Jamell Tousant says investing in California real estate was a no-brainer for many years. People primarily desired to reside in San Francisco or Los Angeles, both of which are already overcrowded; rents and home prices skyrocketed, and investors couldn’t pass up the opportunity. The plot has changed now. California’s population grew by zero percent in 2019, with 200,000 individuals leaving due to high housing costs and a scarcity of new jobs. They relocated to Idaho, Colorado, Utah, and Arizona, which were close by and offered more opportunities. 

California still has 15 million homes, and a million of them are sold each year, indicating that the real estate market is far from dead. However, Jamell Tousant warns that investors must now be much more cautious about where they put their money. However, investors must now be far more cautious about where they place their money and the types of investments they make. The pandemic adds to the complexity of the problem. In response to the economic crisis, ultra-low mortgage rates spurred a rush of home purchases in 2020, taking demand from 2021. Evictions and foreclosures will be the result of the pandemic’s growing financial agony. More people will be forced to relocate as a result of permanent job losses. The housing issue will not be obvious until the pandemic is gone, which we still don’t know when.

In these conditions, investors are best served by keeping to the “center” of the market, focusing on assets that are supported by local economics, and following the figures. The first statistic, the lack of population increase in practically all of these areas, is the most remarkable. Jamell Tousant explains, when a market isn’t increasing, your investment strategy is fundamentally different because it’s a zero-sum game; you have to figure out which sector of the existing demand will be the strongest. Single-family residences? Apartments? Is it better to own or rent? Is it better to invest in the high or low end of the market? Will growth resume in a year or two? Is it possible to overlook this minor setback? No. The wave of population increase in California had already peaked well before the epidemic. The large percentage of renters in most of these markets – the national average is barely 35 percent – is a second crucial statistic. This is related to the average price of a home; the greater the average price, the fewer people who can afford to buy. However, even in the Central Valley, where costs are the lowest in the state, a huge percentage of residents are renters. 

That’s because living in California is expensive; Californians pay the highest rents in the country when compared to their income. The following statistic, the year-over-year growth in home prices, is a gauge of local demand for all types of housing, not just single-family homes. It was quite weak in the costly Bay Area this year, but much stronger in the Central Valley says Jamell Tousant. Home values, like population, rise and fall in extended cycles, therefore I expect this pattern to continue. The last statistic, the average home price to average yearly rent ratio, indicates how closely the owner and renter segments of the market intersect. It’s a list of the most popular investment options in each market.