In this article, we will be studying the US housing industry. We will also be looking at the current industry scenario, some of the major home builders in this market, and the 15 cheapest places to buy a house in California. If you wish to skip our detailed analysis, you can move directly to the 5 Cheapest Places to Buy a House in California.
American Housing Industry: An Overview:
Housing is an important sector of the US economy. The US housing market comprises a diverse set of home buyers. First time buyers are typically young, usually looking for more affordable housing options. While move-up home buyers wish to upgrade their existing home to a better property, active adult buyers aged above 55 seek close-by amenities and low maintenance homes. Lastly, high-end buyers have a desire for luxury in their exclusive homes.
On September 19, The US Census Bureau reported the current situation of residential construction in the country. In August, the monthly building permits for privately owned houses increased to a seasonally adjusted annual rate of 1,543,000 while single family house permits were recorded at a rate of 949,000. However, the housing starts for both private and single-family houses declined from July to August in 2023.
The Housing Industry Facing Challenges
The housing industry in the United States is subject to various challenges as of now. In 2023, Harvard University’s Joint Center for Housing Studies published the State of the Nation’s Housing 2023 report. First time home buying reduced as the median home price in the US approached $3,000 per month in March 2023. People have also been spending a larger portion of their incomes on housing, experiencing a housing cost burden. The construction of affordable, medium sized homes also declined due to rising material and land costs for home builders. This housing shortage and increasing house ownership costs can be traced back to 2022. To counter the rising issues, different US states have been taking measures, for instance Montana and California legalized small-scale housing and duplexes in most neighborhoods. Indiana, South Dakota and Wyoming also allocated funds to start building entry level houses.
Housing in California
The state of California alone has also been subject to a housing shortage as the supply of houses lags behind the demand. The housing production needs to be significantly increased in the state to cater to this supply-demand imbalance in housing. The supply shortage also leads to an increase in house prices and rents, leading to less affordability to own a house ultimately resulting in California being one of the poverty-ridden states in the US. Although these circumstances continue to prevail in California, the state also includes certain places where it is comparatively cheaper to purchase a house considering the low median home prices and rents in these areas.
Housing Stocks to Consider
The dominant home builders in the housing industry include LGI Homes, Inc. (NASDAQ:LGIH), Lennar Corporation (NYSE:LEN), and Pulte Group, Inc. (NYSE:PHM).
Based in Texas, LGI Homes, Inc. (NASDAQ:LGIH) builds new constructions and housing developments. It is one of the largest homebuilders in the United States which guides its customers through the process of buying a house by discussing finances, current income and mortgage qualifications so the customer can understand what needs to be invested in a new house. The company claims to have fulfilled homeownership at affordable prices for 50,000 families. On September 18, the company reported that Terrata Homes, the luxury home division of the company, has expanded to a new community ‘Bella Terra’ in the Tampa market. The needs of homebuyers in Tampa will now be fulfilled through high-end homes located in a natural setting. These homes offer buyers an opportunity to move in already, with prices starting above $670.
Lennar Corporation (NYSE:LEN) is another leading home construction company in the US. The company is involved in the construction and sale of single-family attached and detached homes. Residential areas are also sold directly by the company. The company sells homes in those communities which target first time, move-up, adult active, and high-end buyers. On September 14, the company reported strong earnings for the third fiscal quarter of 2023. The company reported earnings per share of $3.91 and outperformed EPS estimates by $0.38. The company reported a revenue of $8.73 billion and beat revenue consensus by $213.39 million. On September 15, Reuters reported that the company’s strong earnings in the third quarter were due to an increasing demand for new construction powered by a shortage of homes in the market. In the same quarter, the company’s home deliveries also rose by 8% year over year. The Co-CEO if the group, Jon Jaffe, elaborated on this success:
“Our cycle time during the quarter was down 32 days sequentially as the improving supply chain and labor market positively impacted our production times”
Pulte Group, Inc. (NYSE:PHM) is also known for residential home construction in the US. It operates in over 400 major cities in the country. Since existing homeowners in the US have been unwilling to re-sell their houses in a period of high interest rates, consumers are driven to purchase new homes thereby increasing demand for new construction by home builders like Pulte Group, Inc. (NYSE:PHM). On July 25, the company reported its financial results for the fiscal third quarter of 2023. The company reported earnings per share of $3.00 and outperformed EPS estimates by $0.46. The company’s total revenue for the quarter amounted to $4.19 billion, ahead of revenue consensus by $164.28 million while the company’s home sales revenue for the quarter amounted to $4.1 billion, up 8% year over year. The home sales revenue increased as a result of an increase in home closings and average sales price.
