Survey results explain why Californians are leaving

As expected, I had some push-back from readers regarding my column supporting State Farm's request for a 30% rate increase from the Department of Insurance. A week after that was published, Allstate requested a 34% increase. Other insurance companies are likely to follow. I suspect the department will grant all requested premium increases. If not, the insurance companies have given the department notice: grant their requested rate increases or the companies are leaving California. Since private insurance companies fund the California FAIR Plan, their absence would jeopardize the financial integrity of the only insurance available for an increasing number of rural homeowners.

Price controls by the Department of Insurance may seem appealing to policyholders but price controls rarely work and are partially responsible for many insurance companies leaving the state or refusing to accept new applications. Nationally, homeowners insurance companies reported $16 billion in underwriting losses last year, according to AB Best, and in the last five years State Farm has accumulated $2 billion in underwriting losses in California. Few private companies can sustain those losses and remain in business.

The expense of homeowners insurance, primarily for rural property owners, is another reason many Californians are selling and relocating to another state. The number of current listings in El Dorado County are the highest in three years with a disproportionate number of rural properties. Homes on acreage account for 45% of current residential listings but only 35% of county sales. Since the first of the year, the county's median selling price is $673,000 and $327 per square foot while the median selling price for homes on acreage has been $600,000 and $311 per square foot.

There was a time that homes on acreage were selling for a premium. Folks moved to the rural foothills to be close to nature. That's changed. With the threat of wildfire, the cost of maintaining defensible space and the expense and availability of homeowners insurance, living near open space or oak woodland has become a liability. As the costs and risks of wildfires continue to increase, home values will move in the opposite direction. There will always be people who will want to live on rural acreage. They will, however, be cautious of the price they pay.

Out-of-state migration includes more than rural homeowners. Looking back, the state's population peaked in 2000 at 39.5 million. Demographic experts were predicting the state's population would reach 45 million by 2020 and 60 million by 2040. So much for "expert" opinions. According to the U.S. Census data, between 2000 and 2023 California lost about 3.8 million people in net domestic migration. The Department of Finance's most optimistic population projections going forward shows almost no population growth through 2060.

In an effort to understand why an increasing number of Californians are relocating to other states, the Urban Institute conducted a housing survey last month. Not surprisingly, the survey found 75% of renters and those younger than 35 have considered relocating due to rising housing costs. Another 87% of survey participants felt that housing affordability was a serious problem. They are right; housing in California is 97% higher than the national average.

While folks who didn't own a home thought affordable housing was the primary reason for relocating, homeowners had other concerns. The cost of living topped their list. Not including housing, it cost about 38% more to live in California than most other states. The second most disturbing factor to California homeowners is the rising crime rate. Nearly two out of three surveyed expressed concern with violence and street crime in their communities. Elon Musk is a recent critic of California's rising crime rate.

"Have had enough of dodging gangs, of violent drug addicts just to get in and out of the building," said Elon Musk announcing that he would move Space X headquarters from Hawthorne to Brownsville, Texas, and relocate social media platform X, formerly Twitter, from San Francisco to Austin. The Hawthorne facility, Starbase, directly employs 1,800 people and X in San Francisco employs 950.

After cost of living and crime, survey respondents listed "politics" as a reason for leaving. Results showed those who identified as conservatives were three times more likely to consider leaving the state than those who identified as liberals.

More residents are losing confidence in the state's political direction. Only 40% approved of the activities of the state Legislature and 62% of respondents said the state was headed in the wrong direction, up from 37% in 2020. Despite general dissatisfaction with California's lawmakers, three-fifths of Californians plan to vote for Democrats in the November election.

Housing has been more expensive in California because California was where everyone wanted to live. From 1900 to 1950 California's population rose from 2 million to 10 million and then tripled in the last half of the century reaching 34 million by 2000. The growth rate was nearly twice the national average.

The population has been in decline since 2000. Losing a few hundred thousand people isn't likely to have an effect on real estate values but a few million less residents will certainly take the edge off housing demand and price increases.

Ken Calhoon is a real estate broker in El Dorado County. He can be reached for questions and comments at [email protected].