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Richard Rider

Were California real estate prices always so high? Not hardly! Not until the Democrats took over.

A common misconception is that California homes always been much more expensive than U.S. houses.  More expensive, yes — but until relatively recently not nearly as much as people think.

Until, that is, the CA state legislature became solidly Democrat, and the progressive policies started to take hold.  The legislature swung Democrat in the 1960′s.  Both houses have remained solidly Democrat since 1970 (with an odd 2 year State Assembly exception in the 1990′s).

Consider prices for average median value homes:

1960 —  California homes 27.0% higher than national median

2000 —  California homes 76.8% higher than national median

CA would be higher in 2000 but for the Golden State trend to move to condos — purchased at a considerably higher rate than condos in other states because of the scarcity of (and resulting high price for) CA detached homes.  Note:  This U.S. Census chart stops at year 2000.

To adjust for that house size disparity and to use current figures, look at the Zillow website:

Using the PER SQUARE FOOT cost for comparison, we find that for December 14, 2014, California prices per square foot for a sold median home were 114.2% higher than the national average.

But it gets worse.  The disparity is actually greater, considering that about 1/8 of the national average includes the CA homes — based on California having about 1/8 of the nation’s population.  Comparing with just the other 49 states (a more accurate comparison) would likely make the difference more like 154% — vs. the 1960 disparity of only 27.0%.

Of course, apologists would say that this growing disparity is caused by people flocking to California.  It was partly true when I moved here in 1969, but for every year since 1992 but two (1999 and 2000) , more people have left California for the other states than have moved here from the other states.

Our total population is still growing as a state — thanks to childbirths, longer life expectancy and international immigration — legal and illegal.  But the international immigrants put much less pressure on home prices than do migrants from other states.

Here’s a dramatic example of the pronounced reversal of domestic immigration patterns — comparing California between-state migration 1955-1960 with 1995-2000.

Net Migration Between California and Other States: 1955-1960 and 1995-2000

March 7, 2013

This graphic shows the 10 largest state-to-state migration flows in and out of California for the period 1955-1960 compared to that of 1995-2000. In the late 1950s, the largest flows involving California were all inflows to the state, generally from states in the Midwest or Northeast. This pattern contrasted with the flows in the late 1990s, where nearly all of the largest migration streams involving California represented out-migration to other states.

All told, from 1992 through 1 July, 2014, California has had a net domestic out-migration of over 3.7 million people. And I can’t emphasize this point strongly enough — that’s NET domestic migration — since 1991, 3.7 million MORE people left California than came to California from other states.

Most of those migration numbers can be found in this reference, Table 1. The most recent three years I had to dig out from various sources:

The bottom line is that our high housing prices are not some act of nature — and certainly not free market forces. It’s primarily the result of much land being removed from potential housing, high fees for building housing and regulations that both slow the process and drive up costs dramatically.  For instance:

Average 2012 CA impact fee for single-family residence was $31,100, 90% higher than next worst state. 265% higher than jurisdictions that levy such fees (many governments east of the Sierras do not). For apartments, fee averaged $18,800, 290% above average outside state. The fee is part of the purchase price, so buyer pays an annual property tax on the fee!

Our water problems are very real and getting worse, but that should be driving housing prices DOWN, if anything.  Imagine what our housing prices would be if those 3.7 million California residents hadn’t left, and we had plenty of reasonably priced water.  Not to mention average priced electricity!