Price gap between coastal and inland areas increasing

One of the most peculiar consequences of the last housing boom was that the gap in median prices between different areas narrowed; people were often so desperate to grab their own piece of the homeownership pie that they were more willing to ignore more extreme weather (such as in the desert areas around Los Angeles), a punishing commute or a dearth of cultural amenities.

But with prices in the inland areas now falling faster than in those regions closer to the coast, the pricing gap is now widening back to more historical levels, which will ultimately be good news for these areas. Writing in the Sacramento Bee, business writer Jim Wasserman gives some great anecdotes to back this up:

The price gap between the capital region and the Bay Area is widening fast. Ditto for Los Angeles.

According to the most recent statistics, the median selling price of a Sacramento County home is now $388,000 below that of Santa Clara County. Just three years ago, that median gap was $225,000, according to a review of November sales data from DataQuick Information Systems.

Likewise, Placer County's median sales price in November was $178,000 less than in Alameda County. The gap three years ago: only $49,000.

Transplants from Los Angles County also may find Sacramento County a growing bargain. The median selling price here in November was $209,000 less than in Los Angeles. Three years ago, that gap was $81,000.

What's going on? Well, it's not rocket science. Prices here have fallen 25 percent since mid-2005 and are still heading down. Prices in the Bay Area and Los Angeles County have held steady until recently – and they're still rising in Santa Clara County...

But the capital region's growing affordability could become significant. Between 2001 and 2005, cheaper homes helped attract more than 140,000 residents from five Bay Area counties and Los Angeles County.

That migration abruptly slowed in 2005. The capital region became too expensive for many to justify leaving the Bay Area, say some of the earlier transplants. Many are still reluctant to make a move, said Poppy Stercl, a Rocklin resident who relocated from San Jose in 2003.

"A lot has to do with the job market here not being as stable is it is down there," said Stercl, a residential mortgage consultant. "Even though the houses are cheaper, the job market isn't as stable."

In other words, it may take potential transplants a while longer to see the financial advantages of moving. Many real estate observers believe those outsiders are one factor that could help put a floor under this sagging market. The region's renewed affordability is something to keep an eye on.

As it will also be in other inland areas throughout Central and Southern California.