During the pandemic, people stayed at home and became more aware of both the benefits and drawbacks of their living space. At the same time, many companies realized they could get as much (or more) productivity from their employees via remote work. Now, as we settle into a post-pandemic normal, the high cost of California housing is causing people and companies to contemplate an out-of-state move. This is especially true when you consider that many property owners who purchased residential real estate as recently as a couple of years ago can sell and make a handsome profit if they sell soon.
One of my daughters is a prime example. She is thinking of selling her house in Santa Rosa, where her three-bedroom, three-bathroom, 1600-square- foot home is currently worth about $700,000. She would then move to Kentucky where she would be able to buy a five-bedroom, three-bathroom, 3,000-square- foot home for about $265,000. She could carry over the equity from her Santa Rosa house and lower her monthly mortgage cost to a third of what she is paying now.
Heck, I’ve considered liquidating some of my California real estate holdings and purchasing real estate elsewhere. In the Ukiah Valley, it’s impossible to find a duplex for less than $400,000 with rents around $1350 per two-bedroom, one-bathroom unit. In Davenport, Iowa, a comparable duplex costs about $218,000 with $850/unit rent payments. The rent-to-price ratio is astonishingly better outside of California.
If I may step on to my soapbox for a moment, I recommend asking your elected officials why housing costs so much more here than almost anywhere else in the nation. They may go on and on about how all their wonderful legislation makes homes safer and more energy-efficient, but they won’t be as eager to discuss the costs of those improvements. Solar power, all-electric appliances, interior sprinklers, and many other “great ideas” add significantly to the monthly cost of home ownership.
If politicians tell you that these improvements will reduce insurance premiums, I suggest you talk to your insurance agent to find out whether that’s true. Insurance premiums go up as the replacement cost of a home increases and all these safety and efficiency improvements will, no doubt, increase the replacement cost of the home. And if you are adding improvements after a house is already built, be sure the savings you gain from the energy efficiency is not immediately paid to the county in the form of higher property taxes. Some improvements trigger a reassessed value; others do not. Regardless of whether your property taxes go up immediately, upon the sale of your property, the cost of the improvements will be reflected in sale price of the home and will therefore affect its assessed value—and the property taxes will reflect this.
If you are a homeowner and you don’t need to live in California, the potential for a larger, nicer home with substantially lower cost exists elsewhere. If you would be just as happy living in South Carolina, for example, your housing dollars would go a lot further than they do here.
All that said, I must confess that I like living here. I like the weather, the geography, and the proximity to the Mendocino coast and the San Francisco Bay Area. Most importantly, all my kids still live nearby (at least for now), so I have no desire to move.
If you have questions about real estate or property management, please contact me at firstname.lastname@example.org or call (707) 462-4000. Dick Selzer is a real estate broker who has been in the business for more than 40 years.