Why California's High Cost of Living Might Be a Good Thing ...

[chuck22b]

Originally Posted by sheri257

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.

Do you think California will benefit from the onset of retiring rich folks? I mean, Palm Springs, Ventura, Santa Barbara, parts of San Diego, Monterey Peninsula, has always been a haven for rich retirees.

With the population only aging, do you think as prices and the COL of California goes down... would these retirees from other States come here to retire instead of moving out to Florida, Texas, or Arizona? Would retirees be more of a drain or boon for California's economy?

California is a great destination for retirees... the weather, diversity, cultural avenues, entertainment, etc. etc. far outstrips Arizona for example and we don't get the hurricanes and hot/humid/wet/cold weather of other parts of the country. From population studies, there's a gradual move of population South/West... if costs go down in California, I think the State would greatly benefit from this trend.

Census Data shows and projects this trend... with Texas, Nevada, Utah being heavy winners if Costs remain high in California. But, if costs continue to trend lower... than the out migration of retirees might be quite a bit different?
http://www.census.gov/population/www...onsagesex.html

-chuck22b

[Humanoid]

Originally Posted by sheri257

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.

Looking at the median isn't very telling, it says more about what houses are selling (lower end) than about what is happening to house prices in general. Housing in California (both owning and renting) is still grossly out of line with incomes. Only a handful of low end areas are starting to become more reasonable.

Originally Posted by sheri257

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.

Firstly, housing is just one component to cost of living. There are still other things that are inflated in California, such as taxes. The taxes are extremely important, not as much from the household perspective but from the business perspective.

I'm not sure why you think people can randomly pick up their bags and move to California. People can only relocate here if there are jobs here. California has the 3rd highest unemployment rate and little hope of attracting new businesses. None of California's problems were caused by an influx of people.

Originally Posted by sheri257

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.

How many "rich retirees" do you imagine there are? A couple of a million? Do you imagine that rich retirees are moving into your typical middle-class communities because they are in Florida or California? And where were these rich retirees in the past? Did they just decide recently that California and Florida is the place to retire?

Certainly, "rich retirees" increase the cost in some upper-crust communities. But there are such areas in most states.

Originally Posted by sheri257

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

Oh yeah it wouldn't have anything to do with a gigantic housing bubble. The median in Monterey County before the bubble was around $240k (in around 1998). So, did it just become a desirable place over the last 10 years? I'm sure the rich are flocking to an area with such rich culture and events..... There are a few small wealthy communities in Monterey County, most of the county is filled with low income folks.

Originally Posted by sheri257

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.

Rich folks aren't buying houses in middle-class communities. As a result their actions don't distort housing prices at large...

Also, its simply inaccurate that the rich people are all dying to move to California. Many find it a cultural waste land...

[sheri257]

Originally Posted by Humanoid

Looking at the median isn't very telling, it says more about what houses are selling (lower end) than about what is happening to house prices in general. Housing in California (both owning and renting) is still grossly out of line with incomes. Only a handful of low end areas are starting to become more reasonable.

Either enough middle class people are still willing to pay a lot for housing OR ... we've got a lot of wealthy people paying for even ordinary housing OR both. Either way ... somebody is paying, the question is who.

Originally Posted by Humanoid

I'm not sure why you think people can randomly pick up their bags and move to California.

All I said was that IF California got as cheap as Texas that would happen which, obviously, is very unlikely.

Originally Posted by Humanoid

How many "rich retirees" do you imagine there are? A couple of a million? Do you imagine that rich retirees are moving into your typical middle-class communities because they are in Florida or California? And where were these rich retirees in the past? Did they just decide recently that California and Florida is the place to retire?

Certainly, "rich retirees" increase the cost in some upper-crust communities. But there are such areas in most states.

I don't know how many rich retirees we have but, it could possibly explain why the good neighborhoods are so expensive and cheaper neighborhoods tend to be much less desirable with not much in between. It would also explain the income disparity.

Originally Posted by Humanoid

Oh yeah it wouldn't have anything to do with a gigantic housing bubble. The median in Monterey County before the bubble was around $240k (in around 1998). So, did it just become a desirable place over the last 10 years? I'm sure the rich are flocking to an area with such rich culture and events..... There are a few small wealthy communities in Monterey County, most of the county is filled with low income folks.

I was specifically talking about the Penninsula ... like where Clint Eastwood lives. Not the county as a whole. Big difference.

Originally Posted by Humanoid

Rich folks aren't buying houses in middle-class communities. As a result their actions don't distort housing prices at large...

Also, its simply inaccurate that the rich people are all dying to move to California. Many find it a cultural waste land...

Well ... if it's not rich folks then, who is it? The main complaint on this board is that there isn't enough affordable middle class areas left so ... somebody's paying these high prices.

If it isn't the rich folks, who is it? The illegals? I thought they lived in the neighborhoods that middle class people tend to avoid.

[Charles]

Originally Posted by chuck22b

Would retirees be more of a drain or boon for California's economy?

Probably a boon, Here's why (as written by my friend Mike on the COS forum...)

