Explaining Southern California's economy

If you want to buy a house in Santa Monica, bring $1 million or go home

ferris wheel santa monica pier

Photo by guyprentice via Flickr Creative Commons

Gorgeous. You can visit, but if you want to live with this view, you'll need a million bucks.

This week, real estate tracking firm DataQuick released its annual report on the condition of the million-dollar (and up...waaayyy up) home market in California.

There was the usual drive-by-and-gawk stuff. The Woodside manse that went for $117.5 million in 2012. A 13-bathroom (is that unlucky?) palace in Bel Air. The seemingly impressive 26,993 homes that sold for a million or more in 2012 in California, a 27 percent rise from 2011.

Why seemingly impressive?

Because in 2007, the total was 45,502.

How far we have fallen.

The report also contained this astounding factoid: "Virtually all home sales in some communities were in the $1 million-plus category." 

One of those communities was Santa Monica. Specifically, what DataQuick analyst John Karevoll identified as the "enclavish" zip code of 90402, where 91.2 percent of the homes sold in 2012 changed hands for at least a million bucks.

Karevoll said even Beverly Hills 90210 couldn't match that - only 84.8 percent of its homes sold met or exceeded the million-dollar mark.

The adjacent zip of 90212? Sorry. A paltry 59.1 percent of homes qualified. That's barely a majority!

What's interesting here is that Santa Monica didn't make the big DataQuick list of places in which homes sold in the mega-millions. So if you want to spend, say, $100 million on a house in the Golden State, Santa Monica might not be on your radar.

But if it is, you can't play ball without imagining yourself as the owner of a million dollar home.

"It's the attractiveness of the area," Karevoll told me. "Santa Monica was a bitchin' place to live in the thirties, in the fifties, and right on out until now." 

Bitchin' indeed. Ocean breezes, block upon block of charming older homes, and a view of a ferris wheel will induce a warm, loyal, covetous feeling.

"It was a lot of the elements we look for in prestige neighborhoods," Karevoll said. I think he was waxing a surfboard at the time.

He added that when you think about the million-dollar markets in California, you have to adjust your perceptions. It doesn't run according to the usual rules of real estate, with buyers saving up for years for a down payment and then committing to potentially decades of mortgage payments, scrimping along the way.

The coupons clipped. The vacations not taken. The cars driven until the wheels fall off.

"People in the million-dollar category are worrying about other stuff," he said. "Like 'Where do we park our assets? Will the money do more in real estate than in a mutual fund?'"

Then he pointed out why the million-dollar market in California is so strong. "We're seeing a higher percentage of buyers in the market paying cash."

California generally - and Southern California in particular - are safe havens — places to invest your millions in real estate, because...well, because it's unlikely that there won't  be a million- dollar market here in the future.

Follow Matthew DeBord and the DeBord Report on Twitter. And ask Matt questions at Quora.

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