VIEWPOINTS : What Is the Impact of Rising Home Prices? : Sticker Shock Awaits Workers Considering Jobs in California
A s anyone shopping for a house in California knows, home prices here have been skyrocketing. The California Assn. of Realtors has reported that the median price of an existing house climbed 21.2% over the last 12 months, and the percentage increases were even higher in Orange, Ventura and Los Angeles counties. For some businesses and consumers, the rapidly rising housing prices have had unsettling effects. To explore the impact, free-lance writer Meredith F. Chen talked to various authorities. Excerpts of the interviews follow:
Wes Niemond, an executive recruiter in Pacific Palisades:
“It is difficult to recruit people into Southern California and the Silicon Valley area because of (increasing housing costs), and therefore the firms have to look to other places, to perhaps put some plants in areas where home prices are less. They’re moving out into the Imperial Valley, out toward Riverside, but’s that’s only a Band-Aid because eventually the homes are going to increase out there. However, I don’t see any evidence that the California economy has been hurt by increased housing prices because people are still coming into the state.
“The cost-of-housing issue comes pretty early in the conversation. . . . We can’t afford to have it come up later in the conversation when the person has been brought out for an interview and then goes into a state of shock. We tell them ahead of time what the situation is.
“I’ve seen no indication that people are moving away because of the high cost of living. They might move away because they want to get out of gridlock or smog, but I haven’t seen any evidence that people leave because of the cost of housing.”
Cynthia Kroll, regional economist with the Center for Real Estate and Urban Economics, UC Berkeley:
“What we’re finding is that companies are having to pay some part of that higher housing cost. I think a person who has to move to California looks twice because of the housing prices, and if they’re good enough, they’ll command a premium from the company to move here. Many companies are willing to pay that, as an added cost to the operation of that business.
“It’s important to realize that the (factors that affect) business growth are not only housing-related and that housing prices themselves are going up as often because you’ve got a strong economy as for any other reasons that people focus on.
“If you have strong economic growth, you’re probably going to get an increase in housing prices even if you have a fairly open environment for constructing new houses. When you’ve got a restricted environment, they’re going to go up a lot more. And Southern California is becoming more and more restrictive.”
Stephen Levy, director of the Center for the Continuing Study of the California Economy in Palo Alto:
“The trends and the data indicate still that the L.A. region is one of the fastest growing economies in the nation, and, if anything, that it has accelerated in the last couple of years. No one can say that (increased housing costs) have slowed down or adversely affected the L.A. economy. High housing prices are the result of an area that is very attractive to live in. . . .
“The idea that high housing prices will make the L.A. economy undesirable has it backwards. It’s backwards because people are bidding for those houses because they want to live in them.
“What makes the area attractive, aside from the things that have made it attractive for five decades, are its abilities so far to produce good job opportunities.
“If you ask me, ‘Are high housing prices restricting access to the market for certain groups?’ the answer is unequivocally yes. You have no evidence of economic decline or slowdown even though you have evidence that a few people can’t buy housing.
“The L.A. region is very, very big and the high housing prices that you find and the rapidly rising prices that you find are truer in some areas of the region than in others. For example, it is still true that in many parts of Riverside and San Bernardino counties the housing is quite affordable, which (explains why) the growth is going there.
“Whereas in parts of Orange County or the West Side of Los Angeles, the housing prices are truly staggering. But it is not true that the region as a whole is pricing people out. You have many housing markets in the Los Angles region, and not all of them are showing the characteristics of being tremendously high-priced.
“You don’t see firms leaving the L.A. basin, you see more jobs coming in. You see growth rates above average, you see a very health economy in terms of job creation.”
David A. Carothers, a radio communications equipment distributor who moved this summer from suburban Chicago to Glendale:
“Coming here from Illinois was quite a shock in that in Illinois we had a custom-built, solid-cedar, contemporary house that had all of our personal touches--brass, oak, skylights, decks, spas, the whole nine yards. And we came here and had to actually scale down a thousand square feet and ended up with a house that is 50 years old. It’s in need of everything. (Moving here) . . . was a tremendous shock.
“We considered not coming when we came out here and saw what the situation was. Very much so. Initially, we in fact had decided not to take the relocation because of the housing costs, because of what you are getting for your dollar versus what we had in Illinois. In Illinois, a $390,000 home is at the extreme top end, and that is a 1 1/2-acre custom-built home. Whereas in this area that is like starting prices and that’s just the low end.
“I think that California will absolutely price itself out of the market. There are people now that I don’t think can afford to take a relocation to California because of the housing market.
“I was employed by a major top 10 Fortune 500 corporation for the last 22 years and I was overseas, which gave me an advantage because I was earning more money. My wife has been with a major corporation for 12 years. We both look at each other and say, ‘Well now, what have we done wrong?’ Here we are with a combined income well into the six digits and we’re saying that we can’t afford to buy anywhere close to the style of home or the life style that we’re accustomed to.
“So I think California is most definitely going to price itself out, or you’re going to get into the situation where large corporations are going to start having to give some kind of housing allowances to be able to attract professionals to come out here.”
Trish Phillips, real estate agent with Coldwell Banker in Glendale:
“One thing I’ve found is that a lot of people who relocate to the Los Angles area are coming from other areas where a long commute is acceptable, so for most people it’s not a real problem. It’s just a choice of a long commute or less housing. They are usually surprised at home prices because it is one thing to hear that it is more expensive in the Los Angles area and another thing to see the actual housing that your buying capability affords. It can be very, very depressing.
“I think people are more career-oriented than they were, say, five years ago and the step up is more important than life style because they know it’s a means to an end.
“With first-time buyers, it’s just a matter of priority, and a lot of them, instead of opting to go into a house, will go into a condo, whereas before they didn’t want to do that. There used to be the idea that you had to start out in a house like your folks have, but that’s not so anymore. A lot of first-time buyers are buying houses and fixing them up, and they are more willing to go into some of the outlying areas so that they can get a house.
“People’s houses are more of a priority than they have been in the past. It’s more of a commitment. Before people had their house, but they had a lot of toys too. If you want to stretch your budget on your housing, there is not a whole lot left for other things. People who buy houses are not going to have a lot of money left over money for boats and campers. It really is a commitment because it’s going to be their entertainment.”