I keep telling people that retirees are the best "industry" to attract to any area because:
- We don't need jobs. There's no need to spend tax money as "incentives" to get firms to come here.
- We don't need schools. Any kids are grown & gone. Schools eat 50-60% of property taxes. We save El Paso County [CO] a fortune.
- We tend to be fairly crime free. Police are rarely called in for something we've done. Nor do they need courts or jails for us.
- We need fewer highway lanes, since we don't fill up the roads during rush hours.
- Our pensions, social security & other money doesn't drain the local economy. Our money goes INTO the local/state economy.
- Pension checks don't cause pollution, like heavy industry sites.
- All we need are places to spend money, and I don't mean wal-mart or fast foods. We buy cars, clothes, food, meals, entertainment, vacations, houses and lots of other stuff beside low-wage retail. Not to mention what we spend on doctors and hospitals - not exactly min-wage types. Why do you think there's so many hospitals and docs in Scottsdale/Phoenix, they're catering to the retired crowd, and making LOTS of money on our spending.

[sheri257]

Originally Posted by Charles

Probably a boon, Here's why (as written by my friend Mike on the COS forum...)

I keep telling people that retirees are the best "industry" to attract to any area because:
- We don't need jobs. There's no need to spend tax money as "incentives" to get firms to come here.
- We don't need schools. Any kids are grown & gone. Schools eat 50-60% of property taxes. We save El Paso County [CO] a fortune.
- We tend to be fairly crime free. Police are rarely called in for something we've done. Nor do they need courts or jails for us.
- We need fewer highway lanes, since we don't fill up the roads during rush hours.
- Our pensions, social security & other money doesn't drain the local economy. Our money goes INTO the local/state economy.
- Pension checks don't cause pollution, like heavy industry sites.
- All we need are places to spend money, and I don't mean wal-mart or fast foods. We buy cars, clothes, food, meals, entertainment, vacations, houses and lots of other stuff beside low-wage retail. Not to mention what we spend on doctors and hospitals - not exactly min-wage types. Why do you think there's so many hospitals and docs in Scottsdale/Phoenix, they're catering to the retired crowd, and making LOTS of money on our spending.

I agree with a lot of this but, here's an interesting question. Take Florida, for example. I'm an RN so ... nurses should be in huge demand there because of the elderly population. But, I also know a lot of nurses who refuse to work there because the pay sucks and housing costs are high, especially compared with the pay.

Maybe docs are making a lot of money but the nurses aren't. In Florida you make less money than even nurses in Texas without nearly as many retirees so ... go figure on that one.

[Humanoid]

Originally Posted by sheri257

All I said was that IF California got as cheap as Texas that would happen which, obviously, is very unlikely.

No, it wouldn't. The California job market is horrible.

Originally Posted by sheri257

I was specifically talking about the Penninsula ... like where Clint Eastwood lives. Not the county as a whole. Big difference.

Rich people typical own houses in multiple locations. There are certainly a few wealthy areas up there, but there are similarly wealthy areas in other states that aren't no where near the coast.

Originally Posted by sheri257

Well ... if it's not rich folks then, who is it? The main complaint on this board is that there isn't enough affordable middle class areas left so ... somebody's paying these high prices.

Err....its the housing bubble. California has only become so unaffordable over the last 10 years. Sales in California are horrible and over 50% of the sales are foreclosures. Its primarily the low end that is selling right now, do you think that the wealthy retirees are buying low end housing?

Current sales are being driven by knife catchers. People that can afford it and think the prices are "cheap" because they are down from the peak. Ultimately they are purchasing homes that are below what otherwise be there standard of living. But there is a limited number of things people, they can't support the real estate market long term. Hence....the rapid decline in prices.

California still has another 25~30% to go from today's prices, more if the economy doesn't turn around in California.

Originally Posted by sheri257

If it isn't the rich folks, who is it? The illegals? I thought they lived in the neighborhoods that middle class people tend to avoid.

I really don't know what you are asking. Are you asking who is currently purchasing houses? Then the answer is obvious. Its mostly middle-class knife-catchers buying low end housing in areas that have seen large corrections. There is also some investor activity, primarily with low end housing units.

Sales are very slow in more mid/high end communities.

If it was rich folks, you'd expect to see the exact opposite.

[Humanoid]

By the way retirees aren't particularly good for the local economy. Sure they spend some money on the local economy, but this just produces low wage employment for the area. Most retirees also have much less to spend then their working counter parts.

In terms of retirement though. If you have a modest pension etc why move to California when it has a high cost of living and taxes retirement funds? I only have one family member that lived in California during their working life and ended up staying for retirement.

[majoun]

Originally Posted by sheri257

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.

Not just the illegals but CA's poor in general followed the CA middle class to AZ and NV, and wherever middle class Californians move in large numbers (possibly excepting Oregon) they'll be there soon enough.

These people want to live cheap like everybody else.

Exactly. In fact there were articles in the conservative leaning magazines The American and The Economist stating that Texas has now surpassed California as the leading destination for Mexican illegals.