Millennials Don't Want to Live Where They Can Buy

Before 2023 California was unaffordable, but the rise in mortgage rates and the inability to build new homes has exacerbated the problem. The chart above shows that there are extreme differences in affordability between the states. California is so short of housing that even when interest rates decrease, it will still be unaffordable. The consensus is that California has a shortage of three to four million homes today. The state's population is 39 million people with 2.9 persons per home. Say the shortage is 3.5 million homes.

Working backward, 10 million people would have to leave the state for the shortage to be eliminated. That's 25% of the current population, which will never happen. California is stuck in a perpetual housing shortage and will remain unaffordable. It will still attract the people who can afford to pay the sunshine tax and retain those who are stuck and cannot leave.

For anyone analyzing commercial real estate, the fundamentals for service-based retail, single family for rent, multifamily for rent, and self storage will remain strong in cities Millennials and Gen Z find attractive, like Austin, Los Angeles, and Miami.