Formal Research Paper: California Housing Crisis & Its Effects

Reginald Smith

ENC 4313 Research Writer

Instructor: Anne Fowler

10/28/2011

Formal Research Paper:  California Housing Crisis & Its Effects

In this research paper, I will argue California, a State with a population of 37.25 million people, 13.68 million housing units of which 58% is owned as of as of 2010 according to US Census Bureau (1) is having a serious housing crisis. The housing crisis involves three elements which the first is rapid economic deterioration & stagnation, loss of wealth, rising debt levels, and the chance of bankruptcy at the State level, the second element being a severe shortage of quality, availability, and affordable housing due to many barriers including stiff regulation, discrimination, barriers to entry, affordability,  etc. and the effects the housing crisis and economic fallout has on California current and future living conditions.. The purpose of this paper is to demonstrate California has only 2 options which is make a recovery where annual appreciation is modest, home prices rise to more than what consumers borrowed for them replenishing wealth, and is affordable enough so that price levels are not too excessive and can be sustain by current income levels where they don't crash down again due to low affordability, or risk massive default on home loans, banks losing huge amounts of money and going under, economy stagnating, and a possible need for a huge bailout or State bankruptcy due to loss of so much wealth. The methodology will be strong statistical and quantitative research drawn from various sources being typical the most recent regarding the data because housing market is very dynamic, changing, and not constant and will cover the entire State of California as an average of all and future predictions of such along with relevant data including current per capita income levels, unemployment rate, median house prices, foreclosure ratings, percent of buyers in negative equity, affordability rate, number of new housing being built, number of homes bought and sold, appreciation, average days to sale, and chance of recovery. My learning will be to learn both sides and the fate of rather or not California housing market recovers or does not and continues to decline.

Rapid economic deterioration & stagnation

The statewide median home price of single family homes was $297,060 in August 2011 which was 7% below $320,860 median for August 2010 and the sales cycle was 52.7 days compared to 45.5 a year earlier according to DS News by Carrie Bay (2). The per capita income of California State according Orange County Register (3) was $43,104 or the 12th highest in the nation as of 2010 and growth in state personal income was 3%. The current unemployment rate is was 11.9% in September 2011, added 11,800 non-farm jobs, a total of 15.9 million employed and has the second highest unemployment rate in the nation behind Nevada at 13.4% according to Bloomberg BusinessWeek (4) and according to the LTV group (5), California foreclosure's spiked 55% on August 2011 with 28,961 default notices. The state of California had 30% of all its mortgaged properties in negative equity according to RIS Media by Steve Cook (6).