What Half a Million Buys You Around California (And How It Shapes Where We Move)
Tuesday, May 22, 2018
Photo by Matt Levin / CALmatters
The median price of a California single-family home is now well over half a million dollars. That’s more than double what the average house costs in the rest of the U.S.
Put a more nauseating way, you could buy two “average” non-California houses for the price of one California house. Can’t decide between the Cape Cod or the mid-century Craftsmen? Move to the Midwest and buy both!
You’d forgive Californians, though, for shrugging off words like “average” and “median” to describe the state’s housing situation. Our state is nearly 164,000 square miles, with housing markets as distinctly different as Redding and La Jolla. That means half a million dollars may sound pricey to those in Barstow, but it’s a bargain for anyone in Silicon Valley.
Here’s a tour of what $500,000 gets you around our state — and how cost has shaped where we’re moving.
Silicon Valley: Half a Burned-Out Home
Technically, California has seen higher prices before. During the housing boom of the mid-2000s, the median statewide price nearly broke the $600,000 barrier (and that’s without adjusting for inflation). Many parts of California are still cheaper now than they were a decade ago.
But Silicon Valley is not one of those places.
The median price of a single-family home in Santa Clara County — home of Apple and Google — hit $1.4 million in March of this year, according to data from the California Association of Realtors. That’s an all-time high.
The region’s housing market has transformed any piece of available land into a veritable gold mine. No matter what sits on top of it.
Real estate agent Holly Barr said she’s never had a listing generate as much attention as the one on Bird Avenue in the San Jose neighborhood of Willow Glen. The house caught fire two years ago during a remodeling job. What was left was a burned-out husk of a California bungalow sitting on 5,800 square feet of land.
When Barr put the property on the market in April for $800,000, the listing made international headlines. It sold for over $900,000 — in less than a week. The burned down house will be razed and a new property will be built there that will likely sell for far more.
“I wasn’t surprised,” said Barr. “It’s not about the house, it’s about the land and location.”
It’s also not a surprise that with unliveable wrecks selling for that much, residents are starting to look for other places to live. According to data from the California Department of Finance, Santa Clara County lost 17,000 more residents to other parts of the state or country than they gained last year. That’s the second biggest net domestic migration loss of any county in the state.
Los Angeles: A fixer-upper, or a house smaller than your expectations
Los Angeles County saw the largest drop in net domestic migration, losing 58,000 more residents than it brought in. The region tops the list partly because it’s simply so huge. More than 10 million people call it home, which means any population shift in L.A. County is likely to dwarf other parts of California.
But the rising cost of housing is also playing a role. The county’s median home price broke the $600,000 barrier late last year. In a region famous for sprawl, prices are getting prohibitively expensive in and around L.A.’s downtown core.
Los Angeles real estate agent Jenn Cahill specializes in neighborhoods east of downtown Los Angeles like Boyle Heights. She said she gets approached by young families with budgets of $500,000 all the time. Which means a lot of her role is adjusting expectations.
“You walk into a bedroom, and they immediately think it’s a closet,” Cahill said. “And you’re like, no, no, no, it’s a bedroom, with a little shoebox closet in the corner.”
Cahill said options are limited if you want to stay relatively close to downtown — you could find a fixer-upper closer to your job, or you could choose to go farther out and commute. A recent study found that Southern California commutes were the most stressful in the country.
Sacramento: A large suburban home — that is luring Californians
Where are housing refugees from the Bay Area and Los Angeles going? Many are heading to the Sacramento area, where $500,000 still gets you pretty nice digs.
Sacramento saw the largest population growth of any major city in California last year, breaking 500,000 residents for the first time. Where did they come from? Topping the list were L.A. and Santa Clara counties.
Why? A five-bed, three-bath home in Elk Grove, an affluent Sacramento suburb, goes for $490,000. Realtor Veronica Nelson specializes in showing what middle class Bay Area families can get 90 miles East.
“I’ve had teachers, Kaiser employees. They commute [to the Bay],” Nelson said. “Spend a night or two with a relative in the Bay Area, and make the best of it.”
Nelson said she often talks with other Sacramento real estate agents about the influx of residents from costlier parts of the state. She worries that Sacramento is becoming unaffordable to Sacramentans — and knows some clients that are pushing even farther East.
Reno, Nevada: A big, big home — but maybe not as big as you think
Five years ago, Mike Wood said he’d probably get one Californian a week seriously considering buying in Nevada. Now the real estate agent gets one a day, from places like the Bay Area and Los Angeles and Sacramento.
“The reasons are almost always financial,” Wood said. “Their dollar does go further. And our prices have definitely come up over the past five years in large part because of the influx.”
According to the real estate data firm Zillow, the median list price of a single-family home in Reno has jumped from about $300,000 in 2015 to nearly $420,000 today. Part of that run-up has been fueled by the arrival of electric car manufacturer Tesla.
That means some of Wood’s California clients who expect half a million will should get them a mansion in Reno are disappointed.
“We get people that come up and say, ‘that’s ridiculous,’” Wood said. “‘I should be able to buy that home for $400,000, it’s ridiculous how much your prices have gone up.’”
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