This piece is for all the would be Orange County home buyers who lament that our housing prices are insanely high. That this is “unsustainable”. And that there is certainly “…going to be a huge correction”, making homes more affordable as in (fill in the bank) “other state” where the disparity between income and housing prices is not so great.
Take for example this lovely, albeit shockingly bright green, Craftsman style home. This is actually my father’s house. They paid $27,500 in 1972 for what was then a 1,000 square foot ($27.50 per square foot!) one bedroom cottage on a 7,500 square foot lot in Los Gatos California. For those of you who don’t know where this is, it’s a small town about 40 miles south of San Francisco. It is also home to, literally, hundreds of Silicon Valley millionaires. Regrettably my father is not among them. But I digress. This is a very desirable community with some of the highest priced homes in Silicon Valley.
Today, after a “massive” remodel adding a whopping 400 square feet and updating the kitchen and bathrooms, my Dad’s home is worth roughly $1.75 million, or $1250 per square foot. Not a bad return on their investment, right?
Now compare this to a very similar home in Newport Beach, like this one at 1807 Highland Drive, in prestigious Santa Ana Heights, that Coldwell Banker sold in April for $1,300,000. It was built 8 years after my Dad’s house, but is effectively identical in every other way. At $887 per square foot, it’s a bargain compared to the Los Gatos home. And you can bike to the beach from this one!
According to Core Logic’s DQNews.com, the median home price in LA County is now $532,000, and OC’s median is $640,000, versus San Francisco’s median of $1.15 million and Santa Clara County (where Dad lives) at $870,000. And that’s just the west coast.
Examining our neighbors on the other coast, the median price in Manhattan is $994,558 and $563,416 in Brooklyn. Take a look at this stunning condo at 460 W 42nd Street with epic views of the Hudson river and downtown. Recent sales in this building are in the $2600+ per square foot range. Holy cow! That’s more than twice the average for a luxury condo in San Francisco or LA.
While I am not going to argue that Orange County homes are “affordable” by anyone’s measure. I will point out that real estate has become a little ridiculous in other regions as well, with significantly less desirable climates, where there is a great deal more crime, higher unemployment, grossly inferior schools and limited prospects for economic growth. Orange County is a relatively young area with lots of untapped potential for growth and stellar public schools.
Those of you who read my August market report titled “Is the Sky Really Falling?” know that home sales have remained quite stable here in the OC for the past several years. All of this leads me to reassert that this not only a wonderful place to live, but also a sensible way to invest your hard earned cash.
Albeit a little more cash than if you were to brave the snow somewhere else. But why would anyone do that?