Here is a chart from MetroSight that compares housing tenure in California in 2000 and then between 2015-2019:
Two things you might notice immediately are that the number of renter-occupied households has generally increased and that the number of owner-occupied households without a mortgage (i.e. they own their home free and clear) has also increased for every age category except for those 65 or older.
MetroSight uses this data to argue that a new “wealth-related phenomenon is emerging” in California. Instead of the housing market being largely driven by income (that is, I make this much per year and I can afford this much house), it is being driven by accumulated wealth.
The possible explanations for this are as follows:
- The share of renter-occupied households is increasing because people increasingly can’t afford to buy
- The share of owner-occupied houses with a mortgage is decreasing because less people can afford to buy given California’s price-to-income ratios
- The share of owner-occupied houses without a mortgage is increasing because people are increasingly inheriting homes or getting gifted cash from their families
Consider that the share of owner-occupied houses without a mortgage even increased for the 18-24 age category. Unless you’re the next Zuckerberg (who was a billionaire at age 23), this is pretty challenging to do without some kind of assistance, especially in a place like California.
This outcome also provides a possible explanation for why the over 65 age category is the only segment that has seen a reduction in free and clear ownership. It is because they are transferring their wealth to the next generation so that they too can obtain homeownership.