Why California's High Cost of Living Might Be a Good Thing ... (San Diego: low income, foreclosures)

[EscapeCalifornia]

Originally Posted by sheri257

If the state is too expensive for the middle class ... what makes you think poor people can afford it either? It doesn't make any sense.

Simply put, the poor have lower standards. They'll think nothing of raising a family of 5 in a 1 bedroom apartment in Huntington Park. The middle class will move somewhere that they can live like people, not caged animals.

[sheri257]

Originally Posted by Humanoid

California is not so expensive because of "crowds", similarly populated areas of other states have much lower costs of living. The issue is government policy, not the size of the population. Policies in California drive up the costs of a variety of goods. This has been occurring since the 1970's. California is now one of the most taxed and expensive states to live and to do business.

That's too simplistic. Look at Florida ... they've always had much less restrictions on coastal housing construction for example but, the cost of housing is still very high compared to the wages there, mostly due to wealthy retirees driving up the cost of living. A lot of people can't afford houses on Florida wages either.

There's lots of factors besides government policy ... not the least of which is demand for coastal housing generally being higher.

[f_m]

It all depends on if people can find work. You can live in the desert where it can be very cheap, but there's nothing to do there. The state I grew up in has very cheap living costs, but the population growth is slow. It isn't considered a hotbed for jobs opportunities.

[Humanoid]

Originally Posted by sheri257

That's too simplistic. Look at Florida ... they've always had much less restrictions on coastal housing construction for example but....

Land restrictions are only one way governments can artificially inflate real estate costs. But I haven't lived in Florida I don't know what is going on there as far as Government policy goes. California's government policies have greatly inflated property costs in the state and encourage booms and busts in real estate. This has been happening since the late 1970's and is now reaching its logical conclusion - the bankruptcy of the state of California.

I'll ask again, how can you have one of the highest unemployment rates and the highest costs of living long term? You can't. The only question is whether California has a slow death like Michigan, or grabs its bootstraps and fixes its problems. The latter will not happen until the ivory tower liberals and special interests have been destroyed.

Originally Posted by sheri257

There's lots of factors besides government policy ... not the least of which is demand for coastal housing generally being higher.

You always use the word "Coastal housing", but what the hell do you mean by it? Beach front property? The entire state? what?

Housing isn't like other things, the vast majority of people can't move to area X unless they can get a job in area X. If there aren't a lot of high paying jobs in an area then the housing will be cheap, regardless of whether its on the coast or not. For normal middle-class communities what creates demand for housing is a strong local economy....not something geographic. The coast isn't going to create jobs...nor provide people income.

For high end communities homes become a sort of Veblen good and have a much different dynamic.

[Soccersupporter]

Originally Posted by sheri257

Because the cheaper a place gets and more overcrowded it gets. People want their cake and eat it too ... they want cheap but they don't want all of the traffic and crowds that go with it.

But that's the Catch 22. As people move to cheaper places they'll inevitably be dealing with the same problems that California has ... as other people flock to those cheaper places also.

Cheap inevitably leads to overcrowding ... it's just a question of when.

Who knows ... maybe the 100,000 or so people who move out each year is a good thing. It might even help solve the illegal problem.

Here's an article that talks about how even migrant farm workers are moving back to Mexico or cheaper states like Arizona because of the high cost of living here.

Home for the Holidays by Zachary Stahl | Page 1 | December 18, 2008 | Monterey County Weekly | Farmworkers’ migration

That is pretty funny. While the middle class abandons CA the illegals will still be needed to man the Carl's JR, car wash, mow your yards, watch your kids, clean your house? Migrant farm workers leaving. So who is going to pick your strawberries, college students? Now that is funny!

You think 100,000 people a year leaving is the illegal population? Sorry but those 100,000 a year are people looking for a less stressful, more affordable lifestyle not gardeners. I do agree that a less crowded CA would be better but when that happens so goes the tax revenue for a state that can't pay its bill now. That will just bring on bankruptcy sooner than later.

[Soccersupporter]

Originally Posted by edwardius

Housing prices are set on the margin. Housing costs are high in California, because the housing market in California is highly regulated and because of prop 13.

If you compare California and say Texas, in both places people expect to have local schools, libraries, police and fire departments. But California has prop 13 which limits the growth of property taxes to less than the rate of inflation. In general in California, housing doesn't pay for itself. The services required by new residents are not paid for by the property taxes on those new residents. In Texas which has higher property taxes and no prop 13, not only do new developments pay for themselves. In California the incentive is to not approve new development.

Now if housing prices shoot up high enough in California, then even with a much lower tax rate, the cost of new development will start to cover the cost of providing new government services to that development. This is part of the reason California has housing price booms and busts. For local governments to approve new developments housing prices have to get high enough where it makes sense to approve new developments. In Texas, property taxes are such that local governments will approve new developments willy nilly.

