Home Prices Statewide at Record Level

Last June, a window of opportunity opened for David and Lilliana Valdez. And the Burbank couple wiggled through, buying their first home, a roomy two-story house in this mountain town for $276,000.

A few months later, the same model sold for $362,000. Now, across quiet Green Street, an owner is selling a similar home for $420,000.

“We were lucky,” said Lilliana, 32, a mother of five whose husband commutes nearly two hours to a warehouse manager’s job in Chatsworth every morning. “I don’t know if we’d still be able to afford it.”

In California’s scorching housing market, the priciest in the nation, affordable homes for families like the Valdezes are moving out of reach. In some far-flung outposts that for years beckoned cash-strapped buyers, the cost of typical dwellings has nearly doubled in the last year.

The statewide median price of houses and condominiums -- the point at which half sell for more and half for less -- reached $424,000 in April, up $63,000 in 12 months, according to DataQuick Information Systems.

A year ago, renters looking to buy could afford the commuter towns of Southern California’s wind-blown deserts. Or, job permitting, they could migrate to the cheaper markets of the Central Valley or the state’s rural eastern and northern flanks.

Buyers continue to migrate to those areas but, on the whole, “affordable housing is disappearing in California,” said Leslie Appleton-Young, chief economist for the California Assn. of Realtors. “You’re constantly playing catch-up with the escalating prices.”

Her advice hasn’t changed. “My recommendation is the same as last year: Go east,” Appleton-Young said. “Buyers need to go inland or buy a condominium or double up with another professional single person. They need to be very creative and flexible.”

But housing away from the pricey coastal zones isn’t the bargain it used to be.

In the Inland Empire, soaring real estate prices are chipping away at the region’s long-standing reputation as a haven of affordable housing. House and condo prices shot up about $79,000 in a year, reaching a median price of $290,000 in San Bernardino County and $370,000 in Riverside County during the first quarter of 2005.

In the last five years, the share of households in San Bernardino and Riverside counties that could afford a median-priced home plunged from one-half to one-fifth, according to the Realtors association. The search for cheaper land is pushing the boundaries of Southern California’s suburbs to once-unimaginable limits.

Developers and buyers are venturing well beyond communities such as Victorville and Apple Valley, in San Bernardino’s High Desert area, and Beaumont and Banning, gateway towns to Riverside County’s Coachella Valley.

“I used to joke that one day people will commute to [and from] Barstow,” said John Husing, an Inland Empire economist and consultant. “It is no longer a joke.”

“The L.A. Basin has moved out here,” said Willy Olsen, a land broker in Hesperia, 35 miles north of San Bernardino. “Local commuters drive to Rancho Cucamonga, Fontana, Ontario, and some even drive to Los Angeles.”

Even out there, the buyer’s dollar doesn’t go nearly as far as it used to. In the last eight months, Olsen said, the price of an undeveloped acre of desert near town has doubled to $35,000, and some prime lots in Hesperia are going for $75,000. Houses that were selling for a median price of $168,000 a year ago now cost $275,000.

Some say the spiraling costs cannot be measured purely in dollars. The outward push taxes everyone’s quality of life, adding cars to the road and pollutants to the air. Those who can’t afford to move are crowding older neighborhoods in Ontario and Riverside, among others, sometimes packing two to three families in a single-family home.

“The housing market is broken,” said Sam Mistrano, deputy director of Southern California Assn. of Non-Profit Housing. “The starter homes are not happening at all in the Inland Empire. They look like starter homes, but they go for $400,000. They are only affordable in relation to the outrageous prices in Los Angeles and Orange County.”

In many ways, the cycle is predictable, Husing said, having repeated itself since World War II: People move to undeveloped areas, industry and services follow, property values rise and people move farther out. In the 1980s, for instance, an unprecedented influx of families from the coastal counties jolted once-sleepy communities from Rancho Cucamonga and Corona to Redlands and Moreno Valley.

“It will happen as long as you have population growth,” Husing said. “What has happened in the last few years is that the move has shifted to the deserts because that’s where the land is.”

The rush in the Hesperia and Victorville area has gotten so bad that Olsen is looking deeper into the desert for land attractive to builders. “I’m even seeing land listings out toward Trona, Ridgecrest, Ludlow and Amboy now,” he said. “A year ago, I would never even consider looking for listings out there.”

Olsen has been trying for months to find a plot for Ruth and Achinike Nwinye, both nurses from Garden Grove, only to lose out on four offers. “The market is moving too fast,” he said. “And now they’re right at the tail end of being able to get in.”

