California at the Crossroads
One of our ongoing themes in this blog is that we are entering a period of unremitting structural change. We’ve noted previously that the combination of Covid-19 and technological innovation is leading to a surge in the nonbank share of purchase mortgages to the GSE’s. Of course, there are others, notably climate change. As the technology leader among states and also the one suffering severe damage from wildfires, California is at the nexus of these transformations.
A survey conducted by the University of California at Berkeley in 2019 revealed that more than half of the residents of the state had given “some” or “serious” thought to leaving the state. Has this in fact occurred? Such a desire may be offset by the traditional role of the state in attracting immigrants and young people looking for careers in technology and media. One way to look at this is to pull data for the count of new purchase mortgages sold to the GSEs in the state as a share of the US total:
In fact, the number of purchase mortgages has been rising over the past four years but the share of the national market has been in a trend decline. Of interest is the big drop of over 1 ½% in 2018 from Q1 to Q4. This is likely related to be related to the the horrendous surge in acres burned in forest fires during that year.
California’s land area is about 100 million acres. The acres burned in fires this year are more than twice as much as in 2018, but so far, the impact on new purchase mortgages has been more muted, reflecting trends witnessed around the country of individuals moving to less dense locations. It may be that these sales are related to those moving from the densest centers to outlying areas within the state.
Finally, it’s instructive to look at the share of nonbank sales to the GSE’s for California compared to the rest of the country, also measured by loan count.
Not only is the increase in share accelerating, but it’s also reached 80% of the total market! This speaks to the high degree of technical savvy among the residents of this state.
In the end, California is facing enormous challenges from the combination of the destruction of natural resources and Covid-19. But resilience, innovation, good governance, and technical savvy continue to bolster prospects for the Golden State.