The theory of substitution proposes that a consumer may choose to substitute a similar product (house) for their preferred house if there is a noticeable price differential. Thus I am amazed to see mid-town house prices continue to hold at year 2005 peak levels while many surrounding neighborhoods and towns have dropped by 30% -40%-50% and more. While they might hold at their current high level, I don't see how they can hold such a valuation premium of houses that could be substituted for them.
The median listing price and sales price for a 95816 home sized between 2000 and 2400 square foot home is $638,000. Arden (95864) and Land Park (95819) also enjoy a median over $600K for that size.
However, drive all the way out to Carmichael the median sales price this year for houses 2000 to 2400 square feet dips below $400K.
Trade the Hummer in for a Prius and drive all the way out to Northwest Roseville (always amazing) even at $5 gas,(it is coming back, enjoy the $3 gas for the moment) the median sales price of $358K for this size range house is a significant savings for someone who is looking for good schools, parks, lots of shopping, recreation and employment opportunities.
Folsom was at $430K on median sold price in 2008 so far.
Even Granite Bay looks a bargain at median of $507,500 for this size range against those close in neighborhoods.
I think I am comparing apples to apples here. Carmichael, Roseville, Land Park, Arden, mid town,Folsom, Granite Bay
but let me throw in a pomegranate, a nectarine, and guava.
Natomas (95835) $289K, Elk Grove (95757) $299K, Rosemont (95826 and 95827) $305K
Sure McKinley Park is nice but is intrinsically worth twice as much as these other towns and neighborhoods?
Oh, the median sale price in this size range for Florin area? $252,750 ; The same size home in midtown is worth two and a half times as much on average.
Either these desirable suburban areas will revive to their peak prices, or the close in desirable neighborhoods are going to have a hard time holding their value as people move in and out of the metro area. I think this degree of disparity between the close in neighborhoods and the suburbs is a recent phenomenon. I have only lived here for 16 years though. Does anybody remember a time when city houses on small lots were worth twice as much as suburban houses? Maybe before the freeways were built?