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Even with price corrections, they will not be significant enough because the prices jettisoned too high, too fast and opened up too great a gap between salaries and housing prices. This gap is not likely to change. It is anticipated to keep growing. Thereby making it where even though on paper you earn a lot, fact is you can't afford that house. You do not see this phenomena in most markets except perhaps Manhattan, NY or LA. In most markets, salaries are more/less in sync with home prices. As I'd stated in previous posts, the problem does not stem purely from skyrocketing housing prices but that salaries have not grown and in fact in some cases went backwards. I still see companies offering to pay people rates from 1998 when the housing prices are nowhere where they were in 1998. There are also many companies here that pay their employees like $28-40k a year. You can never hope to ever buy a house here with that salary but it doesn't mean they don't pay such wages because they do. I have seen it. So not everyone earns that big paycheck even if it seems like a lot of people do.
I see several sets of people here:
1) Happy go lucky people who have no desire at all to buy a house, period. They're completely happy with being here, love the weather, the people, culture, food. They either earn a good pay or not so good pay - it doesn't matter. They don't mind if they have to live in an apartment for the rest of their lives. They're just happy to be here.
2) Middle-class people who have bought homes early and don't have all these issues that we're talking about. Sure, things are tight for it's expensive here but they don't have so many problems. They won't really be able to really trade up to a huge house but many don't care or want to.
3) Middle-class people who want to buy a house and can't buy one for it's so darn expensive that they're going to end up with debt up to their eyeballls.
4) Mega rich people who no matter where are going to afford what they want.
5) Lower class/poor people who live off government welfare and who live in government housing.
Quote:
Originally Posted by Need_affordable_home
Speed of light is right. The factors arent there to cause a total meltdown in house prices. There however is a correction because prices went up too fast, too high. Ive heard prices will stop dropping between 2008 and 2009 and begin to rise again at a healthy rate which is slightly above inflation.
Those people waiting are going to be buying in a couple years when prices bottom out. Californians make very good money, not all but many do. Those are the ones that can afford at least a condo or a small house. Others rent, get a mobile home or just relocate where houses are affordable for them.
Even with price corrections, they will not be significant enough because the prices jettisoned too high, too fast and opened up too great a gap between salaries and housing prices. This gap is not likely to change. It is anticipated to keep growing. Thereby making it where even though on paper you earn a lot, fact is you can't afford that house. You do not see this phenomena in most markets except perhaps Manhattan, NY or LA. In most markets, salaries are more/less in sync with home prices. As I'd stated in previous posts, the problem does not stem purely from skyrocketing housing prices but that salaries have not grown and in fact in some cases went backwards. I still see companies offering to pay people rates from 1998 when the housing prices are nowhere where they were in 1998. There are also many companies here that pay their employees like $28-40k a year. You can never hope to ever buy a house here with that salary but it doesn't mean they don't pay such wages because they do. I have seen it. So not everyone earns that big paycheck even if it seems like a lot of people do.
I see several sets of people here:
1) Happy go lucky people who have no desire at all to buy a house, period. They're completely happy with being here, love the weather, the people, culture, food. They either earn a good pay or not so good pay - it doesn't matter. They don't mind if they have to live in an apartment for the rest of their lives. They're just happy to be here.
2) Middle-class people who have bought homes early and don't have all these issues that we're talking about. Sure, things are tight for it's expensive here but they don't have so many problems. They won't really be able to really trade up to a huge house but many don't care or want to.
3) Middle-class people who want to buy a house and can't buy one for it's so darn expensive that they're going to end up with debt up to their eyeballls.
4) Mega rich people who no matter where are going to afford what they want.
5) Lower class/poor people who live off government welfare and who live in government housing.
Thats interesting you arrived at the conclusion. Arent alot of companies moving out of Cali because they can make more profit elsewhere by paying employees less, pay less to rent/own the business and pay less taxes? What do companies have in Cali that they dont elsewhere? Yes salaries do look good on paper. Everyone's jaw drops when they hear of this guy making twice what they do but then their jaw drops again when they hear how expensive houses and general cost of living is! Funny eh?
The Florida market has bad problems too. Even though houses are far cheaper, hurricane insurance is a real killer, we have fairly high property taxes and the salaries here rank near the lowest in the nation! Therefore I am all too familiar with the crisis. $30k a year wont really get me anywhere in Florida and will feel like poverty(probably is) in California. The government would need to help me out or ill simply have to relocate rather than be homeless. The median per person salary is $30k in Florida and $54k in California, something like that from sources. But I read that in some cities in California, 10-15% of people pull $100k or more. Those kind of people are the ones chasing a house.
Speedoflight thanks for the post. I would add a 3.4 to your list:
3.4 Upper class people who could afford to sell their overpriced home in an excellent neighborhood for another extremely, overpriced shack in another excellent neighborhood, but won't because it just pisses them off so much that the new place can get a million and a half for such a piece of ---- (insert own word, as see fit ). I could probably think of a few others but I think you did an excellent job of covering most all of the bases.
