If you are lucky enough to be considering a move to California, you may be a bit shocked when you start looking at the housing prices.
California is one of the most expensive places in the country to purchase a home.
For the price you would pay for a 5,000-square-foot home in some parts of Ohio, you might only get a two-bedroom house in California.
If you have always wondered where these high prices come from and what you can do about them, we have the answers for you.
Here are ten reasons California housing is so expensive.
Why Is California Housing So Expensive? (Top 10 Reasons)
1. Overall Cost of Living
If you haven’t already noticed, it is not just the housing costs that are expensive in California.
The overall cost of living in the state is incredibly high.
You will find that, when you are moving to California from another state, you will have to adjust your mindset on everything related to price.
Taxes will likely be more, food will be more, and private schools will be more.
We will get into some other reasons that will cause this increase in the cost of living, but quite a bit of it is just because this is accepted practice in California.
The state is known for high costs, and people are generally so accustomed to paying them, they may not even know the difference.
When you compare the cost of living in California to almost any other state, you will see that it is considerably higher, and it continues to trend higher.
If the cost of living is higher, you can imagine that a major factor related to this is the cost of housing.
Whether you are purchasing a new home or renting a property for a few years, be prepared to pay a good amount of money.
2. Higher Salaries
People in California have access to some very high-paying jobs.
California is home to Silicon Valley, where tech startups are working to make millions of dollars a year.
Of course, these higher salaries do not apply to all people, but in general, companies in California expect to pay their employees higher wages.
This money won’t really get you anywhere in California.
Unfortunately, making more money is all relative when it comes to the costs of things around you.
A job somewhere else in the country might pay $60,000 per year, in California, the pay could be $75,000 for a similar position.
However, when you look at the total housing costs and what people have to pay just to put a roof over their heads, the higher salaries won’t mean all that much.
If you plan a move to California, it is best to make sure that you know your job is secure and that you have your numbers all worked out.
Use a cost-of-living calculator to see how far your new salary will take you.
Don’t be fooled by the fact that it is a higher number, as sometimes this won’t be enough to get you the type of lifestyle you might expect.
Another idea here is to get a remote job in California and live somewhere else in the country.
Your salary will likely be a bit higher, but it will take you further because of the lower cost of living out of state.
You will have to give up the dream of walking on Laguna Beach each morning, but for some, it may be worth it.
3. Access to Beach
If you take a more detailed look at the real estate market and narrow it down to just beach towns and not states, you will see very high housing expenses.
Homes that allow people access to the ocean are extremely high in price.
Not only is the ocean beautiful to look at, but it also gives us a way to exercise, socialize, and relax.
If you are new to the California area, chances are you want to be located somewhere that is relatively close to the ocean.
As far as waterfront states are concerned, California is right up there with Florida.
Not only do you have access to these beaches, but there is an entire lifestyle associated with the surfer/beach mentality.
If this is the type of lifestyle you seek, it is going to be quite hard to find it in Kansas.
Keep in mind that these sorts of lifestyles that become specific like this are going to usually increase pricing.
Housing in California is, without a doubt, higher because of access to the beach.
As you move further out and away from the ocean, home prices will drop slightly.
However, for most people who want to experience all that California has to offer, it makes sense to pay the extra money for the beach.
As we mentioned in our last point, the beach is a major factor behind the high prices for housing in California.
If these beaches were not usable for a good portion of the year, we might see some of these prices going down.
That’s where things really get a bit complicated.
The climate in California is essentially perfect.
The weather is beautiful almost 12 months of the year, and although you need to be prepared for the occasional earthquake, people will admit to California having the best climate.
With the state being so long, you can travel up and down the coast to get different glimpses of climate during the seasons.
Overall, California is a place to be if you want to be out in the sun and enjoying the outdoors.
Areas like this, which provide access to the great outdoors and beautiful scenery coupled with nice weather, are expensive to live in.
If you took California and moved it north of Washington into Canada, the home prices would drop.
The climate would not be nearly as desirable, and people would find other areas to call home.
5. Permits/Regulations on Building
California tends to have a bit of a heavy hand when it comes to permits, regulations, and housing.
If you want to build a home in California, get ready for a battle.
The process is lengthy, it requires a ton of paperwork, and chances are you may get turned down.
In addition to all of the runaround included in this process, you also have to be ready to pay some very high fees.
Of course, each one of the applications you will need to fill out is going to have a fee to go along with it.
