Across the country, the price of land occupied by single-family homes ticked up from 2012 to 2017. But despite soaring housing costs in California, the Golden State didn't rise to the top of the list.
According to a recent report from the Joint Center for Housing Studies of Harvard University, both Nevada and Colorado actually outpaced California when it comes to the increase in land values per acre.
The finding is part of a broader look at the state of the nation's housing market, which revealed that while the number of new households created each year has ticked back up to a healthy 1.2 million, housing construction remains weak, meaning apartments and homes remain out of reach for many people, particularly in expensive markets such as the Bay Area.
Land prices spiked by 158% in Nevada and 96% in Colorado, compared to 88% in California. But while the price of land here may be rising more slowly than elsewhere, it remains high overall compared to neighboring states.
Land in the Las Vegas-Henderson-Paradise metro area was just shy of $140,000 per acre in 2012 and more than $360,000 by 2017, a nearly 158% increase. The Reno area saw a similar 140% increase.
But in the San Jose-Sunnyvale-Santa Clara metro area, land prices already were more than $2.6 million per acre in 2012 and jumped to around $5.2 million, a roughly 98% uptick. Prices in the San Francisco-Oakland-Hayward metro area rose from a little more than $1.3 million to north of $3 million, a 124% increase.
There's "much more room to grow" in places such as Nevada, said Alex Hermann, a research analyst with the Harvard center.
One reason California isn't keeping pace with Nevada and Colorado is that the increases in land values in some less populous counties have been more modest. Prices in Humboldt County, for instance, ticked up only around 9% between 2012 and 2017. In Calaveras County, they went up just 23.5 percent.
According to the report, high land prices may help explain a lack of middle-market housing. Rising land costs and labor shortages, the report says, are prompting growing concern from developers, who are reluctant to build homes affordable to lower-income residents.
In San Jose and the surrounding area, Hermann pointed out, even with relatively high income levels, the median sale price is more than 10 times the median household income. Nationally, homes are selling for closer to four times income levels.
"I think it's just a confluence of events in this housing tragedy," said Bob Staedler, principal executive with Silicon Valley Synergy, a land use and planning consultancy.
Wages for many local service workers and others, such as teachers and nurses, he pointed out, haven't kept pace with the cost of housing.
"That's really been a kind of silent killer as far as affordability," Staedler said.
As prices have risen, more families of even moderate- to mid-income levels are burdened by housing costs. The burden is especially intense in extremely expensive markets. In the San Francisco-Oakland-Hayward metro area, nearly a quarter of renter households are severely rent burdened, meaning they spend more than half their income on housing.
"That has pretty profound effects," Hermann said, pointing out that when families spend so much on housing, they may not have enough to cover other essentials such as childcare and transportation.
In nine metro areas – all of them in California, and including San Jose and San Francisco – a median-income household could afford less than 25% of homes sold in 2017. Nationally, a median-income household could afford more than 60% of homes sold that year.
And, the report notes, where the good economy and aging millennial generation should fuel demand for starter homes, few developers are building those houses, and many young people are continuing to live with their parents well into adulthood. Across the country, more than 10 million adults between 25-34 lived with parents or grandparents in 2017, more than twice the 4.8 million who did so in 2000.
In California and elsewhere, immigrants are helping drive a growth in new households and housing demand. While immigrants make up not quite 14% of the population nationally, they accounted for 37% of household growth between 1990 and 2017.
In California, the report noted, even though about 30,000 more households moved out each year between 2010-17 than moved in, in-migration still averaged about 165,000 households each year. The Golden State had the third-highest level of household growth in the country, according to the report, but that could change because the state also has an aging population and not enough new homes are under construction.
"We're not building enough to meet the demand there is," Hermann said, "much less any kind of latent demand."