Quote:
speedoflight posted: I see several sets of people here:
1) Happy go lucky people who have no desire at all to buy a house, period. They're completely happy with being here, love the weather, the people, culture, food. They either earn a good pay or not so good pay - it doesn't matter. They don't mind if they have to live in an apartment for the rest of their lives. They're just happy to be here.
2) Middle-class people who have bought homes early and don't have all these issues that we're talking about. Sure, things are tight for it's expensive here but they don't have so many problems. They won't really be able to really trade up to a huge house but many don't care or want to.
3) Middle-class people who want to buy a house and can't buy one for it's so darn expensive that they're going to end up with debt up to their eyeballls.
4) Mega rich people who no matter where are going to afford what they want.
5) Lower class/poor people who live off government welfare and who live in government housing.
[quote=speedoflight;130897]I am not a Vegas betting man but I will bet you that you are completely wrong in your assessment for you have no basis in your arguments except the results you see in these doom/gloom sites.
Well you keep on listening to the cheerleaders and I'll rely on common sense. Let's wait and see what happens shall we. Pass the popcorn!!
P.S
Now car sales are down in Cali!! Hmmm....I wonder why?
Last edited by shannon94; 10-19-2006 at 09:39 AM..
2) Middle-class people who have bought homes early and don't have all these issues that we're talking about. Sure, things are tight for it's expensive here but they don't have so many problems. They won't really be able to really trade up to a huge house but many don't care or want to.
What makes you so sure that they "don't have so many problems".? Don't forget the group that bought "early" and took all that equity out of their home to spend spend spend. I know and talk to people like this is California frequently...... they asked my husband for advice (involved in the financial industry for 27 years...knows quite a bit)....didn't listen.....and now they're crying.
What makes you so sure that they "don't have so many problems".? Don't forget the group that bought "early" and took all that equity out of their home to spend spend spend. I know and talk to people like this is California frequently...... they asked my husband for advice (involved in the financial industry for 27 years...knows quite a bit)....didn't listen.....and now they're crying.
I know a few of those too and boy I am just astounded at how foolish they have been. Even when the market was flourishing, I knew these people were in for it. Now, I can't even imagine.
The interesting things is, it seems the it has been the ones that can least afford to do this. Meaning they have the least amount of cushion (at least the ones I know.)
Off the cuff I attribute this to the lottery winner effect, in that people that already had money before the house rich phenomenon, generally speaking, were used to it and behaved exactly the same financially. The people that are not used to having money or excess money spent, spent spent and foolishly so as if they had just won the lottery, problem is it was allusion, unlike the lottery money. This is just off the cuff, but I think there may be some truth here. Thoughts?
I know a few of those too and boy I am just astounded at how foolish they have been. Even when the market was flourishing, I knew these people were in for it. Now, I can't even imagine.
The interesting things is, it seems the it has been the ones that can least afford to do this. Meaning they have the least amount of cushion (at least the ones I know.)
Off the cuff I attribute this to the lottery winner effect, in that people that already had money before the house rich phenomenon, generally speaking, were used to it and behaved exactly the same financially. The people that are not used to having money or excess money spent, spent spent and foolishly so as if they had just won the lottery, problem is it was allusion, unlike the lottery money. This is just off the cuff, but I think there may be some truth here. Thoughts?
That's exactly it!! Without a cushion....what are these people going to do? It's not as easy to file bankruptcy anymore.
I like your comparison.
A lot of companies have moved away from CA but a lot are sprouting up every single day. Part of it is this myth (I reckon) that you can get more skilled labor here. This might have been true some time ago but I don't believe it is completely true today. If I had funding for a company, I would not want to open it here for the burn rate is extremely high. I would look for a city/area that has skilled labor that I can pay less. In other words, you cut your overhead down (labor and rent being the biggest culprits) so that you can conserve more operations capital which will help you toward profitability.
Earthquake insurance is a killer here too. Hard to get it here since statistically, the insurance companies weigh it as heavy odds against them. Let's face it, the Big One will happen, it's just a matter of when. Could be tomorrow, could be not in our lifetimes. Everyone knows it inside them but they just get on with life. I don't know the statistics on how many people pull a high salary here. CA is a huge state with a huge population and not all live in the big metro areas. Unfortunately, even the small towns have become expensive and people in these areas don't earn that much money. Bottomline is, not all Californians are swimming in cash. Most aren't. Go to East LA and you'll see samples of people living in a large metro area but in poverty. There's some news lately about Oscar de la Hoya who is trying to get into a real estate venture to help build affordable housing for poor Latinos there. He grew up in East LA and described the area as, "nice enough, although nobody owned their own home — everybody rented." There are many families in large metro areas that are generational renters. They've never owned a home of any kind in their lives and given the cost of living today, it's becoming harder and harder. With outsourcing going at such a rampant rate, lack of govt support for raising wages, companies trying to pinch at wages, etc., you're not going to see salaries rise on par with inflation and on par with cost of living and without that, it's going to be hard for people to afford much of anything, let alone a house. What you see in CA is just a very magnified version of things. If the other states don't keep a lid on it, they will end up in the same predicament.