What happens with a process being so difficult like this is that many people just choose not to pursue the home building.
They give up, move out of state, or purchase a home they don’t like and fix it up.
This same thing happens to business owners and real estate developers.
They will attempt to put up a housing complex and then realize that it does not make any sense financially.
These fees, prices, and time spent to get the homes the way they should be will ultimately end up costing the buyer quite a bit of money.
The process of building a home and keeping a home compliant in California is a major factor in the high cost of housing in this state.
6. Access to Entertainment
Not only is California home to Disneyland, but there are also thousands of other activities that you can experience in California.
If you want to enjoy the seashore, zoos, parks, historical sites, or wineries, you will have very easy access.
In addition, California has several large airports that will fly you anywhere in the world.
Should you feel like getting out of the state for a while, you can be there in a matter of hours.
The access to Hollywood and all of the entertainment makes California a place where you could never get bored.
As great as this is, it is going to cost a bit of money.
As most real estate agents will tell you, the most important concept of real estate is location.
California has potentially one of the best locations in the world when you want an active and enriching life.
There are zero reasons to be bored when living a life in California, and this is bringing more and more people to the state each year.
Unfortunately, with all of these benefits and amenities, the state naturally becomes more expensive to live in.
7. Shortage of Housing
The old concept of supply and demand is going to play into almost any situation.
In California, there is a great desire to live in the state.
People from all over the world are interested in what California has to offer.
The problem is there is not enough room for everyone.
There is no possible way for California to keep up with the demand of the people who want to live there.
The supply of housing is low because of the cost and difficulty to build.
The demand is high because of all that California has to offer.
This gives current California homeowners an upper hand in the market and an ability to sell their homes for a very high price should they choose to do so.
Essentially, this is like having something that many people want.
You can play them against each other to get the best price for the product.
This is exactly how the real estate market works in California.
It is incredibly competitive, and people will pay top dollar just to purchase a home.
It’s almost as if they worry about securing a home first and figure out how to pay for it later.
8. Land Costs
If you thought it was just the housing that’s expensive, don’t worry, it’s the land, too.
The costs of land in California are some of the highest in the country.
For all of the reasons we have already gone over regarding the quality of life and the climate, the land costs in California remain high.
For a person looking to build a new home, they will pay more than the price of other completely new homes in other states just to secure the land.
Once the land is secured, the building process starts, and it just continues to get expensive at every turn.
The important thing to remember is that, as a homeowner, you will own your home and the land that you live on.
The land costs are going to be just as much a part of the total overall value of your home as the housing costs.
Nothing will change about the land costs in California.
The supply is still too low, and there is no way to make more land appear, and the zoning process is going to be too complicated for most people to undertake.
9. Raw Materials Costs
Raw materials cost quite a bit more in California than in other states.
This means that, when you purchase a new home for several million dollars, it likely cost several million to build.
You would think, with California being close to the sea and shipping ports, that they could import materials is cheaper than other states.
This does not seem to be the case.
The price of lumber at this point is quite high.
When you look at the price of lumber in California, it is even higher.
The only way to avoid these high costs for raw materials is to bring the materials in from another state.
By the time you pay for the shipping and the transport, chances are you will be better off just staying in California.
Once you have yourself established in California, you will get to enjoy all that it has to offer.
However, getting to this point can be a bit difficult to navigate.
10. Worldwide Demand and Interest to Live in CA
Last but certainly not least is the demand to live in California.
When you look at a state like North Carolina or South Carolina, there are people from the North who plan to move down and retire.
Although there are some transplants from out of the country, most are local moves, and the appeal is moderately high.
However, when you look at the people who are interested in moving to California and living a piece of this lifestyle, the demand is incredibly high.
The demand is not just from those living in the United States as there is a global appeal as well.
People from other continents know about California and all that it has to offer.
Sometimes the money in these countries goes quite far in the United States.
This helps people be able to afford homes in California without quite as much trouble.
As long as people continue to pay high prices for the homes in California, the pricing will stay high.
One real estate concept talks about how a home is worth what someone will pay for it.
People in California know that their homes are in high demand, and they will continue to move the market up with the number they ask for their houses.
When you couple this with low-interest rates and an overall increase in the desire of people to own homes, the numbers get a bit radical.
If you have always dreamed of living in California, it is certainly possible.
Millions of people have figured out a way to make it work.
Be prepared, however, to throw your idea of normal home costs out the window.