Now that we have analyzed the US housing industry and what the dominant players such as LGI Homes, Inc. (NASDAQ:LGIH), Lennar Corporation (NYSE:LEN), and Pulte Group, Inc. (NYSE:PHM) are up to, we can move to the 15 cheapest places to buy a house in California.
Mobile homes in a manufactured home park. Front yard.
Methodology:
In order to create a list of the 15 cheapest places to buy a house in California, we sourced data from the California Association of Realtors. We utilized the traditional housing affordability data for all counties in California. We selected median house price as our metric since it is a more accurate measure of the typical selling price of houses in California and hence depicts housing affordability. For the purpose of this research, we have chosen to focus on the counties in California as this provides a more comprehensive overview of the housing market, considering both urban and rural areas and their respective affordability factors. The most recent data is from 2023. Thus, we have sorted all the counties in California in descending order of their median home prices to rank them as the cheapest places to buy a house in California.
15 Cheapest Places to Buy a House in California:
15. Fresno
Median House Price: $420,000
Fresno is one of the cheapest places to purchase a house in California. The monthly payment for houses including tax and insurance is also less. As of 2023, the median house price in Fresno is $420,000.
14. Tuolumne
Median House Price: $418,300
Tuolumne provides cheap housing as the county is known to have a lower cost of living than other regions, with some houses even priced below the state average. As of 2023, the median house price in Tuolumne is $418,300 and hence it is one of the cheapest places to buy a house in California.
13. Mariposa
Median House Price: $390,000
The median house price in Mariposa is $390,00 which is comparatively low. Mobile and manufactured homes tend to be affordable low-income housing facilities in Mariposa. Thus, Mariposa is a cheap living option in California.
12. Merced
Median House Price: $390,000
Merced also tends to be a cheap place to buy a house in California. This is because the median home price and the cost of living in the county is low. As of 2023, the median house price in Merced is $390,000.
LGI Homes, Inc. (NASDAQ:LGIH), Lennar Corporation (NYSE:LEN), and Pulte Group, Inc. (NYSE:PHM) are among the well established home builders in the United States.
11. Shasta
Median House Price: $389,000
Shasta also makes it to our list of the most affordable housing places in California. The median rent is also lower than the state’s median rent prices. As of 2023, the median house price in Shasta is $389,000.
10. Kern
Median House Price: $380,000
The list of the 15 cheapest places for housing also includes Kern. The Housing Authority of the County of Kern especially ensures affordable but stable housing options for low to moderate income families in Kern. The median house price in Kern is $380,000 as of 2023.
9. Tulare
Median House Price: $370,000
Tulare is another potential cheap place to live in California as the median house price is as low as $370,000 as of 2023. Tulare even offers cheaper house rents for those on a budget.
8. Del Norte
Median House Price: $365,000
Del Norte is a cheap place to buy a house in California. The cost of living in the county is less, which attracts those who are looking for housing options they can afford while having access to basic necessities. As of 2023, the median house price in Del Norte is $365,000.
Investors who wish to increase exposure to the housing industry in the United States can look up LGI Homes, Inc. (NASDAQ:LGIH), Lennar Corporation (NYSE:LEN), and Pulte Group, Inc. (NYSE:PHM).
7. Kings
Median House Price: $361,000
Kings is an affordable living option in California. Although the prices of houses have been on the rise, they still tend to be a cheaper alternative to other expensive housing options in California. The median house price in Kings is $361,000 as of 2023, making it one of the 15 cheapest places to buy a house in California.
6. Lake
Median House Price: $357,000
Lake is one of the most low-priced places to buy a house in California. The minimum income required to qualify to buy a house is $89,600 which is also comparatively low in the US. As of 2023, the median house price in Lake is $357,000.
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Disclosure: None. 15 Cheapest Places to Buy a House in California is originally published on Insider Monkey.