If L.A. Sucks Why is housing expensive (Los Angeles, Palmdale: mortgage, loans)
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California continues to grow but it has a net negative domestic immigration. The people who are leaving are middle class and those that are replacing them are foreign born - many illegal. I would think the income of the replacement population is lower. If that is true, then how can home prices be sustained? Demand would have to fall in response to affordability. The price "correction" might put the brakes on the emigration trends of middle class Californians and certainly would be felt in nearby states and maybe throughout the country.
But it's not growing in the same way it used to. The only growth in LA county anymore is from foreign immigation and births - though there is strong growth in Riverside Co. It seems from over here in AZ that everyone is leaving LA. The people in Idaho, Oregon, Nevada and other places get the same impression. The CA home price boom is fueling our own price boom in these states, but when it pops in LA it's gonna pop here too. I need to time my exit from AZ while the market is still inflated by California migration. So I guess my question is how long can the prices in CA hold up with the exodus that is taking place? Or is there really no exodus, just the illusion that everyone is leaving?
Here are the stats of the top five fastest growing states, according to the U.S. Census in 2005, pre Hurrican Katrina. I listed the top five that had the greatest percentage net increase in population and the top five states that had the greatest net increase by actual number of people. As you can see California is ranked 3rd in the latter category. So while those leaving CA are in part causing the population increases in the western and southwestern states, those people are essentially being replaced by domestic and foreign immigrants into CA. So the anwer to your question is, Yes, there is an exodos out of CA, but that exodos is a wash because of the continued influx of new people.
Top Five by Percentage Increase
Nevada 2,414,807 81,909 3.5%
Arizona 5,939,292 199,413 3.5%
Idaho 1,429,096 33,956 2.4%
Florida 17,789,864 404,434 2.3%
Utah 2,469,585 48,877 2.0%
Top Five by Actual Number
Florida 17,789,864 404,434 2.3%
Texas 22,859,968 388,419 1.7%
California 36,132,147 290,109 0.8%
Arizona 5,939,292 199,413 3.5%
Georgia 9,072,576 154,447 1.7%
California continues to grow but it has a net negative domestic immigration. The people who are leaving are middle class and those that are replacing them are foreign born - many illegal. I would think the income of the replacement population is lower. If that is true, then how can home prices be sustained?
You ask the intelligent question, and you frame it oh-so-well!
I'm just a guy who likes to study stats and trends, so my guess is as good as yours. Here's mine:
A survey conducted a few years ago in randomly-selected remote nations asked the question "Where would you most like to live if you could live anywhere in the world?" Obviously you know what they said --- Los Angeles! By an overwhelming margin.
The allure of LA isn't limited to impoverished low-skilled laborers sneaking over the nearby border. It's global and it goes all the way to the top of the rich and famous and powerful.
The mix of these forces is, by happy coincidence, beneficial to both types of immigrants. The wealthy immigrants have access to cheap labor from the poor immigrants. Have you ever looked into the number of wealthy Iranians and Russians (just 2 of many examples) who recently moved to LA? They need maids and gardeners! "...And on the Eighth Day, God created Mexico." Offensive? Sure. True? In a silly way, yes.
I'm over-simplifying it, but I think most people in this thread are smart enough to fill in all the other factors that keep LA high-priced and a top destination for people of all types from all over the world.
California continues to grow but it has a net negative domestic immigration. The people who are leaving are middle class and those that are replacing them are foreign born - many illegal. I would think the income of the replacement population is lower. If that is true, then how can home prices be sustained? Demand would have to fall in response to affordability. The price "correction" might put the brakes on the emigration trends of middle class Californians and certainly would be felt in nearby states and maybe throughout the country.
I think you've answered your own question, but don't know it. The people who are buying homes aren't poor, working class illegal immigrants, but are Americans and foreign born immigrants who are affluent or at least upwardly mobile and have decided for one reason or another to plant their feet in LA.
According to the economics 101 the price is a reflection of demand/supply. If the demand exceeds supply the price goes up. Southern California is a magnet for the qualified, creative, hard-working, industrious, etc. In 1975 there was a big influx of Vietnamese to Orange County, California. They came poor and devastated. These days many of them are shopping at the Armani stores. What is preventing the native-born to be as successful as the Vietnamese are?
Or is there really no exodus, just the illusion that everyone is leaving?
It's an illusion. LA, IE, San Diego are becoming a megalopolis. In 20 years that megalopolis will include Las Vegas, Pheonix, and everywhere inbetween.
The people who are leaving are middle-income families (most making combined incomes of 50-100k). Many of these people are probably our peers or co-workers, so it seems like "everyone" is leaving.
But for every 5-person family that leaves LA for riverside, a young, childless couple making 80k apiece is there to pick up the slack. Or a wealthy gay couple looking for a fixer. Or an immigrant family from almost everywhere in the world. Fewer, wealthier people are displacing a larger, lower income population in a finite housing stock.
Someone else mentioned it - the wealthy are buying the properties close to job centers and the middle class are drivng further and further to work. Look at the growth of Southern Riverside, Rancho Cucamonga, North Fontana, and even the high desert for examples of the "exodus"
On the east coast it started with NYC'ers moving to Long Island, Westchester, Connecticut. Now it's middle-income Long Islanders moving to North Carolina and Florida while the wealthy push NYC housing through the roof. It's been happening for a long, long time.
if property taxes drop in Texas, house prices will experience another jump. I did seriously consider Texas but the crime scares me. I have $50k for a house and everyone says a $50k house would be in a high crime area in Texas!
I believe its the plethoa of high paying jobs in LA and the fact alot of people want to live in LA, including immigrants. I know lots of people making over $100k in LA. If they have a wife/husband or friend, they can combine the income and expenses and afford a half million dollar house quite easily.
My personal opinion and observation has been that it's the WORLD'S rich that are buying up property here. If you talk to the new owners, you'll find that they're foreigners. The same thing in NYC. Many of the people owning and buying up the property in Manhattan are also from other countries.
Our country is being sold out.
Absolutely, LA and SF housing are pushed up by foreign wealth, just like NYC. I visited a friend in Palos Verdes States a few years ago and his neighbors were from all over the world, but none was getting a paycheck in LA as most still owned business oversea. This is not unique to America, I'd imagine there's also a lot of wealthy Americans buying the hilltops in Paris or Venice, and French people complaint about Paris just like we do with LA.
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