California Suburbs Expanding, But Supply is Still Tight

Population growth continues to swell in many centers across the state of California, and while the big cities have typically been the focus of major population growth, this trend is now expanding to surrounding suburbs.

Thanks largely in part to a shortage of inventory, buyers are looking to places where they can snag a home at a decent price, and the suburbs are a viable option – sometimes an only option for many.

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The population in California grew just under 1% since the same time last year, and now sits at 39.3 million residents. But despite the typical appeal of big city life, more affordable suburb living is apparently attracting more and more residents.

In particular, suburbs outside of the San Francisco and Los Angeles areas grew especially quickly in 2015. The fastest population growth went to suburban areas in San Joaquin County, west of the San Francisco Bay area, which grew by 1.3% to 733,000 residents. More and more people are flocking to this area to get away from the exploding housing prices that San Francisco has been experiencing over the recent past, while still taking advantage of a reasonable commute into the city.

Following closely behind San Joaquin County are Yolo, Riverside and Santa Clara counties. As far as suburban cities over 30,000 people are concerned, Porterville, Eastvale, Lake Forest, Beaumont, Santa Clarita and Lake Elsinore grew the fastest, which are located in this Inland Empire and Orange County area.

In fact, the majority of the 482 cities across the Golden State experienced population growth in 2015, helping California obtain the title of 8th-fastest growing state in the country.

With 450,000 new jobs added last year in both city and suburban centers, California’s economy is a robust one, helping to contribute to migration within the state. But finding an affordable place to buy in big cities is a challenging feat, leading to migration to surrounding suburban areas.

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Affordable housing inventory in the state is simply not keeping pace with its population growth. With stringent regulations and sky-high expenses that new home builders are faced with, new housing development continues to be an issue.

But such new developments is exactly what’s needed to deal with the current inventory and affordability issues that are plaguing the state. And while residents are looking to set up shop in suburban areas where housing is more affordable, inventory is still tight.   

Roughly 13% of the US population lives in California, yet the state only accounts for 8% of all national building permits. California’s housing stock would have to expand between 6% and 7.5% – or 800,000 to 1 million additional residential homes. In Los Angeles County, another 180,000 to 210,000 units, would have to be built, and in the San Francisco Bay Area, an additional 170,000 units would need to be constructed.

It’s a vicious cycle: it’s expensive for developers to build, increasing the final sale price of new residential units. Meanwhile, such shortage of new home builds is contributing to inventory shortage, further contributing to sky-high prices and a dire housing affordability issue in the state.

Residents are taking to suburban areas, where housing availability and affordability are better, but not necessarily where it should be.