Buying a home in Southern California can be a daunting and competitive process, according to first-time home shopper Imelda Pastrana. Despite having two incomes, savings, and minimal debt, Pastrana and her husband still find it difficult to afford an entry-level house. Their recent bid for a condo in Anaheim was met with fierce competition, as 19 other offers were made for the same property. Pastrana acknowledges that many of the homes they come across online are simply out of their reach. She feels pressured to act quickly on placing an offer due to the high demand in the market.
Traditionally, individuals would start their homeownership journey with a starter home – a small two- or three-bedroom house, a townhome, or a condo. As they gain equity, advance in their careers, and start families, they would move to larger homes in the suburbs with better schools. However, over the past decade, bidding wars and skyrocketing home prices have made entry-level homes unattainable for all but well-paid professionals or young adults receiving financial help from their families. According to a study by Redfin, the median price for starter homes in Southern California and the Bay Area has doubled or even tripled since 2012. To afford an entry-level home, potential buyers need a minimum annual income ranging from $160,000 to $245,000. Even in the more affordable housing market of the Inland Empire, a six-figure income is required to purchase a starter home.
Redfin defines starter homes as the lowest 35% of home sales, excluding the cheapest 5% that may not meet the standards of first-time buyers. The study reveals that median prices for starter homes have risen significantly in various regions. For example, in Riverside and San Bernardino counties, prices have increased by 264% to $400,000. In Orange County, prices have risen by 188% to $700,000, and in Los Angeles County, prices have increased by 171% to $583,000. These price increases are outpacing income growth, making it increasingly challenging for first-time homebuyers to enter the market.
Real estate agents in the area acknowledge the difficulties faced by first-time homebuyers. Joseph Huelskamp, an agent with EXP Realty, emphasizes the limited availability of affordable homes, stating that inventory in the affordable price range is extremely low. Ruola Fawaz, a real estate agent with Surterre, highlights the need for young adults to receive financial assistance from their parents or relatives to afford an entry-level home. She expresses concern over the rising prices and the fact that many first-time buyers are purchasing extremely expensive homes.
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