building those houses and many young people are
continuing to live with their parents well into adulthood. Across
the country, more than 10 million adults between 25-34 lived with
parents or grandparents in 2017, more than twice the 4.8 million
who did so in 2000.

Related Articles

In California and elsewhere, immigrants are helping drive a growth
in new households and housing demand. While immigrants make up not
quite 14 percent of the population nationally, they accounted for
37 percent of household growth between 1990 and 2017.

In California, the report noted, even though about 30,000 more
households moved out each year between 2010-17 than moved in,
in-migration still averaged about 165,000 households each year. The
Golden State had the third-highest level of household growth in the
country, according to the report, but that could change because the
state also has an aging population and not enough new homes are
under construction.

“We’re not building enough to meet the demand there is,”
Hermann said, “much less any kind of latent demand.”

Source: FS – All – Real Estate News 1
Land values in these states growing faster than in California