California home ownership articles

Millions of Californians at risk of foreclosure

It is time to accept that home ownership is not a realistic goal for many people and to curtail the enormous government programs fueling this ambition. A February Pew survey reported that nine out of 10 California homeowners viewed their homes as a "comfort" in their lives. But for millions of Americans at risk of foreclosure, the home has become something else altogether: the source of panic and despair. Over a million homes were lost to foreclosure nationwide in 2008, as homeowners struggled to meet payments. The number of foreclosures reached an all-time record last month-when owners of one in every 355 houses in the country received default or auction notices or were seized by creditors. California is at the top of the list for all US States. New tools, including the securitization of mortgages and subprime lending, made it possible for more Americans than ever to live the dream or to gamble that someone else would pay them more to make their own dream come true. Anyone could be an investor, anyone could get rich. The notion of home-as-haven, already weak, grew even more and more removed from the notion of home-as-jackpot. Home should be a place to build a household and a life, a respite from the heartless world, not a pot of gold. -Thomas J. Sugrue is Kahn professor of history and sociology at the University of Pennsylvania. He is writing a history of real estate in modern America.

California Home Ownership Rates Fall

The rate of California homeownership is forecast to keep tumbling in the next decade to lows not seen since the 1980s; a trend that could redefine a key element of the American dream even after the housing market recovers. The percentage of households that own homes hit a peak of almost 70% in 2004 and 2005. By the second quarter of this year, that slipped to 67.4%, according to the Census Bureau. Now, a University of Utah analysis projects it'll drop to about 63.5% by 2020 - the lowest since 1985. It will fall steadily by about half a point per year," says Arthur C. Nelson, director of the university's Metropolitan Research Center. "We'll have far more renters in the future". About 57% of the 30.3 million housing units added from 2005 to 2020 will be rentals, Nelson says. "We're returning more to what was normal in the 1960s," says Dowell Myers, housing demographer at the University of Southern California. "People didn't buy homes then as an investment. They bought them to raise families." California home owners are seeing the same trends as the US in general, with higher-than-average ownership difficulties.

Renting Becoming More Popular for California

Renting also may be more appealing because: Rental households are smaller. The youngest of 79 million Baby Boomers will turn 56 by 2020 and many will be empty nesters who favor small homes. The 20-something millennial generation is at a peak age for renting. "What we used to think of as the typical American family - married couple with children - is really not typical anymore," says Mark Obrinsky, chief economist for the National Multi Housing Council in Washington, D.C. It's tougher to buy. The California subprime mortgage crisis is tightening credit availability. Some are new to the USA. Many recent immigrants rent. Some want to save energy. From tax credits to mass transit, going green is reshaping growth. California homeownership is not inherently good or bad, Obrinsky says. "Let's give people the best set of housing choices. They want to be a renter, let them be a renter. If they want to be an owner and they can afford to be, let them be an owner."

Is it a good time to be a California Home Owner?

For all the doom and gloom about the California housing market, it still generally pays to own a home. That might be a tough case to make right now to the 16 million homeowners who owe more on their mortgage than their house is worth. But history suggests the American Dream is a pretty safe bet. California homes have appreciated by an average of 4 percent a year since World War II. They act as hedges against inflation and bestow significant tax benefits. California real estate is a leveraged investment; a 10 percent down payment produces a 1,000 percent return if the price of a home merely doubles. Plus there are intangibles: Owning a home provides a sense of independence, security and community. And you get to live in your investment. You can't do that with a stock. Of course, historical trends don't pay your California mortgage. People who wade in and out of the housing market too often, or who buy at the wrong time or price and need to sell quickly, can get burned. But if you own your home for a decade or more, price appreciation usually overcomes even bad slumps. (Source - AP)

Buying vs. Renting a California Home

Buy vs Rent…but how can you tell in the short run whether it's better to buy or rent a California home? There's a way to gauge how expensive homes are - the price-to-rent ratio. The ratio is determined by dividing the price of a home by the annual rent that could be earned from it. Since 1986, the California home ratio has averaged 9. Anything above that suggests it may be better to rent, depending on your area. After soaring to 15 at the end of 2005 - above 20 in some areas - the nationwide ratio has dropped back to 10, according to Economy.com data, making California ownership far more attractive. Prospective buyers can do the price-to-rent calculation themselves. For example, if you can purchase a home for $180,000 but can rent a similar one for $18,000 a year ($1,500 a month), your price-to-rent ratio would be 10, making the buying price reasonable and close to average. And you would have the tax benefits and equity that you don't get with renting. It would be nice to say California home prices rise reliably and steadily - and a few years ago they seemed to. But that "sure thing" is no longer. Short-term prospects are cloudy. Many economists expect home prices to keep falling through 2010 as mounting unemployment, California foreclosures and a glut of unsold homes all weigh on the housing market. Robert Shiller, a Yale University economist and co-inventor of the Case-Shiller index, says he expects California home prices to be roughly flat for five years. Yet housing has proved a good investment if you stick with it. And with prices already having fallen so far, buying now could make it an even better one. (Source - AP)