What does $500,000 buy you in Southern California real estate? A look at Culver City, Pasadena, and Riverside.
We have a large readership from California but also many others that simply enjoy peeking into the mania that is SoCal real estate. It must appear to an outsider that all Californians ever think about is buying, selling, and flipping real estate. During certain periods of time the mania gets out of hand and the delusion runs rampant across the L.A. River. We reach certain stages like today where prices are reaching limits in certain areas and people are no longer clamoring at every open house like a hungry house lusting lemming. Inventory is picking up as would be expected to start the spring season but also because investors are finally pulling back from their half-decade long binge. It is useful to look at actual home prices and what a certain amount will buy you in today’s market. Are prices justified? For many that question is merely answered by what a buyer is willing to pay. Can you fault a seller for trying to get as much as possible if a buyer is willing to foot the bill? The challenge with California real estate is that in order to reach healthy payment levels in certain targeted areas, a large down payment is required to make any economic sense. I can tell you that investors realize that any property will cash flow as long as the down payment is big enough. So what does $500,000 buy you in Culver City, Pasadena, and Riverside today?
A look at what half-a-million dollars will buy you in SoCal
People in California have lost all perspective on big sums of money. It certainly isn’t because incomes in the last decade have suddenly grown at a healthy clip. No, what has happened is that low rates have allowed for prices to balloon thus making a massively expensive purchase seem cheap. I’ve talked about folks being able to go with an interest only loan on a $1 million purchase and having their monthly mortgage payment under $2,000 (minus taxes and insurance of course).
Buying decisions are made given a host of life circumstances; marriage, divorce, driving distance to work, schools, etc. Some of these carry heavier motivating factors than others. I’m certain that for someone with kids good schools are a priority. Biologically most parents want the best for their family so that helps to explain some of the financially back breaking moves some people make to buy certain homes in certain areas. Yet people wanted these things a few years ago as well. It isn’t like suddenly parents became better today.
With that said, let us go on a house hunting trip with half-a-million dollars in our budget. Our first stop is Culver City.
6050 Canterbury Dr UNIT F223, Culver City, CA 90230
3 beds, 2 baths listed at 1,208 square feet
List price: $475,000
A condo with 3 bedrooms is a good size for a starting family. The HOA on this place is listed at $377. This place appears to have a pending offer on it already. The last sale on this place occurred in 2004 for $375,000.
Good deal? I’ll leave that up to you.
Let us head on over to Pasadena to take a look at a home and a condo.
1704 Corson St, Pasadena, CA 91106
3 beds, 2 baths listed at 1,112 square feet
List price: $539,000
The price seems steep especially since the assigned high school isn’t all that great. The above photo does more justice than the actual location:
Your front-yard view is the freeway! As we have mentioned before only 1 out of 3 families in California can actually afford to buy at today’s prices. The last sale on this place occurred in 2001 for $205,000.
The next place is a condo in Pasadena.
2386 E Del Mar Blvd UNIT 310, Pasadena, CA 91107
3 beds, 2 baths listed at 1,492 square feet
List price: $499,000
Both of these condos look like they have some work done on them. I think the Culver City condo has some better work on the place. The HOA here is $380. I crack up when I get e-mails from people in other states when they think this is the annual HOA (no, these are monthly HOA dues). Is this what you have in mind when you think of $500,000?
Finally it would be helpful to look at something in the Inland Empire.
8195 Aliso Ct, Riverside, CA 92508
5 beds, 3 baths listed at 3,802 square feet
List price: $525,000
This is a giant home. The last sale took place in 2002 for $407,000. Interestingly enough, plugging in the 2002 sale price into the CPI calculator gives us almost the current list price. But one thing people fail to factor in with a big house is big expenses. Are you ready for $500+ monthly electric bills on those hot days (aka the entire summer and some spring)? Do you have the energy to clean 3,802 square feet? The modern family at most will have two kids so what will you do with all those other rooms and space?
Keep in mind that this Riverside property is less than one hour from Orange County and Los Angeles County. This is merely a sampling of properties that are currently listed on the market today. The fact that investors are pulling back dramatically should tell you something. There are likely better, worse, and in between deals out there. From what I’m seeing, inventory is going up because sales are weak. People are still house horny. They just have a beer budget (income) with champagne taste. This isn’t necessarily happening because suddenly a flood of people are ready to sell. There is a natural ebb and flow to housing that has completely been circumvented in California. Some will say that this is simply the new market. Yet we have discussed that in California, timing absolutely matters. Boom and bust central folks. Buying a home is more than simply saying “in the long run, real estate always goes up!” In the long run we are all dead so simply looking too deep into the future probably doesn’t help with immediate economic decision making especially when it comes to real estate.