Quote:
Originally Posted by Need_affordable_home
Thats interesting you arrived at the conclusion. Arent alot of companies moving out of Cali because they can make more profit elsewhere by paying employees less, pay less to rent/own the business and pay less taxes? What do companies have in Cali that they dont elsewhere? Yes salaries do look good on paper. Everyone's jaw drops when they hear of this guy making twice what they do but then their jaw drops again when they hear how expensive houses and general cost of living is! Funny eh?
The Florida market has bad problems too. Even though houses are far cheaper, hurricane insurance is a real killer, we have fairly high property taxes and the salaries here rank near the lowest in the nation! Therefore I am all too familiar with the crisis. $30k a year wont really get me anywhere in Florida and will feel like poverty(probably is) in California. The government would need to help me out or ill simply have to relocate rather than be homeless. The median per person salary is $30k in Florida and $54k in California, something like that from sources. But I read that in some cities in California, 10-15% of people pull $100k or more. Those kind of people are the ones chasing a house.
Last edited by speedoflight; 10-19-2006 at 11:52 AM..
Many of those who bought their homes very early or inherited them do not have the same issues as those who are trying so darn hard to even afford a tiny condo. If they had problems, it's because of poor money management as opposed to having no money to buy a home. You cannot confuse between these sets of people. BIG difference between people who screwed themselves over by having poor money management and those who no matter how much money management they have cannot afford a home. I have a friend who bought her home in the 70s here and paid like $25k for it. Her home today is valued to be worth a very disgusting amount - I think you can imagine the number. She's long paid it off. She does not live in luxury but she does not have all the headaches concerning trying to buy a home. Her biggest headache for her home is being able to afford to pay for her property taxes.
Quote:
Originally Posted by fairweathergolfer
I know a few of those too and boy I am just astounded at how foolish they have been. Even when the market was flourishing, I knew these people were in for it. Now, I can't even imagine.
The interesting things is, it seems the it has been the ones that can least afford to do this. Meaning they have the least amount of cushion (at least the ones I know.)
Off the cuff I attribute this to the lottery winner effect, in that people that already had money before the house rich phenomenon, generally speaking, were used to it and behaved exactly the same financially. The people that are not used to having money or excess money spent, spent spent and foolishly so as if they had just won the lottery, problem is it was allusion, unlike the lottery money. This is just off the cuff, but I think there may be some truth here. Thoughts?
Shannon, I may not agree with everything you've said, but your premises are well founded, and this has made for one of the more interesting threads I've read lately.
I think that some of "doom and gloom" that certian economists write about as far as China holding a substantial portion of our debt instruments is a bit overstated. China is not this all-powerful economic giant. It is heavily reliant on the US economy to keep it's economy going. If the US economy went into a substantial recession, its impact would likely be disproportionatly adverse to China itself. China is not the only nation out there that has figured out how to stuff Wal-Mart's shelves with cheap goods. Eastern European countries, India, Pakistan, Vietnam, South Korea (perhaps components made in China), and even Italy are making inroads into these markets. I've been surprised by how much stuff we actually import from some of these other countries - more so than we did 5 years ago.
China's economy is riding fast on a boat made of tinfoil. As long as it can keep its sea smooth and adversaries pacified, it will probably be in good shape. But, all the US has to do is decide to raise tariffs on Chinese goods, and you will find one angry and hurt China. On the other hand, OPEC messes around with the price of oil all day long, and although we groan about it, it doesn't throw our economy into a tailspin. In other words, the US economy has much more depth and strength to it than China's. Remember when we used to think Japan was going to run us into the ground and that we couldn't possibly compete with it anylonger? Only to find out just how fragile the Asian markets really are.
Sometimes we focus too much on the small problems that the US has to deal with, but forget what the US has: abundance of iron and other metals, coal, oil, gas, abundance of arable land, some of the world's largest and strongest corporations, stable economy and government, technology, highly educated and trained workforce - and the list goes on. Sure, we have a trade deficite, oil dependancy, and a national debt, and I'd be more comfortable if all of these were much lower. However, compared to what our country generates, both in GNP and in tax revenue, these figures are not the "doom and gloom" that some people try to make it. At worst, in certain conditions, these things pose a drag on our economy.
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I could probably think of a few others but I think you did an excellent job of covering most all of the bases. 
She's long paid it off. She does not live in luxury but she does not have all the headaches concerning trying to buy a home. Her biggest headache for her home is being able to afford to pay for her property taxes.
