If you’re like me, you just have to look at those listing sheets in real estate office windows – and can’t help but do a double take at the prices.
We all know how absurdly expensive some houses are in San Francisco, Los Angeles and other well-to-do enclaves in California. Prices on the East Coast in places such as New York and Boston are astronomical, too – often several times those in middle America for a similar home.
Even knowing all that, it’s still astounding to see how big that gap actually is. About 44 percent of the total property value of $33 trillion in the entire country is concentrated in just five states: California, New York, Florida, Texas and Pennsylvania.
That’s partly because the coasts are the most densely developed and populated, but stratospheric prices are a major factor as well. Just by itself, New York City’s $1.5 trillion in property value accounts for 5 percent of the nationwide total, though its 305 square miles make up a tiny fraction of the total land area. Manhattan real estate alone is worth $733 billion, more than 37 states.
Max Galka, a numbers guru who posts at Metrocosm.com, came up with a cool cartogram that substitutes property value for land area. That map looks very different than the one on my elementary classroom wall.
California and New York are huge blobs, while states in the Midwest and South get scrunched down. At the county level, the cartogram looks even more different than a normal map, showing how super-sized property values are in California and the Northeast compared with the rest of the nation.
I have personal experience on this score. I bought a condo just outside Boston at the absolute peak of the market in 2004, paying more than twice as much as I did for a house in North Carolina. When I moved to Sacramento in 2010 – after the housing crash – I had to sell at a loss. So I was happy to find a nice house in East Sacramento for less money than in Boston. I certainly couldn’t afford a similar house in San Francisco.
Historically, lower housing prices in the Sacramento region compared with San Francisco and Silicon Valley have fueled growth here. But home construction isn’t a sustainable strategy for long-term prosperity.
We also don’t want to repeat the housing crash that plunged us into the Great Recession. There are signs, however, that another bubble is starting to form in California.
Barron’s, the financial magazine, had an analysis done on where homes are most overpriced. While U.S. home prices overall are 4 percent overvalued – much lower than the 15 percent during the 2006 boom – the numbers are higher in California.
In fact, of the top 10 most overvalued housing markets in the nation, six are in the state: Sacramento (14.9 percent), Oakland (12.8), Anaheim (10.9), Riverside (10.6), San Francisco (7.7) and San Diego (6.6).
If you’re selling your house or tapping into your home equity – or just want to feel a little richer – rising prices and a hot market are great. Not so much if you’re trying to buy a house.
The Sacramento Bee’s numbers expert Phillip Reese figured out that after a 6 percent increase in home prices over the last year, about two-thirds of the region’s households would be unable to afford the median-priced home at $320,000.
Either way, as real estate agents always say: Location, location, location.
By the numbers
Where selected states stack up in their share of the nation’s land area and property value:
- California, 4.3 percent of land area, 23 percent of property value
- New York, 1.4 percent, 7.1 percent
- Florida, 1.7 percent, 5.8 percent
- Texas, 7.1 percent, 5 percent
- Pennsylvania, 1.2 percent, 3.7 percent
- Nevada, 2.9 percent, 0.84 percent
- Arizona, 3 percent, 1.9 percent
- Oregon, 2.6 percent, 1.7 percent