The endangered western home - Special Report

Sunset, May, 1993 by Peter Fish, Daniel Gregory

The low rates are the result of a simple and obvious fact: housing is expensive here. According to a recent National Association of Home Builders' housing survey--which factors in both median home price and median income--the nation's five least affordable metropolitan areas are all in California. They are San Francisco (median home price $285,000), Santa Cruz ($215,000), Salinas-Seaside-Monterey ($169,000), Santa Rosa Petaluma ($182,000), and Oxnard-Ventura ($195,000). You want to know the five most affordable metropolitan areas in the West? Here they are: Greeley, Colorado ($69,000); Denver ($91,000); Salem, Oregon ($75,000); Fort Collins-Loveland, Colorado ($85,000); and Salt Lake City-Ogden ($90,000).

It's hard to over-state the impact of the 1980s' rise in housing prices on the Golden State. From 1978 to 1990, the average price of a new California home rose 65 percent more than the cost of living.

Back in 1970, the median-priced house in California cost only 7 percent more than the median-priced house nationwide; by 1990, that differential was 111 percent. And because these statewide figures include less costly areas like the San Joaquin and Sacramento valleys, they don't adequately gauge the price rises in coastal metropolitan areas like Orange County and the San Francisco Bay Area.

What caused the climb? You hear a lot of different answers. One is that a huge cohort of baby boomers came of home-buying age. Another is sheer population growth. California's population increased by 6 million, or about 25 percent, between 1980 and 1990. But new single-family housing (including condominiums and townhouses) came fairly close to keeping up with that pace, increasing by 20 percent.

Some experts, like Cynthia Kroll of the University of California's Center for Real Estate and Urban Economics, believe that strict land-use controls, time-consuming permit processes, and impact fees levied on developers for streets, utilities, and schools are partly to blame. "They made developers build higher-priced homes," she says.

Others are less certain. "It's really hard to say why there was the huge rise in California housing prices," says William Fulton, editor of the California Planning and Development Report. "Developers will say it's the regulatory structure, and that's part of it. But if that's true, why are developers willing to sell houses today for $30,000 less than they were a few years ago? The boom was a feeding frenzy, one of those things you really can't predict."

Whatever the frenzy's causes, its effects were dramatic. In California, new development leapt to cheap land on the outskirts of metropolitan areas. Notes Cynthia Kroll, "People are willing to move far away and put up with long commutes rather than move into multifamily housing."

A second effect of the boom was rapid growth in cities outside California. San Francisco housing sociologist Nina Gruen notes that in 1990-91, for the first time in California's history, more 30-to-45-year-olds left the state than moved in. "Who can blame the emigrants when single-family detached homes located in desirable neighborhoods can be purchased in so many other states for less than $100,000?"