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More than miles apart

California newcomers must leap the stunning home-price gap. It makes some think twice.

March 27, 2005|Marnell Jameson | Special to The Times

When Erik Mellquist graduated from the University of Michigan in 2003 with an engineering degree, he had a plan: Get married. Find a job. Buy a house.

The bride and the job proved the easy part. He and his fiancee, Emily, also an engineering student, married three weeks after they graduated. About the same time, Erik landed a job at an aerospace firm in El Segundo. But when the newlyweds arrived, he said, "the housing prices blew us away."

Based on Erik's salary -- Emily returned to school for a teaching credential -- they could afford up to $350,000 for a home. Because that seemed high, they looked at properties for $300,000 or less.

"We figured for $300,000 we could get something half as big and half as nice as our parents have," Erik said. Each set of parents owns a house worth about $300,000. His parents live in a 4,000-square-foot home on 2.5 acres near Columbus, Ohio, and Emily's live just outside Detroit in 3,000 square feet.

They figured wrong.

The sticker shock the Mellquists experienced is typical for buyers moving into the Golden State, where home appreciation has far outpaced that in most of the country. Even recent softening in some spots at the higher end of the market won't make a big difference to newcomers.

In the last five years, housing prices in the region have appreciated an average of 135.6, compared to just 41% nationwide, according to the California Assn. of Realtors and the National Assn. of Realtors. In November 1999, for example, the median price for a home in Southern California was $206,300; nationally it was $134,000. Fast-forward five years: The gap between home prices has widened to $486,100 in Southern California compared with $190,600 nationally. In just the last 12 months, the rate of appreciation in the Southland has been more than double that of the nation.

While housing prices have skyrocketed, Southern California paychecks have not. The median family income in Southern California last year was $55,103; nationwide it was $52,680, according to recent Census Bureau figures.

Californians who already own homes are basking in the rapid appreciation, but those who find the prices way beyond their means include people moving here from out of state. To make a move work, many are lowering their expectations and relying on creative financing and rising-but-still-low interest rates.

"Unless they're coming from another pricey market, such as the Bay Area or New York, a buyer relocating to Southern California usually winds up with a smaller house, a smaller yard and a home that's not built with the same quality," said PK Jenican, a Coldwell Banker relocation specialist in south Orange County.

"I can't tell you the number of times I've had women crying in my back seat," she said. "They all say, 'If you could only see my house back in so and so.' "

Cathy Abram was such a client. She and her husband, Scott, 41, moved to California in July from a 4,800-square-foot home on a wooded lot in Castle Rock, Colo., which they sold for $608,000. They bought a home in Rancho Santa Margarita for $769,000.

"Our new house is about half the size, on a smaller lot and cost more," Cathy said, adding that although both houses are 8 years old, the California house isn't built nearly as well.

"We loved Colorado and didn't want to leave," said Cathy, 37. But when her husband, who had left his job a year ago to start his own company, got an offer from a California-based medical care company that promised financial security and insurance benefits, they opted for security.

"Besides missing my friends, I miss the wide open feeling, the big sky and the pines," she said wistfully. "I now look at the Santa Ana Mountains instead of the Rockies every day, but this was the best choice for us."

Relocating from out of state is often tough, said Jenican, who represented the Abrams in their purchase. "I've had many [prospective] clients turn down jobs because they don't want to compromise lifestyle. They often say that even though they got a promotion, they feel as if they're downsizing. They feel like they're taking a giant step backward."

Aerospace engineer Mellquist, now 24, expressed that same sentiment. "Here I was making twice as much as all my friends, and they were buying houses and I couldn't. In Michigan, people don't live in apartments when they're married. They get a house and a yard. Many times we said, 'Maybe we should just move back.' "

Then their agent, Sandy Levy, with Horrell Realtors in Redondo Beach, got the listing for a probate property. The place was a rundown, 30-year-old, 1,000-square-foot one-bedroom condo in Rancho Palos Verdes with no garage and no yard. The Mellquists snagged it last March for $284,000.

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