In a state long known for its housing extremes, one metro may have crossed the point of no return.
A new report from Redfin projects that Anaheim is the only California market unlikely to return to pre-pandemic affordability levels — even if home prices flatline for the next decade.
While other pricey markets like San Francisco and Oakland are slowly drifting back toward 2018-era ratios of housing costs to income, Anaheim’s home values have surged so dramatically that a reset may be completely out of reach.
Anaheim is the one California housing market that may never return to “normal,” according to a new Redfin analysis. Nancy Pauwels – stock.adobe.com“It would be nearly impossible to go back to pre-pandemic levels, even in the next 10 years,” Chen Zhao, head of economic research at Redfin, told SFGate in an interview.
The study finds that the Orange County metro’s home prices have climbed so steeply that even a decade of stagnant growth wouldn’t bring affordability back in line. Matt Gush – stock.adobe.com
Redfin’s analysis relies on a mortgage payment-to-income ratio to gauge affordability, comparing today’s market to July 2018, when housing costs relative to income were more sustainable.
By that measure, San Francisco has effectively returned to normal. Home prices there are only up 8% since July 2018, while national home values have jumped 56% in the same timeframe. At the same time, incomes in San Francisco have grown by a healthy 7.7% annually, nearly double the national average of 3.9%.
Using a mortgage payment-to-income ratio, Redfin modeled when major metros might return to July 2018 conditions — the last time many markets were considered “normal” in terms of affordability. mike ledray – stock.adobe.comThat doesn’t mean the city is suddenly affordable.
“There hasn’t been a ‘cataclysmic event,’ like a housing crash, where prices come way down, or even a meaningful decline in mortgage rates,” Zhao said. “All of a sudden, you find yourself back to normal, and there’s not this big adjustment that happened.”
Oakland is on track to reach similar “normal” levels this month, assuming prices remain steady.
Austin, Texas, is the next major US metro projected to return to 2018 affordability, but not until March 2027.
Other California cities will take far longer: Redfin estimates Sacramento will normalize by November 2028, San Diego by February 2029 and San Jose by May 2029.
Anaheim, however, stands apart.
While San Francisco, Oakland and even Sacramento are projected to reach those levels within the next few years, Anaheim didn’t make the list. Sundry Photography – stock.adobe.comIts home prices have risen so sharply relative to wages that the market may remain structurally unaffordable for the foreseeable future.
Zhao noted that Redfin’s projections don’t even account for local property taxes or the rapidly escalating cost of homeowners insurance in California, both of which could push affordability even farther out of reach.
Redfin’s analysis doesn’t include property taxes or California’s surging insurance costs, which could make the outlook even more dire. Getty ImagesThe rapid rise in insurance costs across California could alter Redfin’s affordability projections for individual markets, Zhao said.
And even in markets that do revert to historical norms, many residents may still find homeownership elusive.
“Even if and when we get back to that normal scenario, a lot of people are still going to say, ‘Well, buying a house is still out of reach for me,’” Zhao said.
In San Francisco, Redfin agent Ali Mafi noted that the return to normal hasn’t dampened demand among well-paid newcomers.
“AI companies are setting up shop here — not just in Silicon Valley — and they’re offering unusually high salaries and big signing bonuses to attract talent,” Mafi wrote in the report.
“I’m seeing more young tech workers and couples moving in with the means to buy. With incomes rising and home prices holding steady, those buyers view the market as an opportunity for relative value.”
