Friday, July 30, 2021

Are Californians Really Driving up Values?

I hear this notion a lot from sellers and buyers. Typically this comes from anecdotal evidence like a buyer says... "I got outbid by a cash buyer from California." California has been the big bad boogeyman in the Northwest for decades now. For many years California real estate prices outpaced growth in the NW leading to an opportunity for Californians to sell or borrow against, their high priced properties and pay cash for similar properties in the NW often outbidding or displacing locals trying to buy the more 'traditional' way using a bank loan.

Much of it was perceived rather than reality, but there was some truth to the notion. The rapid rise in real estate values came to us because the Northwest is desirable. The Californians came here much like mid-westerners went there in droves during the Golden state's post-war boom. In the 1950s and 60s there was ample opportunity in California's booming economy and the weather and scenery was a lot better than most of the USA.

As a consequence to the demand and government actions, during the 1970s California real estate became very expensive. The state began to enact very strict building requirements and regulations that drove the cost of new homes up and demand continued to outstrip supple well into the 1990s. Many in the 31st state started to become unhappy with the crowds, high taxes, traffic, and escalating cost of living. Oregon and Washington among others, were natural targets for the aggrieved in California.

But how much of our housing costs are really being driven by exterior forces such as people coming from California? Maybe not as much as you think. Both Oregon and Washington have emulated to some degree the California regulatory atmosphere. A large chunk of a new home's expenses is permits and government mandates, engineering and such. This was one of the primary drivers in California's rapid housing rise in the 1970s and 80s. Now that the NW economy has become much more diverse than just logging and maritime industries, we too are in hot demand. Our land prices are rising as are the regulatory costs to build.

Washington State isn't even in the top five destinations for Californians moving out any more and hasn't been for years. One reason could be the fact that Washington State is the 4th most expensive housing market in the US and California is the 2nd. Washington is no longer a "bargain." In fact according to statistics from the National Association of Realtors®, King County Washington is more expensive than 52 of California's 58 counties. Yes only San Francisco, Santa Clara, San Mateo, Marin, and Santa Cruz counties are more expensive than King County, WA. Three of those five counties lost value over the last 12 months! King County as with most of Washington State is still seeing increases. Most residents of the Golden State can't afford to move here anymore. Even our local Clark County is about the same as Sacramento, County, CA.

Top Ten Counties on West Coast by Median Home Price Q2 estimate :

  1. Santa Clara County, CA population 1,927,000 (San Jose, Silicon Valley) $1,150,000 +4.1%
  2. San Mateo County, CA population 767,000 (Silicon Valley) $1,100,000 -6.5%*
  3. San Francisco City and County, CA population 875,000 $1,000,000 -6.9%*
  4. Marin County, CA population 260,000 (SF Bay Area) $965,000 -7.9%*
  5. Santa Cruz County, CA population 274,000 (Monterey Bay) $875,000 +4%
  6. King County, WA population 2,302,000 (Seattle) $800,000 +6.4%
  7. Orange County, CA population 3,168,000 (Anaheim) $795,000 +5.7%
  8. Alameda County, CA population 1,657,000 (Oakland) $775,000 -4.2%*
  9. Napa County, CA population 140,000 (Napa Valley) $725,000 +4.8%
  10. Los Angeles County, CA population 10,081,000 (Los Angeles) $705,000 +6.6%
* most of the year over year declines shown in the data have been recovered in a recent uptick in median home values.

The majority of California Counties are priced less than Clark County, WA (2020 data) :
  • Clark County, WA (Vancouver) $402,463
  1. Alpine County (High Sierra) $375,200
  2. Humboldt County (Eureka, North Coast) $366,400
  3. Stanislaus County (Modesto) $363,600
  4. Butte County (Sacramento Valley) $351,100
  5. Calaveras County (Sierra Foothills) $336,300
  6. Sutter County (Sacramento Valley) $333,200
  7. Amador County (Sierra Foothills) $330,200
  8. Mono County (Eastern Sierra, Mono Lake) $329,000
  9. Madera County (Central Valley) $318,400
  10. Yuba County (Sacramento Valley) $307,900
  11. Fresno County (Fresno, Central Valley) $306,400
  12. Tuolumne County (Yosemite) $304,500
  13. Trinity County (Siskiyou Mountains) $302,900
  14. Merced County (Central Valley) $300,700
  15. Shasta County (Redding, Shasta Lake) $297,700
  16. Mariposa County (Sierra Foothills) $290,200
  17. Inyo County (Eastern Desert, Death Valley) $283,300
  18. Colusa County (Sacramento Valley) $279,200
  19. Lake County (Clear Lake, Wine Country) $268,700
  20. Kings County (Central Valley) $265,200
  21. Tulare County (Central Valley) $260,300
  22. Tehama County (Sacramento Valley) $256,300
  23. Plumas County (Northern Sierra Foothills) $255,100
  24. Kern County (Bakersfield, Central Valley) $253,000
  25. Glenn County (Sacramento Valley) $245,500
  26. Imperial County (Desert South, Calexico) $244,300
  27. Sierra County (Sierra Foothills, High Sierra) $243,600
  28. Del Norte County (Crescent City, Redwood NP) $230,300
  29. Lassen County (Mt. Lassen NP) $213,700
  30. Siskiyou County (Mt Shasta, Siskiyou Mountains) $209,400
  31. Modoc County (Northeastern Corner) $148,000

The rising cost of housing is no longer about one "rich" group driving up values, but really our own state and local governments pushing of heavy and ever increasing regulatory requirements that drive up the cost to develop land and this is an AWESOME place to be and everyone wants to live here. This is what really drives the values up.  

So Californians may be a pain in the rear quarters, and don't get our more relaxed Northwest vibe, but they are not really the cause of our bloated real estate prices. That won't stop us from blaming them though... they messed up the Golden State pretty bad, so bad they are fleeing by the tens of thousands every year. We just don't want them screwing up our great state. The real boogeyman if we are honest, is King County and Seattle. They are buying up more Clark County homes than Californians at this point.

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