Ruth Nwinye, 42, a native of Zimbabwe, said the couple tried to buy a home in Riverside and in Redlands last year but didn’t have enough for a down payment. Her student loan lowered her credit rating.

“I’m frustrated,” she said. “If it’s meant to be, I’ll get this house or I’ll build my home in heaven.”

The story’s the same in Riverside County’s low desert communities, said broker Andy Dean of Desert Hot Springs, where the median price of a house or condo climbed $70,000 to $225,000 in a year.

“It’s wild; we’re growing like crazy,” Dean said. “We have 11,433 housing units on the books right now to be constructed. The problem is the price goes up 10 grand every month.”

Costs are also climbing along the Interstate 5 corridor, where communities increasingly attract commuters to Santa Clarita and Los Angeles.

The median price of a home in Frazier Park, near the Tejon Pass, has skyrocketed $163,000 in one year to $345,000, according to DataQuick’s analysis of house and condo sales for the first quarter of 2005.

A median-priced dwelling in Bakersfield went for $150,000 a year ago, but prices have since soared by $70,000.

By April, the Realtors association reported, about a sixth of the state’s households could afford to buy a median-priced single-family house, and less than a quarter could afford a condo.

By comparison, more than half of households across the U.S. could afford a median-priced home. (Those figures are based on a 5.8% interest rate for a 30-year fixed loan, assuming a 20% down payment, if a buyer with an average income spends 30% of it on a mortgage.)

The California Building Industry Assn. reported recently that 21 of the nation’s 25 least-affordable metropolitan areas were in California.

A DataQuick analysis of home and condo sales in more than 700 California cities and communities during the first quarter of 2005 showed that the median price was less than $100,000 in 16, compared with 41 a year earlier.

Likewise, the median price was less than $300,000 in 213 communities, down from 347 a year earlier.

Fueling the sales boom -- and the run-up in prices -- is the increased use of interest-only loans, which allow buyers to qualify for financing they might not have received under traditional lending rules. Even so, monthly payments on these variable-rate loans have become so steep that buyers with moderate incomes increasingly are shut out of the market.

In April, buyers in Southern California paid an average of $2,019 in principal and interest a month, up from $1,760 a year before, according to DataQuick analyst John Karevoll. Once property taxes and insurance are added, the total monthly outlay approaches $2,500, requiring a gross income of about $78,000 a year, Karevoll said.

“Even then, you’re kind of on the edge of what lenders are comfortable with,” he said.

However, defaults on home loans have remained at a historic low because the upward spiral of home values has allowed owners to borrow against their rising equity and remain solvent, Karevoll said.

About three-fourths of buyers are cashing in equity from one house to buy another, often putting a large down payment on the second, Karevoll said.

The remaining quarter are first-time buyers, who usually buy the cheapest homes available with variable loans, hoping to sell before their mortgage payments escalate. “Still, the entry-level part of the market is not as active as it was,” Karevoll said.

Even in Bakersfield, once among the state’s most depressed housing markets, home prices have doubled in three years.

That bothers Heather Richardson, who worries that she may no longer be able to buy a house in her hometown. Richardson, 32, makes about $45,000 a year selling houses in one of the city’s most affordable subdivisions, where the price of the cheapest model surged from $158,000 in early 2004 to $265,000 today.

“It depresses me because I haven’t bought one yet,” she said. “A year ago, I’d have been just fine in qualifying. Now it’s tough.

“And time is very important,” she said, “because prices are going up every month.”

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Housing prices and incomes in California’s counties

The median price for residences in the state hit $421,000 in March, up $68,000, or 19.3%, from a year earlier. The tables below show median housing prices in selected cities and in the state’s 58 counties, along with median incomes for each county based on 2003 tax returns. Marin County leads the state in all categories, with the highest incomes and the most expensive housing.

A sampling of less expensive cities:

*--* 2005 median 1-year City housing prices* increase *--*

*--* Barstow $110,500 $31,000 Susanville 135,000 14,000 Clearlake 148,750 51,250 Oroville 165,000 35,000 Coalinga 171,000 44,500 Running Springs 186,000 36,000 Bakersfield 220,000 70,000 Colusa 220,000 43,500 Desert Hot Springs 225,000 70,000 Fresno 225,000 48,500 San Bernardino 230,000 80,000 Eureka 240,000 50,000 Redding 250,000 40,000 Hesperia 275,000 107,000 Sonora 305,000 80,000 Sacramento 309,000 59,000 *--*

Among more expensive cities:

