California still golden for pricey homes

LOS ANGELES — Home prices might be plunging across California, but the Golden State still dominates the nation's 10 most expensive housing markets.

California accounts for eight of America's 10 priciest places to buy a house, according to the Coldwell Banker Home Price Comparison Index released this past week.

Topping the list is the tony San Diego-area seaside enclave of La Jolla, where the average sale price for a 2,200-square-foot house so far this year is $1.8 million. That's 13 times more expensive than the $133,459 average for a same-size home in Sioux City, Iowa, the most affordable market.

In Seattle, the average price for such a house was $584,500, Tacoma's was $338,750 and Bellevue's was $814,483, according to the study.

Coldwell Banker has been putting out this list for 21 years, and California has always been at the high end, said Jim Gillespie, the company's president and chief executive. That's true even now, as the state sees some of the biggest price drops in the country.

"They came up so much in California [before the declines], it still puts you at a higher price point than the rest of the country," Gillespie said.

And the reason for such longevity may surprise you. It's the landmark Proposition 13, passed in 1978, that capped the annual property tax at 1 percent of a home's value, said Daniel Blake, director of the San Fernando Valley Economic Research Center at California State University, Northridge. Most other places have a tax rate of 2 to 2.5 percent, he said.

"In California you can pay a higher mortgage and therefore buy a more expensive home for the same amount of money than you can in a place where you have higher property taxes," he said.

Coldwell Banker's list is based on the average value of a 2,200-square-foot house with four bedrooms, 2 ½ bathrooms, a family room and a two-car garage in 315 U.S. markets.

But two big markets — Los Angeles and New York — are not included.

L.A. is simply too big to get an accurate sample to compare with other areas, and skyscraper-friendly New York doesn't have enough houses in the sample size, said a Coldwell Banker spokeswoman.

There are two other reasons why California features expensive residential real estate, Blake noted: the economy and the Mediterranean climate.

"It [such a climate] is offered in about eight places in the world, so this is a very nice place to live," he said. "And we have a lot of really good jobs."

If you want inexpensive homes, go east. Eight Midwestern cities made the list of the nation's 10 most-affordable home markets.

Typically, homes near the coast or in resort areas appreciate more.

Overall, the average sales price of the homes that met the survey criteria was $403,738, a drop of 4.4 percent from 2007.

That reflects the decline in the housing market since the boom fizzled.

Fewer buyers and rising mortgage defaults have left many markets saddled with a large supply of foreclosed properties and other heavily discounted unsold homes, fueling price declines.

The drops have been most severe in California, Arizona, Nevada and Florida — states that saw a rapid surge in prices during the housing boom, but have since borne the brunt of the foreclosure crisis.

Home values in the Midwest, meanwhile, have also taken a beating, in large part because of rising unemployment in such states as Ohio and Michigan.

Philip Deslippe knows what it's like to go from a pricey coastal market in California to an infinitely more affordable city in the Midwest.

The graduate student and his wife moved earlier this year from Los Angeles, where they lived in a rent-stabilized apartment for $900 a month, to Iowa City, Iowa.

Now the couple own a three-bedroom, 1-½ bath home and pay a mortgage that's just under what they paid for their L.A. apartment.

No place in the study, which also tracked some international markets, was more expensive than Dubai in the Mideast.

A 2,200-square-foot, four-bedroom, 2 ½ bath home there averaged $2.5 million, or a third more expensive than a similar property in La Jolla.

In 15 markets outside the U.S., the average home price averaged more than $1 million.

Quito, Ecuador, was the most affordable housing market outside the U.S. The average home price in the South American nation is $140,100 — or about 5 percent more expensive than Sioux City.

About half of the U.S. housing markets surveyed had an average home price less than $300,000. In all, 13 U.S. markets in the study had an average home price of at least $1 million.

Among U.S. markets, Greenwich, Conn., and Beverly Hills, Calif., were ranked the second and third most-expensive markets, respectively, with average home prices just under $1.8 million.

The other California markets that rounded out the top 10 by price are Palo Alto, Santa Monica, Santa Barbara, Newport Beach, San Francisco and San Mateo. Boston was ranked ninth at an average home price of $1.5 million.

After Sioux City, the most affordable domestic markets were Jackson, Mich., with an average home price of $134,325, and Akron, Ohio, at $135,780. Canton, Ohio; Grayling, Mich.; Minot, N.D.; Arlington, Texas; Muncie, Ind.; Killeen, Texas; and Eau Claire, Wis.; rounded out the bottom 10 most affordable markets.

For more on about the index, go to www.coldwellbanker.com.

Information from The Associated Press was included in this report.