Realty Times September 3, 2003

California Yields Most High-Cost-Of-Living Markets
by Broderick Perkins

California is taking it on the chin again.

No, the Terminator hasn't given Gov. Gray Davis a stiff uppercut -- yet.

Home buyers in the Golden State, however, do feel the acute pinch of high prices.

San Jose, as the nation's least affordable city, San Francisco as No. 2 and Los Angeles as No. 9 make California the state with the most, least affordable places to live among the Top 10 "Most Overpriced Places," according to Forbes magazine.

Based on housing affordability, home prices, job growth and other factors, Forbes magazine's second annual roundup of money pits said San Jose has become an example of "the bigger they are" syndrome.

Once considered among the most desirable locations, San Jose is considered the capital of Silicon Valley and fell victim to a downturn in the same economic sector that gave the national economy the longest expansion on record -- technology.

The company perk parties are over, venture capital is scarce and joblessness continues to grow, but so do home prices. That's good news for owners and bad news for buyers and Forbes ranking. Forbes ranked San Jose 145 out of 150 for housing affordability (the median price listed by Forbes was $565,000, which isn't far off the local MLS's official $550,000 for July) and 144 out of 150 for job growth.

A 45 minute drive (when commuters aren't swallowing road rage) to the north, No. 2 San Francisco checked in with a $509,000 housing price, negative job growth and a smaller population than it had during the dot com Gold Rush.

From San Francisco in the north to San Jose in the south the San Francisco Bay Area has learned the true meaning of reversal of fortunes.

Also on the list of the most overpriced markets, which some say are also bubble markets waiting to burst, were:

  • No. 3 - Honolulu, where the waves are still surfworthy and the volcanoes haven't stopped erupting, and the tourists who do visit now get more beach per person. Affordable by California standards, the median home price was $350,000.

  • No. 4 - Bergen-Passiac, NJ, with a median home price of $358,300 that's more than twice the national median ($176,500), is largely a bedroom community of a commuter town affected by the greater New York City area economy.

  • No. 5 - New York, which has certainly had it's share of hard times from terrorism to a major black out (which doesn't mean the Mets didn't sell out again). With a median home price of $329,000 that belies the cost of many homes in the City That Never Sleeps, New York long ago left the ranks of affordable cities. The economic slowdown and high cost of housing -- and just about everything else from a slice of pizza to a taxi ride -- keeps the Big Apple expensive to the core.

  • No. 6 - Boston, hot on the heels of New York City. With fallout from the same technology sector that took California with it, Beantown, likewise, has long been an expensive place to live. The median price of homes is $413,500. Forbes concedes Boston remains one of the best places to attend college -- if you can afford it.

  • No. 7 - Chicago, another big toddling town down on it's luck. The job market is tough as the town and that makes it's median home price of only $220,000 more expensive than it appears.

  • No. 8 - Milwaukee, which only appears to be a surprise on the list. A closer look reveals a grim job market that makes it difficult for many working stiffs to come up with the cash necessary for a $173,600 median home price. All the beer just doesn't cut it.

  • No. 9 - Los Angeles, the largest city in the nation with some of the nation's largest problems. The median housing price of $307,900 keeps rising even as employment stagnates. Arnold should run for mayor and take on the City of Angels instead of grappling with California's bear.

  • No. 10 - Seattle, another bastion of technology and fortunes reversed. The median home price is a neat quarter of a million dollars, which many of the area's workers easily earned each year -- once upon a time. Now the perpetual cloud cover provides an ironic frame where there once was a silicon lining.

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