The Correlation Between California Commute Times and Home Value

With sandy beaches to the West, sweeping deserts to the East, and majestic mountains in between, it’s no wonder that so many people want to call California home. Because of its popularity, however, affordable homes are hard to find. In fact, according to the Legislative Analyst’s Office (LAO), housing is more expensive in the Golden State than anywhere else in the country–the average price of a house is 2.5 times the national average.

As in most states, housing prices tend to skyrocket in urban areas like Los Angeles and San Francisco (where the year-end 2017 median home sales prices were $592,000 and $775,000, respectively). That’s why prospective homebuyers often venture to outlying areas around major cities, where there’s an abundance of housing at lower costs. As do bargain-hunters as they scout for distressed homes (fixer-uppers) with drastically reduced prices that can make an otherwise steep market surmountable.

Each approach has its own trade-offs, but an important variable figures in to both: the length of the drive to work in miles and minutes.

Here we’ll look at the relationship between commute times and home values in California. We’ll also provide guidance for buyers as they weigh the importance of location when it comes to purchasing a home–distressed or otherwise.

Exorbitant Housing Costs Impact California Commute Times

The high cost of living in California can be chalked up to factors such as limited vacant land, little incentive for local governments to approve housing, the high cost of construction, and topographical constraints in coastal areas (hills, mountains, the ocean, and other bodies of water).

San Francisco County, for example, is one of the most expensive places to live in California and also has one of the longest average commute times.  According to data collected from the Census Bureau, roughly 14 percent of commuters in San Francisco County drove between 45 and 59 minutes to work in 2016.

Compare that to Imperial County (among the most affordable counties in the Golden State, with a median home sales price of $200,000) where only two percent of commuters drove for that same amount of time.

Amid these challenges, residents often have to make concessions in order to purchase a home. Most often, that means living outside of dense metro areas, and further away from where the majority of jobs can be found. Which, in turn, means longer commute times in the service of affordable housing.

Inland Cities and Long-Term Real Estate

In addition to long commutes, another concession prospective homeowners make when moving farther inland is a slow growth of potential property value over time.

According to the LAO, home prices in central cities of coastal counties throughout California have a tendency to increase faster than inland areas. This is due to the high housing demand, resulting in more competition, and thus higher prices.

Unmet demand for coastal housing spills over into inland areas where demand can be met. The net effect is mitigated by competition and lowers housing prices–not to mention, slower growth in property value.

This isn’t to say that home value won’t grow at all. Myriad variables influence local housing prices. Outlying cities can introduce new schools, universities, jobs, shopping centers and housing developments which, in turn, may stimulate a real estate renaissance.

When it comes to shopping for an affordable home in suburban areas, it’s just a matter of weighing the costs. For instance, if the reduced cost of a home is worth the commute and the risk of lethargic real estate growth, then for many the payoff is worth it. Slow growth is still growth.

The Land of Distress

A red flag, though, is when people aren’t commuting. This sign of a depressed local economy and high unemployment rate can also indicate an increased number of distressed homes in the area.

Take those aforementioned counties–San Francisco and Imperial. Respectively, they had among the highest and lowest percentage of commuters driving at least 45-59 minutes to work. Similarly, in 2016, San Francisco County’s total distressed sales made up only four percent of total home sales, while Imperial County had a total of 18 percent in distressed sales, according to ATTOM Data Solutions.

The numbers show that San Francisco is experiencing an urban housing shortage with flourishing suburban areas, while Imperial’s low number of commuters and high distressed sales reveal economic hardship.

Across California, almost every county that had a low percentage of distressed home sales in 2016 also had high average in commute times.

For example, these counties have some of the lowest percentages of distressed home sales and highest number of commuters:

  • Marin County–Five percent total distressed sales; 12.5 percent of commuters drove 45-59 minutes to work; median sales price of $950,000.
  • San Mateo County–Four percent total distressed sales; 11 percent of commuters drove 45-59 minutes to work; median sales price of $1,075,000
  • Santa Clara County–Four percent total distressed sales; 10 percent of commuters drove 45-59 minutes to work; median sales price of $860,000.

While counties that had exceptionally high percentages of distressed sales and lowest numbers of commuters included:

  • Kern County–18 percent total distressed sales; five percent of commuters drove 45 minutes; median sales price of $193,000.
  • Lake County–17 percent total distressed sales; six percent of commuters drove 45 minutes to work; median sales price of $213,750.
  • San Bernardino County–15 percent total distressed sales; four percent of commuters drove 45 minutes to work; median sales price of $270,000.

Being familiar with these statistics, when shopping for a potential home (especially a fixer-upper) in a California community, will not only help with making the right choice, but provide leverage at the negotiating table.

Tips for Future Homeowners

In addition to researching commute times and economic growth trends in a given area, here are tips when shopping for a residence in California:

  • Weigh gains and losses, such as buying a fixer upper instead of a turn-key property, or commuting longer to work in order to live closer to child care services.
  • When considering commute times, keep in mind that those long drives to work and back are likely only worth it if your home appreciates in value over those years of mortgage payments.
  • Consider public and private school options for children, and commute times / transportation options there as well.
  • In a geographically-diverse state like California, don’t be tempted to cut costs when it comes to having a future home evaluated by a geological surveyor. Find a company (for example, Disclosure Source or Certified NHD) that can provide a Natural Hazards Disclosure (NHD) report that covers detailed information about hazards such as fire, earthquake, flood, and landslide.
  • Make sure the home is financeable and insurable. Things like outdated wiring or plumbing, wood stoves, aged appliances, and rare materials (antique doors, hand-painted windows) can make a home difficult or more costly to adequately protect.
  • Research and enlist the help of professionals who can discern the value in different homes.

In California, counties with higher property values correlate with higher average commute times. Pay more than the average, and you’re likely to have a shorter commute. Likewise, counties with more distressed properties have lower home values and shorter commutes.

Sources:

Home value data in this article is sourced from ATTOM Data Solutions

Commute time data is sourced from the U.S. Census Bureau’s American Community Survey, available here.

Evan Brown is a copywriter based in San Francisco, California. He started at Esurance in 2016, following a stint as a freelance writer, during which time he wrote content for a wide variety of professionals — including actuaries, tech startups, YouTube fitness moguls, and Indie Filmmakers. He spends his free time reading the New Yorker on the roof and exploring the textured and tidal city called San Francisco.

 

 

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