With California’s housing market and personal debt, Alleviate Financial Solutions offers debt relief strategies to help homeowners and buyers manage their financial challenges. Contact us for a free consultation.

It seems as though the housing market is in a constant state of flux, going up for a few months and then down for a few years. In truth, it’s more stable than that, but that can be a problem when it’s holding up in a housing crisis. Another problem is that the state of the housing market seems inextricably linked to personal debt levels. Something with which debt relief services are familiar.

The question is, “How do housing costs affect personal debt?”

California Is A State In Crisis

California’s housing market has always leaned favorably toward white households. It still does, even though COVID-19 played havoc with all middle- and low-income families, regardless of race.

One of the biggest problems with California’s residential housing market is zoning laws. Most residential areas only allow detached single-family homes per lot. In Los Angeles, for example, 75% of residential land is reserved for detached single-family homes. In San Jose, it goes up to 94%.

This dramatically curbs affordable housing development. Furthermore, house prices, mortgage interest rates, and rental housing are all increasing, which puts homeownership out of reach for many families. Rental housing increases actually play a big role in preventing homeownership.

In the past, the norm was for families to rent a house or apartment until they saved enough money to buy a house. Now, rates are so high that households spend around 30% of their income on rent. They don’t have much, if anything, to save towards homeownership. The higher the rent, the less money there is for other items, which pushes many families to the brink of poverty.

For some, the only way to cope with the financial burden is to adopt debt resolution strategies. A necessary tactic to keep a roof over their heads.

Homeownership, Race, And Personal Debt

In California, in 2019, Latino homeownership was 19.2 points below white ownership. The difference between white and black homeownership was 26.4 points. This was after significant growth in black and Latino homeownership between 2014 and 2019.

The link between homeownership and debt (or wealth) is this: home equity is tied to personal wealth, especially in middle- and low-income families. With no affordable housing units available, black and Latino families don’t have access to this equity, which impedes the accumulation of wealth and, in a series of knock-on effects, increases personal and household debt.

The matter is not helped by income inequality. In California, white households have an income that is 45% higher than Latino households and 65% higher than black households. White households also tend to have better credit scores, which makes it easier for them to access credit, including home loans and mortgages.

Homeownership And Income Inequality

It’s been determined that, typically, the higher the rate of homeownership, the greater the economic equality. However, despite an uptick in salaries and wages, the increase can’t keep up with the rising cost of housing in California.

Not only are prices increasing, but interest rates are also going up, dramatically. From January to October 2022, interest on 30-year mortgages doubled, from 3.5% to 7%. That leap, once again, puts homeownership out of reach for many middle- to low-income families.

Once upon a time, families were able to move to other towns, cities, or areas that had better employment opportunities with higher salaries and access to more affordable homes. Now, however, housing prices and rent increases make it impossible for them to chase the dream, trapping them in low-income areas. This serves to further increase economic inequality.

Middle-Class Households Also Feel The Pinch

Homeownership used to be the way for average middle-income families to build wealth. Raising house prices and interest rates have made that much more difficult. Studies show that mortgage debt constitutes 66.6% of all personal debt in the country. California ranks seventh in the mortgage-to-income ratio.

Basically, 18.5% of Californians are being snowed under by housing debt. This makes it more likely that they’ll have to turn to debt settlement programs to keep their roofs over their heads.

Supply, Demand, And Negotiation

The pre-pandemic housing market (2018–2019) was fairly stable with a healthy ratio of supply and demand. That is no longer the case. Currently, California’s housing market (supply and demand) is 28% lower than pre-pandemic rates. This contributes to increasing house prices and a seller’s market. In theory.

Thanks to increasing economic inequality and personal debt, this isn’t necessarily the case. It’s more a matter of demand that can’t afford supply.

Contrary to 2022, 2023 is seeing a decline in house prices in California. Sellers appear to be so keen to rid themselves of their property that they’re more open to negotiations than previously. In some cases, buyers ask for and receive concessions on things like closing costs.

Perhaps the tables are turning, and sellers are now the ones who are desperate to avoid high mortgage payments (and other personal debt).

Debt Solutions For Buyers And Sellers

Housing markets are as fickle and changeable as the seasons. One day you’re riding high as a homeowner, and the next you need to downsize to something with more affordable monthly payments. Alternatively, perhaps you’re shut out of the market due to a dearth of availability and ridiculous mortgages and are then suddenly able to negotiate affordable deals with sellers.

Whichever side you’re on, when you find yourself facing stressful debt, help is at hand. Alleviate Financial Solutions has experts in debt resolution, management, and settlement to save you from crippling financial difficulty.

Call us at (800) 308-2935 or complete our contact form to arrange a free consultation.