According to the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.), there are so few homes for sale because homeowners who want to sell are caught in an affordability squeeze, also called an affordability crunch. In plain English, that means we are tapped out and if we had to buy the house we currently live in at today’s price we couldn’t do it. So it’s impossible to move, even to a house that costs the same.
For example, let’s say I bought a house for $400,000 that’s now worth $600,000 thanks to San Diego’s manic depressive real estate market. But I can’t afford a $600K house, even if I take every penny of equity out of my current house and use it for a large down payment. Why? Because expenses of sale and purchase will eat up almost 10% of my equity, plus the new house will automatically have $200 a month higher taxes. And that’s just to buy another house that costs the same as the one I live in now, what we call a lateral move.
But who makes only a lateral move? People usually want a better house in a better location. Of course that will end up costing even more than I pay now, so that’s not going to happen. The rapid rise in prices has me stuck in an affordability squeeze.
I wish I had a nickel for every time someone said “If I could find a better house in a better neighborhood for the same price as mine, I would move.” Well, so would I and so would everyone else I know. Actually, there is a way to do that, but not in the same market. You have to move to an area where homes are cheaper, perhaps further away from work or in a school district that isn’t as good. You have to give up something to gain something else, so most people decide not to move.
According to findings from C.A.R.’s “2015 Survey of California Homeowners,” about 2/3 of homeowners who would like to move are caught in the affordability squeeze. So they stay put and as a result, there aren’t many homes on the market.