August 23, 2006
California Middle-Class Packing Up, Heading East
By Jim Christie
OAKLAND, California -- Father Mark Wiesner has grown accustomed to wishing parishioners bon voyage as they flee the San Francisco area's high housing costs for California's Central Valley, where developers are increasingly transforming farms and ranches into a new suburbia.
Tracy and Modesto are 50 and 80 miles east of Oakland respectively. Both have seen blistering growth in recent years amid a middle-class exodus from California's famed coastal urban centers in search of affordable housing.
Analysts say the middle-class flight will press on even if coastal home prices sag amid a national housing slowdown. Home prices near the state's coastline would need to collapse to make buying a home there possible for many households.
Barring a collapse, ever more Californians will call the state's Central Valley home because homes there are relatively affordable. July's median home price in San Francisco was $771,000, compared with $438,000 in San Joaquin County roughly 60 miles to the east, according to real estate information service DataQuick Information Systems.
Southern California is seeing a similar exodus to Riverside and San Bernardino counties, known as the region's Inland Empire, from Los Angeles, Orange and San Diego counties.
"Having been in the house market in Los Angeles, I can tell you a house with little bit of privacy and space to call your own is pretty hard to come by," said economist Christopher Thornberg of the consulting firm Beacon Economics. "For many people getting out to that Inland Empire is the only way to really have a backyard for the kids."
Demographers expect inland California will post the fastest growth rates of any state region as families seek the American Dream -- at the cost of long commutes to distant jobs. Over the next 20 years, the population of the state's inland counties will rise by 45 percent compared with 17 percent in coastal counties, the Public Policy Institute of California projects.
'IT'S FLAT IMPOSSIBLE'
Big-box stores, malls, business parks and houses sprouting up throughout inland California underscore that newcomers are staying put -- to frustration of many in coastal cities.
Oakland lost an estimated 5 percent of its residents between 2000 and 2005 as home prices skyrocketed. Its police department now advertises for new officers by promising to offset high living costs with starting salaries among the highest of any department in California.
In Santa Barbara the hard reality of its housing market is causing some to rethink the city's anti-growth attitude.
"Unless you're coming in with equity from some place, it's flat impossible for a person on a middle-class income to purchase a house here," said Bill Watkins of the University of California, Santa Barbara Economic Forecast Project.
Santa Barbara has become so concerned about middle-class flight it may rezone industrial land to allow condominiums to be built for families with annual incomes of up to $160,000, or 234 percent of the area median for a family of four.
"They can afford a $600,000 home but the median price of home in Santa Barbara is $1.2 million," said Steven Faulstich, housing programs supervisor for the city.
Many in the San Francisco Bay area are in the same predicament, the reason the interstate linking it to the Central Valley has become one of California's most congested freeways, said economist Sean Snaith, a consultant to the University of the Pacific's Business Forecasting Center.
During bouts of insomnia, Snaith has witnessed the cost of the congestion from the window of his home in the Central Valley city of Stockton: "It wasn't unusual to see people lining up at 4 in the morning at the gates of the community where I was living to begin their commute to the Bay area."