'Locked Out' Part 5: A Regional Quandry

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(Davis, CA)
Thursday, April 28, 2005

Time was, ten years ago, that a person could buy a little starter home in the university town of Davis for around $150,000.  Those days are gone. 

“I’d say entry level is certainly between $400 and $500,000, in Davis.”  Kaethe Sullivan works for Lyon Real Estate. “We actually have a little over 80 homes, about 80 or 90 homes for sale in Davis right now, of which, believe it or not, there are 17 over $1 million.” 
For a pair of young public school teachers, each earning around $45,000 and trying to buy their first home, those prices leave only one conclusion.  “It’s impossible to break into the Davis housing market,” says Michael Joyce, president of the Davis Teachers Association, the union that represents local teachers. “Most of our members cannot afford to live in Davis, especially the new teachers,” he says. 

Joyce knows what he’s talking about. He and another teacher, Matt Best own a home in West Sacramento.  But Best is getting married soon, and he and wife-to-be are re-entering the housing market. She teaches in West Sacramento, and Best says they know that buying a house together won’t be easy. “It’s still going to be a stretch for us, on two teachers salaries, within a 40 minute commute of Davis, to get into a three bedroom two bath fixer-upper, with a hundred thousand dollar down payment.” 

Firefighters, police officers, and other public employees face the same situation as teachers. And it’s not just the rank and file. The city’s new police chief is commuting from the home he already owns in Elk Grove.
Davis home prices have basically tripled over the past ten years, rising faster than most cities in the region. According to Rob Wassmer, professor of public policy at Sacramento State University, two factors drive that trend. “No question, places like Davis are attractive because of the good schools, at least the perceived quality of schools, and the lower crime rates, and people are willing to pay a premium for that.”
High test scores and high home prices tend to go hand in hand, in Sacramento and elsewhere, says realtor Kaethe Sullivan. “The scores are high, and it makes people want to buy a house in Davis for their children. I’ve had people come in from Sacramento and buy just a second home in Davis, to live part time here so that their child can attend an elementary school.
Affluent families will also buy a house in Davis for their college age son or daughter who’s enrolled at the University of California. With home prices rising at a rate of about three thousand dollars a month, the investment can largely offset the cost of a college education.
But Sullivan says these people compete with first time home buyers which can make the Davis market pretty intense, especially at the entry level. “Right now, if it was priced well, if it was an attractive house, and it was a family style, something with three or four bedrooms, less than $500,000, it will probably sell within two weeks, if not sooner, with multiple offers.”
A bidding war can ensue between prospective buyers, driving the offers higher than the asking price. But she says if a buyer takes on more debt than they can comfortably sustain, they can jeopardize the quality of life they thought they were gaining. “Absolutely. It gets expensive. It can limit family vacations, it can limit family together time, mom and dad are both working, so there is a cost involved. Buyers still need to be smart and make sure they’re not buying over their own ability.”
After eight straight years of steep increases in home prices, the question on many people’s mind is “Where is this housing market headed?” Professor Rob Wassmer of Sac State advises that the law of supply and demand indicates that prices in expensive areas l would probably go down if enough new homes were built. But at the same time, we’d have even more people in Sacramento, more congestion, more air pollution. It’s really a policy quandary. We want it both ways, says Wassmer. “ We want a high quality of life, but at the same time we want to have low housing prices. And often times they don’t go together.”