California has long been the economic darling of the U.S. Driven by the technology companies in Silicon Valley, the entertainment, tourism and aerospace industries in Southern California, and rich agricultural lands everywhere in between, California produced $3.1 trillion in gross domestic product (GDP) in second-quarter 2019.
That’s more than the combined GDP of the Midwestern states of Illinois, Indiana, Michigan, Ohio and Wisconsin, which produced about $2.9 trillion in goods and services during the same quarter. In fact, if California were its own country, it would have the fourth-largest economy in the world behind Germany and ahead of the United Kingdom.
In 2018, for instance, the Golden State’s annual population growth rate was the smallest since this data began being collected in 1900. Officials chalked this up to immigration restrictions, declining birthrates and economic strains. The state added slightly more than 186,000 residents in 2018, or 0.47% annual growth.
California faces substantial natural hazards with the ever-present danger of earthquakes — the state has more than 500 active faults — and the growing risk of wildfires that are endangering lives and forcing tens of thousands of people to evacuate their homes each year. Roughly half of the homes built in the state between 1990 and 2010 are in areas that are susceptible to wildfires, according to a report in The Atlantic.
In response to the wildfires, Pacific Gas & Electric, the state’s largest utility, has executed rolling blackouts to prevent fires, although critics argue the company and the state should update electrical grids. Water woes have plagued California as a series of droughts have occurred for decades. The most recent one lasted from 2011 to 2019 and led to the state imposing several water-conservation measures.
California became only the second state, after Oregon, to enact a statewide rent-control measure, which took effect at the start of this year. Many people are eyeing what the new law could mean long term for the state’s housing market.
One of the largest megaprojects in the U.S. — a $100 billion bullet train that would run from Los Angeles to San Francisco — is in the works, but it has faced escalating costs and delays. The first section is yet to be complete.
Still, with its fair climate, beaches, mountains and strong job market, people continue to want to live in the Golden State.
California home sales
Like much of the nation, California saw home prices plummet during the Great Recession, with great swaths of unsold homes and falling rents. Since then, however, home prices have surged throughout the state.
The median home price in the Golden State has grown from $268,300 in 2012 to $493,500 in 2019, according to Zillow. Prices have risen so fast that many consider the state to be in an affordable-housing crisis.
More than four in 10 households in the state had unaffordable housing costs, meaning the renters or homeowners were paying more than 30% of their income toward housing, according to the California Budget and Policy Center. Gov. Gavin Newsom suggested the state needs 500,000 new homes per year by 2025 to meet housing demands, but Chapman University projects statewide permitting for new homes at only 115,000 units this year.
What the locals say
“I remember a half-a-million-dollar home being a big deal and now a $1 million home is not a big deal. It’s kind of like the normal. … Homeownership does not go out of style. Everyone is thinking, ‘Oh my gosh, how can home prices stay this high? We’ll have a dip in home prices in the future.’ They think that they can wait it out and the market still surprises me. If they say, ‘Oh, we’re going to have a softening in the market,’ for example, that softening just doesn’t seem to appear.”
Originating sales manager, CMG Financial
3 Cities to Watch
From the gold rush to the counter-culture movement to the tech boom, San Francisco almost always appears to be at the forefront of the moment. With a population of 883,000, it is the fourth-largest city in the state. The city is a popular tourist destination and also is a financial hub, serving as home to more than 30 major banking and financial institutions. The median household income in the city averaged $104,552 from 2014 to 2018, according to census figures.
With 1.4 million people, San Diego is the second- most populous city in California and the eighth largest in the U.S. San Diego has an economy that thrives on manufacturing, trade and tourism, and it relies heavily on the military bases located around the city. One of the city’s largest private employers is telecommunications giant Qualcomm, which has nearly 13,000 employees in San Diego County, although the company made major layoffs last year. The median household income is $75,456.
Located in the Central Valley, Fresno is the fifth-most populous city in California with more than 530,000 residents. The city is surrounded by fertile agricultural land that produces more than 350 crops, many grown almost nowhere else in the country. About one in five jobs in Fresno County are tied to farming. The city has a poverty rate of 21.1%, making it one of the largest cities in the U.S. with such a high share of impoverished residents.
Sources: California Budget and Policy Center, California Earthquake Authority, CNN, Curbed, Forbes, Fresno County Farm Bureau, Investopedia, Los Angeles Times, MarketWatch, NBC News, Orange County Register, Otis College of Art and Design, San Francisco Chronicle, The Atlantic, The New York Times, Time, U.S. Bureau of Economic Analysis, USA Today, U.S. Bureau of Labor Statistics, U.S. Census Bureau, Zillow