OK, California housing market: first population decline responds to biggest residential construction boom since 2008

The state lost 182,000 people in 2020, but added 100,000 homes, for 270,000 people. Los Angeles lost 52,000 people, added 18,000 homes. San Francisco lost 14,800 people and added 4,000 homes.

By Wolf Richter for WOLF STREET.

California’s population hasn’t exactly “collapsed” or anything, but it was down 0.46%, or 182,083 people, in 2020, the “first negative growth rate” since estimates were collected. demographic, according to the California Department of Finance on Friday. . At 39.47 million, California’s population has fallen to the lowest level since 2017, resulting in a multi-year trend of declining but positive growth rates.

As we’ll see in a moment, many of the more populous, congested, and expensive coastal counties have lost population not only in 2020, but in previous years as well, including Los Angeles. The pandemic has only accelerated the trends. But many cheaper inland counties have gained in population.

Government members are now praying that this state-level decline is just a one-off thing and that population growth will return in 2021, and the finance ministry has said so. The idea is that more people will pay more taxes.

But I will not deplore this drop in population. I am like many others who are not in love with the congestion, the rising distortions of the local economy and the costs of housing, which hold back the local economy because too many people do not have enough money to live with. spend. on other things. We have encouraging words for future graduates who keep chatting about it: “Just Do It”.

And the move from coastal cities to inland cities has already become evident in apartment rents, with rents plunging in San Francisco and falling sharply in Silicon Valley and Los Angeles, while skyrocketing in inland cities such as Sacramento and Fresno.

Southern California.

In Los Angeles County, where more than a quarter of Californians live, the population fell 0.9%, the third consecutive year of declines (%, columns, right scale), after years of slowing down. growth. The population peaked in 2017 at 10.19 million people. In 2020, it dropped by an additional 91,200 people, to 10.04 million (red line):

In the city of Los Angeles, the population fell by 52,000 people, to 3.92 million.

San Diego County and Orange County, California’s other most populous counties, also experienced “negative growth rates”; San Diego for the second year in a row, -0.48% in 2020, to 3.32 million people; and Orange for the third consecutive year, -0.85% in 2020, to 3.15 million people:

In Ventura County, north of Los Angeles, the population fell 0.7% in 2020, the fifth consecutive year of declines. Since the peak of 2016, the population has fallen 1.7% and, at 835,000, it is back to 2011 levels.

A similar trend has occurred in Sonoma County, in the Bay Area wine country, as we’ll see in a moment, and could be the result of the boom in second homes and vacation rentals. . Although their owners do not actually live in these housing units, the buying activity drives up house prices, pushing low-income people out, and the county’s population is shrinking even as house prices are exploding.

But in the most populous and also the cheapest interior counties, Riverside and San Bernardino, the population grew by 0.56% and 0.02% respectively in 2020, for a combined increase of 0.3%, to 4.63 million people, continuing the relentless upward trend:

San Francisco Bay Area.

The population of San Francisco County (the same as that of the city) grew by more than 10% between 2009 and 2019, with growth slowing in 2018 and 2019. But in 2020, it fell by 1.7 %, the largest drop in a year among the largest. counties, losing 14,800 people, bringing the population down to 875,010 – the lowest since 2015:

Silicon Valley: The population of Santa Clara County (including San Jose) fell 0.6% in 2020, the first year of decline, after being almost stable in 2018 and 2019, to 1.934 million. The population of San Mateo County fell 0.8%, the second consecutive year of declines, to 771,000 souls. And combined, a measure for Silicon Valley, the population declined 0.62% to 2.70 million people:

The counties of Alameda and Contra Costa in East Bay have for years been the target of refugees from San Francisco. Driving to San Francisco or Silicon Valley can be a mess, but working from home has largely solved that problem.

Alameda County (includes Oakland and Berkeley) declined 0.4% in 2020, to 1.659 million people.

But Contra Costa County, which is largely suburban and runs from the bay deeper inland, grew 0.4%, to 1.147 million people, maintaining its relentless growth. The population of the two counties combined fell 0.1% in 2020 to 2.81 million:

Sonoma County, which is part of Wine Country, is emerging as a weekend home and vacation rental haven, with fewer people living there. Since peaking in 2016, the population has fallen 3.8%, the largest part of all major counties. With 484,000 inhabitants in 2020, the population is back to where it was in 2009.

Its boiling housing market, now focused on vacation rentals and weekend party palaces for San Franciscans, has likely pushed low-income households, shrinking the overall population for four years.

And given the terrible wildfires the county has seen in recent years, handing the county over to visitors and weekends might not seem like such a bad idea:

Inland counties have picked up some of the outgoing coastal areas. For example, each of the four most populous inland counties north of Southland – Sacramento, Fresno, San Joaquin, and Stanislaus counties – has grown each year. In 2020, they increased between 0.2% (Stanislaus) and 1.2% (San Joaquin). The four counties combined grew 0.6% in 2020, to 3.93 million people:

Main reasons for the population decline in California.

The Ministry of Finance outlined two groups of reasons for the population decline: visible long-term trends in slower growth and “leveling off” of the population in recent years; and now the issues related to Covid.

Birth rates have been declining for years, but the current sharp drop in birth rates attributed to the pandemic was just beginning to appear at the end of 2020.

“Excess deaths”: Covid increased the number of deaths in California by 19%, or 51,000 deaths, above the three-year average in 2017-2019.

“Negative net international migration”, with more people returning than arriving, due to the suspension of visa issuance from March 2020 and global travel restrictions. This includes a drop of 53,000 international students.

Net domestic emigration has been the rule for many years, with more people leaving California for other states than coming to California from other states. This trend has accelerated in recent years and accelerated further in 2020, although the report did not shed light on it.

In recent years, the positive international migration balance has more than offset the negative domestic migration balance. This trend includes immigrants arriving in California who end up moving to other states. This allowed California’s population to grow, albeit at a slower rate – until the pandemic reshuffled the game.

The biggest construction boom since 2008, despite the population decline: who is buying?

As the state lost 182,083 people in 2020, 99,917 housing units of all types were added – 103,073 new housing units, the most since 2008, minus the demolition of old units, according to the California Department of Finance.

The average California housing unit is occupied by 2.7 people. Thus, 100,000 homes add space to 270,000 people, even though 182,000 people have left. Think about it for a moment.

The number of dwellings increased by 0.7% to 14.43 million. Of these, 64.3% are single-family homes, 31.8% are multi-family homes, such as rental apartments, condos and “group housing”, such as dormitories; and 3.9% are mobile homes.

These are the cities with the strongest housing growth in 2020, which are also the cities with the largest population losses:

City county Growth, housing % several families
Los Angeles Los Angeles 17 851 87%
San Francisco San Francisco 4,048 100%
San Diego Dan Diego 3 897 99%
Oakland Alameda 2,750 100%
Santa Clara Santa Clara 2,066 87%
Irvine Orange 2,062 47%

For example, the city of Los Angeles lost 52,000 people but added 17,851 housing units in 2020.

And San Francisco lost 14,800 people, but added 4,048 housing units in 2020. So who is buying or renting all of these units?

The apartment market in San Francisco has already reacted to high vacancy rates and new units coming onto the market, even as people have left the city: rents have fallen by 30%. Condo prices are also going down, but not as much, but house prices are going up. Which brings us back to the theory that homeowners have left, but haven’t put their old and now vacant homes on the market as they try to push up soaring home prices.

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