By Jim Wasserman
Wednesday, Jan. 27, 2010
One of Sacramento's longest running competitive advantages its relatively cheap housing in a notoriously expensive state is back.
Call it the positive side of the region's long, painful contraction of housing values since 2005. Though the housing collapse has shredded the fortunes of thousands of existing homeowners, the sudden return of affordability also may help set the stage for an eventual turnaround.
Already, some people who were priced out of Sacramento just a few years ago have bought homes and settled in bringing their job skills with them.
"It's not the be-all, end-all," Jeff Michael, head of the Business Forecasting Center at Stockton's University of the Pacific, said of the affordability factor. "But for sure it's going to help with the recovery."
Widespread $400,000 and $500,000 price tags for single-family homes "used to be a hurdle," said Barbara Hayes, who woos companies and jobs as head of the Sacramento Area Commerce and Trade Organization. "Now (they're) not."
With median home prices back to 2001 levels in many parts of the region, skilled outsiders and professionals have begun trickling back to Sacramento's housing market. From July 2008 to July 2009, the population of the four-county capital region comprising Yolo, Sacramento, El Dorado and Placer counties grew 1.1 percent faster than the state as a whole, according to the California Department of Finance.
Placer County, which saw its median home price drop 13.6 percent in just the past 12 months, posted the region's strongest growth, adding about 1.8 percent to its population. In December, the median price for a house in Placer was $275,500, compared with $525,500 at the market peak in 2005.
The migration suggests a resumption of Sacramento's 1995-2004 "brain gain," a pattern identified by the Public Policy Institute of California. The PPIC said people moving into the capital region then were better educated and more skilled than those leaving. The magnet then as now was reasonably priced houses.
"We liked where we were, but it was way beyond our reach to own a home," said attorney Anthony Cortez, who left Orange County with his family in 2008 for a house in Lincoln. After a year of renting there, the now-Sacramento attorney closed escrow before Christmas on a distress-sale property in Lincoln Crossing.
"We paid literally less than half what the original owners paid for it," said Cortez. He said many of his new neighbors are also from Southern California and the Bay Area. All bought at housing-bust prices in a new neighborhood plagued by foreclosures. Consequently, they also have more disposable income to help fuel regional economic activity than the previous owners.
"Three or four months after we moved in, a friend of my wife's from the Bay Area saw where we were living," said Cortez. "She came, too." The friend's husband, a computer engineer with global clients, now works from home in Lincoln. It's one more job created in a region with 12.3 percent unemployment.
"We wouldn't have done this two years ago," said Cortez.
Michael, a Maryland economist who moved into the capital region in 2008 and bought a house at 2009's lows, said the same about his decisions.
"I would not have come in 2005 or 2006."
Clearly, Sacramento buyers are scoring real estate deals unimaginable three years ago. Still, the larger economic gains of cheaper home values remain hard to identify in a region shedding jobs instead of adding them.
The real estate collapse remains a significant hindrance to recovery, spilling people out of foreclosed homes, chilling spending and undermining the tax base.
When the local economy improves, economic development officials say, cheaper home prices will be just one competitive factor among many for resumption of job growth and Sacramento won't be the only region to possess it. Home prices are falling throughout the nation, as well as in Sacramento, says Hayes. When it comes to competing for jobs, there's also the regulatory climate, quality of a region's work force and stature of its culture and amenities to consider.
But it helps if people can afford to buy houses.
"It's a nice carrot to offer a company that's relocating or transferring employees that you can buy more for your money in Sacramento," said John Boyd, a corporate relocation consultant in New Jersey.
More house for the money attracted Ryan Green, a sales executive for Superfeet Worldwide, from Park City, Utah, to Rocklin's Whitney Ranch community late last year.
"I had the ability to live anywhere along I-80 from San Francisco to Auburn. But we chose the Sacramento area for the lower cost of living and lifestyle," he said. "The factor that had the most weight was the cost of housing."
Green's decision, too, effortlessly added a job in the region. It also added his wife's graphic design skills to the regional talent pool that employers will someday need to tap again.
"We were looking to come out here a couple of years ago," Green said. "But after looking at the cost of living then, it basically killed it for us."
Statewide, the California Association of Realtors says median home sales prices are down a third from their boom-era peaks in coastal areas and more than half in inland areas such as the Central Valley and Inland Empire of Southern California. Jared Weed, a recruitment services manager at large regional employer Sutter Health, said that means "qualified applicants can still choose where they want to live and buy a house at a very respectable price in that region."
Hayes said that's why SACTO still emphasizes advantages other than cheap homes. Touting cheap housing alone can wind up attracting lower-quality jobs that subsequently get moved to somewhere even less expensive.
"When I started at SACTO 15 years ago, that was our position: We are affordable in California," said Hayes. "We moved away from that in the early 2000s. We market ourselves now on the strength of our work force and access to markets."
Relocation consultant Boyd said it's true that corporations can always find somewhere less expensive than a less expensive part of California.
"There is a trend now toward small markets in the Midwest," he said.
In one part of the capital region, Davis, little has changed as a result of the housing bust that flattened prices to the east along I-80. Home prices remain relatively high in the university city, which sits just a little closer to the Bay Area than the rest of Sacramento.
The cost of housing "was a problem, and it still is," said Pam Marrone, owner of the biotech firm Marrone Bio Innovations. Yet location always trumps cost for her more senior staffers, she said. No one is turning down job offers because of housing costs in Davis, she said. "We have Ph.D.'s. They want to live in Davis."
ABOUT THIS SERIES
Listen to Insight on Capital Public Radio at 10 a.m. to hear Bee reporter Jim Wasserman talk about today's installment of Road to Recovery, an ongoing series by The Bee and Capital Public Radio examining the people and companies that will contribute to Sacramento's recovery. The next Road to Recovery stories, dealing with the health care industry, will air Friday on Capital Public Radio during "Morning Edition" and run Saturday in The Bee.