Dive Brief:
- Calling the San Francisco area market "frothy" and characterizing land prices there as "lofty" and "speculative,” homebuilder Hovnanian has announced it will no longer build in the Bay area, MarketWatch reported.
- The company's stock sank 15% over exit cost concerns as the company said it would leave the Raleigh, NC, Tampa, and Minneapolis markets as well.
- Hovnanian CEO Ara Hovnanian said the company wants to focus on other markets and that they have been a "relatively small" player in the Bay area.
Dive Insight:
According to MarketWatch, home prices in San Francisco have risen by double-digit percentages to bubble-era levels, and, just to be able to afford a median-price home, a homebuyer must make at least $147,996.19 annually, almost 50% higher than in San Diego, the next priciest market.
According to a report by Curbed, new home construction in the Bay area has not kept up with job growth, and the difference between home prices and income is growing greater, making conditions ripe for a bubble ready to pop. According to Curbed, in 2015, the Bay Area added 64,000 new jobs but only increased homes by 5,000.
In fact, Beacon Economics recently released a report that found California lost a net 625,000 residents between 2007 and 2014, primarily because of the rising costs of housing. The Beacon report said that the people most likely to become "out-migrants" are lower-skilled workers in vital jobs like food service and transportation, who earn less than $30,000 and have a lower level of education.
Perhaps the most striking example of how insurmountable the housing situation is for some is the fact that Toyota is moving its headquarters from Torrance, CA, to Plano, TX, largely because of housing costs. Its employees said they wanted the American dream of owning a home and that they'd be willing to move out of the area to get it.