In California there is usually a shortage of buildable lots, local governments are reluctant to rezone land from agricultural uses to housing. Ag land in California sells for 10k an acre. In California they are putting up to 11 homes per acre. But when that land is rezoned from ag to housing, its not selling for less than a 1k per acre because there is an artificial shortage of buildable lots. In Texas, ag land is a bit cheaper, but residential lots are lot cheaper because local governments rezone land from ag to housing based upon demand.

When interest rates were lowered nationally, California experienced the the housing boom much more as a price spike than in Texas where the housing boom there was experienced more as a construction boom.

Before prop 13, California had fairly affordible housing. If this region wants more affordible housing it should just repeal prop 13.

But new growth need not lead to high housing costs and expensive housing. Atlanta, Dallas, and Houston are among the fastest growing regions in the country yet they have also managed to retain very affordible housing.

High housing costs in California are the results of bad housing policies in California. If you fix them, you can make housing more affordible here as well.

Very well thought post and probably spot on. I am afraid though if Prop 13 were repealed many people would loose their houses. I could not have imagined paying $23,000 a year in property taxes for my house in Irvine. Housing would have to come down drastically before you could get rid of Prop 13 or many more Californians would have to pack up and leave, and not by choice like myself.

[EscapeCalifornia]

Originally Posted by Soccersupporter

Very well thought post and probably spot on. I am afraid though if Prop 13 were repealed many people would loose their houses. I could not have imagined paying $23,000 a year in property taxes for my house in Irvine. Housing would have to come down drastically before you could get rid of Prop 13 or many more Californians would have to pack up and leave, and not by choice like myself.

They could fix a lot of problems if Prop13's cap on tax increases was set to match inflation. You'd be protected against booms where the value doubles in 2-3 years and the state would get enough increases to offset inflation so revenue isn't falling farther and farther behind every year. It may not be a perfect solution but it would make a big dent in the problem of a house paying $1000/yr in taxes while 4 kids attend the local schools.

[sheri257]

Originally Posted by Soccersupporter

You think 100,000 people a year leaving is the illegal population? Sorry but those 100,000 a year are people looking for a less stressful, more affordable lifestyle not gardeners.

Originally Posted by EscapeCalifornia

Simply put, the poor have lower standards. They'll think nothing of raising a family of 5 in a 1 bedroom apartment in Huntington Park. The middle class will move somewhere that they can live like people, not caged animals.

This is a myth ... that somehow the illegals who make even less money can afford to live here but the middle class can't. And this article demonstrates that it's a myth. Even migrant workers are leaving for the same cheaper states that everybody else is moving to.

Home for the Holidays by Zachary Stahl | Page 1 | December 18, 2008 | Monterey County Weekly | Farmworkers’ migration

Lopez says an increasing number of farmworkers are skipping the season in Salinas and just going to Yuma or traveling to cheaper states. “I know so many farmworkers who used to migrate,” Lopez says, “and they don’t come back to Salinas anymore. They can live in another place that’s not expensive.”

Just look at the Texas forum ... a cheap state that lots of Californians have moved to. A house painter who wants to move to Austin was warned about competition from illegals and, consequently, lower wages.

http://www.city-data.com/forum/austi...good-move.html

"One thing I'll warn you about being in the trades, you'll have a hard time getting the prices you're used to back north. There's LOTS of competition from the illegal crowd."

I don't think all of the 100,000 are illegals but, obviously, at least some of them have to be. You guys may want to believe that the illegals aren't following you out of state but, they are. These people want to live cheap like everybody else.

[sheri257]

Originally Posted by Humanoid

I'll ask again, how can you have one of the highest unemployment rates and the highest costs of living long term?

Obviously you don't. I guess you haven't noticed but ... we're in the middle of a huge correction with the cost of living as we speak. The median price for a California home now is $260K and the average mortgage payment is $1,200.

Of course, that includes a lot of the inland areas like Bakersfield but, even the expensive coastal areas (which I define as communities within an hour from the beach) have come down from two years ago.

It's not like the cost of living has actually been going up lately. Sure ... it's still not as cheap as Texas but, it's certainly no where near what it was two years ago either.

So ... the much needed correction is already in the works. I don't, however, want to get as cheap as Texas or other states either because if that happened ... we'd get another huge influx of people and then we'd be back to where we started.

[sheri257]

Originally Posted by Humanoid

Housing isn't like other things, the vast majority of people can't move to area X unless they can get a job in area X. If there aren't a lot of high paying jobs in an area then the housing will be cheap, regardless of whether its on the coast or not. For normal middle-class communities what creates demand for housing is a strong local economy....not something geographic. The coast isn't going to create jobs...nor provide people income.

You're overlooking a key factor that complicates both the California, Florida and other coastal real estate markets ... rich retirees who don't have to work, who already have money and who drive up prices.

The Monterey Penninsula, for example, doesn't have that many high paying jobs but ... housing prices remain high because rich people want to live there. Sure ... Carmel is in a real estate slump right now but even tiny condos are still selling for 500-600K.

Housing markets aren't just driven by jobs ... they're also driven by demand and people with money are frequently going to want to live on or near the coastal areas.