Inflated Bay Area Housing Will Prop Up Other Markets
Posted in Bainbridge Island, Investing on February 27th, 2006 by Chip GibbonsThe San Francisco Chronicle published an article this morning that supports my contention that housing markets like Bainbridge Island will remain an attractive alternative to Bay Area housing.
According to the article, 40% of Bay Area residents are thinking of leaving because of the high cost of housing there. That’s a lot of people.
Two out of five residents of the nine-county region have given serious thought to moving away — mostly because of high housing costs, according to a survey released today by a business and public policy group.
The Bay Area Council’s annual poll found that concerns about housing ranked as the region’s second-most-vexing problem, behind transportation woes.
Even with some recent cooling in the local housing market, the price for a middle-of-the-road single-family home hovers around $628,000, or about triple the national average. That means many families with two income-earners are having a hard time managing.
As I pointed out before, while housing prices are expensive here they are cheap relative to markets like the Bay Area. Those who sell properties in the overpriced markets can get much more for their money by moving elsewhere. That leaves them with cash to spend on other things which further props up the economy in their new location. Furthermore, with all that cash in the bank, they don’t have to borrow against their new home to buy stuff, making the economy in their new location more stable and sound.
Peggy and Ted Crane moved from San Carlos to Barrington, R.I., last year after nearly a decade in the Bay Area. Although their No. 1 goal was to move to an area with strong schools, they also stepped up to a bigger home.
Where their 1,700-square-foot San Carlos home sat on a 6,500-square-foot lot and was located on a street with some crime problems, their home in Barrington is 3,300 square feet on a three-quarters-of-an-acre lot and is one block from the Atlantic Ocean. The price tag: $650,000 compared with a nearly $1.1 million sale price for their San Carlos home.
“Everyone we run into is moving from California, the Bay Area,” said Peggy Crane, 35. “I thought we’d be exotic.”
Still, the Cranes say other costs — such as property taxes and food — are much more expensive than in the Bay Area. Ultimately, the couple hopes to move back to San Francisco after their two children, now ages 2 and 4, go to college.
For the time being at least, I will spare you a lecture on how government creates such massive distortions in the marketplace. There are currently 1900 posts on my blog and more than a few of them address that issue.