Top Factors Responsible For The Ongoing Home Price Appreciation In California

Top factors responsible for home price appreciation in California

There is no doubt that the real estate industry in California is a huge success. Your home builder in Carlsbad may attribute this to the growing national economy. However, several other reasons are responsible for these rising values, and these factors are worth considering.

Home prices in California double what you will get in other parts of the country, with some areas partaking in the rising valuation while others don’t even come close.

Fewer Californians can afford their own homes, yet design-build firms appear to be growing in popularity by the day. Where are the houses then?

Here are the top factors responsible for the high housing costs in California and what may be the way forward.

There are Not Enough Houses in California

One major cause of home price appreciation is insufficient housing. The available houses are not enough to go around, which reflects in housing costs. It is a simple supply and demand situation. People want to move to major cities in California because these areas are desirable, but the number of new houses built every year cannot meet this demand.

Construction activities are ongoing every other day, but the question is, where are these new homes being built? Not in coastal cities. Most apartment buildings are built in the Inland Empire, while major cities like San Diego and Los Angeles see little of this building frenzy.

People are more interested in living and working in urban California, making those cities jammed. Yet, there is a slower rate of building new houses in the metros, and this limited housing supply causes house prices to rise.

One can even argue that most people who leave California do so because they simply cannot afford the costs of living there, home prices being a top factor.

Homeowners in urban California take on extension projects to expand their homes and increase the available living space. This attempt is perhaps the reason for the high rate of home remodeling in Carlsbad.

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High Costs of Land

Construction problems are just one part of the issue when you consider that home prices are tied to the land the houses sit on. And land in California is among the most expensive in the country. Different land surveys attest to this, with areas like San Francisco having the highest values.

When land comes with a high price tag, housing becomes more expensive. We can link this appreciation to the limited supply of land in metro areas. Even with the short supply, several limitations to construction exist in these areas.

High costs of land can be managed by building denser houses. This response allows contractors to spread land costs. However, we hardly see it work out in urban areas, making home prices in the metros expensive.

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Increased Building Costs

Your home builder in Carlsbad may have mentioned this before: building costs in California are higher than in most other places. Labor and raw materials are expensive and these costs keep rising.

With all these components being higher in California, housing prices are bound to increase. Still, you want a home builder that follows through with the appropriate building codes during your home remodel in Carlsbad. Commit your building needs to House to Home for the best standards.

Building costs determine home prices to a large extent. Since these costs are relatively lower in inland California, you would expect home prices to be more affordable. However, these areas are seeing an increase in demand because of their proximity to coastal metros.

If people find it difficult to get houses in central cities, they look towards the inland areas. Demand spills over to these inland metros, resulting in expensive rents and home prices.

High land costs are only one part of what swallows the housing budget. Design-build firms in Carlsbad also have to deal with the shortage of skilled construction workers, going the extra mile to build their workforce.

Cumbersome Process of Housing Approval

Housing approval in California is generally more time-consuming and expensive than in other states. You have to deal with tons of government policies that are not always the most friendly towards home buyers.

The rules and regulations appear to be getting more rigid, and sometimes, home prices suffer from bureaucracy. This is why working with a trustworthy contractor like House to Home has become increasingly important. You want a design-build firm that remains transparent throughout the approval process.

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Sometimes, developers must battle long waits and risky processes to get approval to build new houses. From layers of government reviews to environmental laws, all of these add to the increase in housing costs. Sometimes, the locals fight the development for fear of their neighborhood getting congested. These local growth controls reduce the number of new homes and make existing ones expensive.

What Does the Ongoing Increase in Housing Costs Mean for Californians?

Housing costs directly impact a household’s spending, which is where Californians might be most affected. People have to decide how much of their income goes to housing carefully. They sometimes make trade-offs between having a decent roof over their heads and dealing with the stress of a long commute to work.

Here are some of the ways home price appreciation affects Californians:

They Spend More of Their Income On Housing

This consequence is especially severe for renters and low-income households. When more of their income goes to housing costs, there is little left for other essentials. This, perhaps, is a major contributor to California’s poverty rate, which is surprisingly higher than in several other places in the US.

Fewer Californians Own Houses

While the government, in its efforts, continues to promote homeownership, it is evident that only a percentage of Californians own their own homes. High home prices mean fewer people can afford to be homeowners, as much as developers try. You should talk to design-build firms like House to Home to help bring your dream housing project alive with your budget.

Crowded Households Become More Common

Housing experts can testify to this. Sometimes, people call for a home remodel in Carlsbad because there are more people than available rooms. The consequences of crowded homes are strained relationships between members and general stress. Research confirms children are more likely to display negative behavioral patterns in these situations.

Californians Commute Further to Work

The ideal situation would be households building homes in neighborhoods that reduce their commute time. With metropolitan cities overcrowded, this has become a dead dream for most Californians. High home prices lead to longer commutes since workers cannot find or build homes in locations close to where they work.

Home Price Appreciation Affects Economic Growth

Think about what happens when able workers cannot move to the most productive parts of the city because of high housing costs. More people are discouraged from living in California, and businesses face challenges recruiting employees. The consequence remains unchanged: constrained economic growth.

Is There a Solution to the Current Home Price Trend In California?

Indeed, there can be. Home prices in California can get cheaper, but this would require several stakeholders to get involved. From policymakers to design-build firms and even residents, everyone has a role to play if California’s high housing costs are to be contained.

  • It may be time to re-examine and address certain housing policies that result in high housing costs. There is more need for housing in urban areas, so developers should build densely in those parts. Choose a design-build firm like House to Home for tailored projects in coastal cities.
  • Affordable housing programs increase housing access for Californians. Low-income households especially need these to tackle homelessness. 
  • Focusing on developing other areas reduces the high demand to live in metropolitan cities. 


Several other reasons account for the ongoing home price increase in California. California can be affordable again if the state, residents, and design-build contractors play their parts. In the same way, turning the situation around would involve a lot more than the suggestions here. 

House to Home is your reliable design-build firm, whether you are looking to finally own a home or remodel your property to suit your taste. If you’re looking for a home builder in Carlsbad, consult us to provide a strategy that exceeds your expectations and transforms your house into your dream home.