*--* 2005 median 1-year City housing prices* increase *--*

*--* Laguna Beach $1,350,000 $262,500 Del Mar 1,225,000 333,750 Santa Barbara 991,750 199,250 Indian Wells 760,000 210,000 Monterey 760,000 200,500 San Francisco 703,000 142,500 Santa Monica 700,500 20,500 Huntington Beach 643,000 143,000 San Jose 560,000 93,500 San Luis Obispo 548,500 101,000 Truckee 540,000 108,500 Ventura 535,500 110,500 Davis 515,000 113,000 San Diego 460,000 60,000 Santa Rosa 480,000 87,000 Los Angeles 400,000 75,500 *--*

Housing prices and incomes in California’s counties:

*--* 2005 2003 median incomes median housing All Joint County prices* Rank returns Rank returns Rank *--*

*--* Alameda $520,000 11 $38,411 8 $72,332 5 Alpine 325,000 29 36,124 10 61,315 16 Amador 311,455 31 33,632 18 53,436 26 Butte 250,000 40 26,205 44 46,857 42 Calaveras 350,000 26 33,453 19 52,726 29 Colusa 271,000 38 24,305 56 37,254 57 Contra Costa 495,000 15 42,880 3 78,366 4 Del Norte 172,500 53 27,825 39 47,062 41 El Dorado 440,000 19 41,609 5 69,086 7 Fresno 241,500 42 26,021 46 48,222 37 Glenn 191,500 50 24,523 55 38,902 56 Humboldt 252,500 39 26,157 45 47,641 39 Imperial 200,000 46 21,799 58 33,217 58 Inyo 300,000 32 29,120 34 53,275 27 Kern 199,250 47 27,729 41 49,223 34 Kings 192,000 49 25,839 49 43,320 46 Lake 228,000 45 26,702 42 43,306 47 Lassen 142,500 56 34,615 16 53,567 25 Los Angeles 429,000 20 27,746 40 49,701 33 Madera 247,250 41 25,718 51 43,152 48 Marin 775,000 1 44,797 1 94,410 1 Mariposa** 230,000 44 27,984 38 45,152 44 Mendocino 345,000 27 26,005 47 44,690 45 Merced 293,500 33 25,636 52 42,642 49 Modoc 78,000 58 25,749 50 39,022 55 Mono 510,000 12 28,556 36 56,153 21 Monterey 549,500 8 29,789 32 51,913 31 Napa 557,250 7 35,472 11 61,853 15 Nevada 399,000 23 32,682 21 54,739 24 Orange 548,000 9 34,632 15 65,772 10 Placer 456,000 18 40,015 6 70,149 6 Plumas*** 135,000 57 30,306 28 48,263 36 Riverside 370,000 24 30,227 29 52,839 28 Sacramento 343,000 28 34,087 17 60,292 17 San Benito 560,000 6 35,059 14 62,642 12 San Bernardino 290,000 34 29,829 31 52,185 30 San Diego 475,000 16 32,410 22 59,604 18 San Francisco 685,000 3 36,354 9 58,888 19 San Joaquin 369,000 25 31,804 25 55,188 23 San Luis Obispo 475,000 17 31,831 24 57,716 20 San Mateo 700,000 2 43,369 2 81,621 2 Santa Barbara 498,500 14 31,311 26 56,002 22 Santa Clara 599,000 5 42,642 4 81,233 3 Santa Cruz 625,000 4 32,002 23 62,299 13 Shasta 230,000 43 28,984 35 48,173 38 Sierra 161,000 54 30,309 27 47,201 40 Siskiyou 175,000 52 25,456 53 39,990 53 Solano 410,000 21 38,436 7 66,851 8 Sonoma 499,000 13 35,346 13 64,214 11 Stanislaus 320,000 30 29,987 30 50,619 32 Sutter 277,000 37 28,203 37 46,453 43 Tehama 192,500 48 25,978 48 40,868 52 Trinity 160,000 55 25,046 54 39,884 54 Tulare 185,000 51 23,373 57 41,033 51 Tuolumne 289,500 35 29,122 33 48,636 35 Ventura 525,000 10 35,370 12 66,083 9 Yolo 400,000 22 32,806 20 62,032 14 Yuba 281,000 36 26,505 43 41,809 50 *--*

*--* Statewide 421,000 32,242 58,653 *--*

*Median sales price, first quarter 2005. **Home sales through Feb. 22. ***New home sales only.

Sources: DataQuick Information Systems, California Franchise Tax Board. Graphics reporting by Daryl Kelley