When personal finance company WalletHub recently compared 1,300 American cities with populations between 25,000 and 100,000 based on affordability, economics, health, education, safety, and other indicators, Los Altos and Palo Alto ended up in the 95th percentile, just behind Livermore as the highest-ranked California small cities. See the full list here.
According to the U.S. Census, Americans are on the move, with 8.7% of the population changing their environment in 2022 alone. Why? There are a number of factors. The aspiration to move from renting to owning is part of everyone’s home dreams. Proximity to family is also a critical component, especially with the cost of childcare. And of course, housing affordability and the cost of living are also huge factors.
It’s interesting to note that young people and seniors are the most motivated demographics to move, and for many of the same reasons like new jobs and career opportunities. Check the numbers for additional insights.
If you’re a regular reader of our blog, you’ve probably heard of “housing elements” – plans that every California city need to update every eight years to set goals for housing development based on projected growth.
If that sounds super geeky, well, that’s because it is. But it doesn’t make it any less important, especially if you’re considering the affordability of homeownership in Silicon Valley.
For example, here’s a Mercury News article with a map of where the City of San José would like to build 77,500 new homes in the next ten years.
Jumping into the homebuying market for the first time? Before you go straight to the deep end of the pool to find your forever home, think about the pros and cons of a starter home.
Affordability
Housing prices remain high despite a dip in the market, and a starter home makes more sense (or cents) if you need to stay within a budget.
Expedience
You won’t need as much for a down payment on a starter home, so you can afford to buy earlier.
Investment
You don't necessarily have to sell your starter home once you're ready to move. You can rent it out to generate a passive stream of income.
Size matters
Starter homes are typically more modest than what you’d want from a forever home, and it may not have enough space for you right now either.
Interest rates
Mortgage rates are on the rise, so it might make more sense to wait on such a huge investment.
Buying to sell
Choosing a starter home means you'll eventually have to go through the hassle of buying another home and selling (or renting) this one.
In 2020, housing affordability for African American and Latinx households in California was half that of white households, illustrating a persistently wide homeownership gap and ongoing wealth disparities. See the charts below, and watch this video to learn more about how to close the gap.
