That White Picket Fence

Picture that white picket fence with the little path leading to the front porch, 2.5 kids and a cute golden retriever –

BEEP, BEEP, BEEP, BEEP.  That was the alarm, it’s time to get up for work. Nice dream, but that scenario does not exist in California.

There continues to be talk of low interest rates, but those offers of 2.9% only matter if there is a property available to buy. Due to lack of inventory, sellers are receiving multiple offers, sometimes dozens, and are able to incite a mosh pit for the right to pay for the home. 

Case Study: In 2020, my wife and I were looking to purchase our first home in San Clemente or Dana Point – nothing available within our budget.  We expanded our search to San Juan Capistrano – still nothing available that did not require major renovations. One example, a 1,600sf 3 bed/2 bath home with a sagging roof and severely cracked foundation that sold for $760k.  After discussions with our realtor, we further expanded the search into Laguna Niguel after saying earlier in the year there was no way in H-E-double hockey sticks we would live in suburbia.  Yet we found a townhome and offered $10k over asking. They came back to say that they had 21 offers in one weekend at or above asking.  We countered at the very top of our budget, but still were nowhere close to the final sales price, which was $55k over asking. This year, another unit came up for sale in the same neighborhood and we went for it.  Again, multiple offers. Two other parties offered more, but we had a short escrow and the seller’s realtor liked us. We ended up getting the house for $50k over asking. 2 bedroom instead of 3, in a city that we didn’t originally want to live in.

According to 2019 census estimates, Orange County is home to over 1 million households with a median income of $90k. Currently on Redfin, there are a mere 220 3-Bed/2-Bath SF Detached or Townhomes for sale under $850,000 in the whole county. $850k x 0.2 = $170,000 down payment. Without major funding from family, extremely lucky sports betting or winning the lottery, very few families are able pull that kind of cash together. Single income households are likely shut out of home ownership all together.

As the pandemic got into full swing, working from home became a necessity and companies pivoted to keep their employees productive and safe. Particularly in parts of California, that trend is not going away.  According to a poll by LinkedIn, 55% of respondents believed that their industry could be successful on a work-from-home platform. Heading into 2021, more and more businesses are making their pandemic policies permanent, allowing employees to work from home full or part-time.

These changes are providing opportunities for more people to own a home. With no commute to contend with, saving substantial money on childcare and a significantly lower cost-of-living, someone working for a tech company in San Francisco can move from their apartment in San Francisco out to the East Bay and buy a home for the same or less.  Here in Orange County, instead of being constrained to a few cities in the home search, all the neighborhoods of the LA basin become options while still remaining driving distance from friends and family. Beyond that, cities across the country are seeing influxes of people from California whether they like it or not (usually ‘not’). Tucson, Denver, Boseman, Austin, the list goes on.  While keeping a West Coast salary, that household income goes much further elsewhere.

Moving forward, the 2020 pandemic “offices” of the dining room table or a plastic folding table in the garage are no longer going to cut it.  Residential architecture and interior design are likely to see home office spaces become not only an option but a requirement from buyers. With square footage always at a premium, incorporation of a desk as part of the stair layout, or a murphy bed in a third bedroom can give a developer a leg up on their competition.