Wednesday, April 8, 2009

Is the Location Equation broken

Location Location Location..... how many times have you heard that when looking at houses. But with the drastic drops in the cities on the outer edges of civilization is the location equation broken. Is a house in Corona really worth double what the same house is selling for in Hemet? There's always been a premium the closer you are to the OC. I don't recall it being double (or higher). It was 30%, 40% or maybe even 50% if you were really out in the sticks. Currently though it's 100% or even 150%.

Lets compare two similar homes.

First in Hemet. 1433 Veronica Trail. This is a 2005 vintage home with 3105 sq/ft having 5 bedrooms and 3.5 baths. The lot is average at 6500 sq/ft. The home is in good shape and the kitchen has all the modern niceties like granite counters. This home is an REO, it's been on the market for 80 days with no sale. So chances are the price is too high. That price is $170K or $55 sq/ft. Payments with 5% down are approx $900/mo plus taxes.

Our comparable home in Corona is 13692 Ruby Ave (in Eastvale). This home built in 2004 also has 5 bedrooms and 3.5 baths. It's slightly larger at 3271 sq/ft. It also looks nice and has new (cheap) carpet. On the negative side, the kitchen does have the old white tile counters and the lot is 1000 s/f smaller at 5600 s/f. It does have better curb appeal because some one is watering the grass. This one is asking $370k. payments with 5% down are $1900/mo plus much higher taxes. You also need double the down payment.

That's a $200k difference for fairly similar properties. Or you can look it another way. You could buy two homes in Hemet for the price of the Corona home. That way when your spouse pisses you off you have somewhere to go.

So, is it worth $200k to live in Corona? The stores are the same, the restaurants are the same, the weathers the same, both have several very nice golf courses but Hemet has a huge lake. I don't think any one will argue that Corona is a better area than Hemet. But is it worth $200k more to live in Corona? Think what you can do with that extra cash you are not spending if you buy the Hemet house. You can pad your 401K or you can pay the house off in 10 or 15 years, then relax knowing you have no mortgage payment to worry about. You can take nice vacations and drive better cars. Or live on one income, something unheard of in Southern California 5 years ago. One parent can stay home and raise the kids, what a concept!

Sure, if you work in LA or the OC this option might not be very attractive. But if you are a nurse or a have an occupation that can go anywhere, why would you sign up for $200k more debt than you have to. And it's not just Hemet that has these prices. They can be found in Winchester, Perris, Moreno Valley, Lake Elsinore, Menifee etc.


Oldtimer said...

In the late 1990s there was a Bay area study that showed that for each mile of commute from San Fran/San Jose, home prices declined by $10K.

Assuming your job was in Anaheim, how much further would a commute from Hemet be than from Eastvale? More importantly, assuming a daytime work schedule, how much earlier in the morning would you have to leave home. I've never done rush hour on the 91, but even in off-peak times that seems to be a pretty miserable freeway.

Todd said...

Commuting distance is almost removed from the equation when you compare Rancho Cucamogna to Fontana. Homes in the Etiwanda area (eastern Rancho Cucamonga) are considerably more expensve than what you find right next door in northern Fontana.

I'm still trying to figure out why similar homes are oftentimes 1.5 to nearly 3 times more expensive per sq ft just a couple of miles away (literally) in Rancho Cucamonga. Is Fontana's reputation really that bad?

Ken said...

That home in Hemet is in a gated community, or as we say in East Hemet a nice prison. That Willow Walk community is riddled with rental homes, thanks to flippers, so the area is a ghetto!!!

a said...

As far as Rancho vs. Fontana there is a big difference. It's like Chino Hills vs. Pomona (or even Chino.) I suspect the quality of the schools has a big impact on pricing too. But you can just drive around Rancho and then Fontana and notice a big difference. Not that I like Rancho, it's close to my work but it has zero character (strip mall hell.)

California Girl said...

The "weathers", or weather, is not the same. Eastvale, like Norco, is in a high wind area. Hemet, for some reason, does not get the exact same weather mix as nearby areas. Don't know if its the hills that block it or what but you will often find rain or wind near the 215 and no rain or wind in Hemet at the same time.
As for Corona being a "better" area than Hemet, think it depends on what area of Corona you are referring to. Also think its more a matter of taste.
Not everyone feels that closer to OC is better.If you don't have to go to OC for a job, why bother with it?

golfer_X said...

The wind near the 15 fwy is a result of the venturi effect of the canyons and passed. The northerly winds come down the cajon pass and rifle down the 15fwy. They peter out the farther away from the passes you get. Norco and Eastvale to get pummeled any time there is an offshore blow. Other than that though, they are both hot dusty hell holes in the summer with similar temps. The air does actually seem a little better though in the Hemet area than it does in Corona. Seems odd but that's been my experience.

As far as Rancho and Fontucky goes, there are nice areas and crap areas in both cities. But you are paying a boat load right now for that Rancho Zip and it's just stupid. There's no way a house on the east side of the 15 should be $200k less than the same home a mile away on the other side. The newer areas of either city are clones of one another. Any out of towner would never ever understand why there should be a difference between them.

Jack said...

i know this is the IE blog but if people have mobility in their careers and are looking for cost effective housing, a sweet life, and plenty of cash for retirement - i would say CA is the last place to be... lots of beautiful suburbs in other states where your salary & dollar can be stretched much, much further...

I'm Not POTUS said...

The only reason Corona carries a premium to Hemet is because a POS in Temple City is still overpriced.