The Great Housing Bubble Migration Continues
A Census Bureau report found that high home prices are driving some people out. “The five counties that comprise New York City grew by about 1.65% between 2000 and 2005, according to the bureau’s estimates. The data further show that New York’s population declined slightly between 2004 and 2005.”
“A steady flow of immigrants has kept New York ahead of other Northeast cities, while steep housing costs may keep the city from further growth.”
“A senior fellow at the Manhattan Institute, E.J. McMahon, said of the city’s population, ‘The thing that’s pulling it down is a slowdown in immigration, as well as real estate and housing costs.’ Joel Kotkin said, ‘What I do sense is that immigrants are getting smart about America and are realizing that there are a lot of other places to go besides Los Angeles and New York,’ he said.”
“Analysts agreed that the city’s high cost of living, heightened by rising real estate prices, was a top challenge for maintaining population growth in the future. ‘Even though New York has done a great job with crime, and it’s more pleasant, it’s just too expensive,’ Mr. Kotkin said.”
“New Jersey’s continuing population slowdown is prompting some economists to warn it could be a symptom of serious economic illness in the nation’s wealthiest state. County-by-county population estimates for 2005 released yesterday by the U.S. Census Bureau showed declining growth rates in nearly every area of the state, with some counties experiencing dramatic drops.”
“‘It may well be an early warning signal,’ said (professor) Jim Hughes. ‘There is evidence that the cost of living has become excessive and income levels don’t fully compensate for that.’ The state has been losing high-paying jobs for several years. At the same time, housing prices and property taxes have skyrocketed..and experts said longtime New Jerseyans are voting with their feet.”
“For the first time in more than three decades, the population of San Diego County declined last year, joining other California coastal counties that are losing their allure as high housing prices drive home-buyers to more affordable regions.”
“While the county’s overall loss of population was 1,728 between July 2004 and July 2005, the more telling number is the net exodus of 43,126 people, many of them who likely headed up Interstate 15 to Riverside County, where housing prices are still considerably lower than in San Diego.”
“‘This is pretty stunning,’ said demographer Ed Schafer of the San Diego County Association of Governments. ‘The net out-migration (domestically) is so powerfully high. That’s the story. Here you have the coastal counties with all these people leaving them but the counties just to the interior have all these people moving in.’”
“People also moved out of Los Angeles and Orange counties, but the two counties were able to muster modest population increases. ‘What’s driving this is the cost of housing,’ Schafer said. ‘It’s just pushing people further east.’”
It seems like there is also a migration of real estate investment dollars out of the U.S. Would be interesting if someone had the stats on that.
In light of dollar depreciation and our RE’s double digit appreciation will not come back for years, pulling money out of the US market is a smart thing to do. Dollar will fall 20 to 50% in the next few years. Only brain dead foreign investors will put money in the US market.
I agree… as the dollar gets weaker, overseas currency get stronger which is just an added bonus on top of foreign and overseas investments which are doing waaay better than US stuff. The Fed can only downplay inflation for so long…..
yeah … please invest all this funny money in European real estate that is already WAY more overvalued (UK, Netherlands, Spain, Ireland etc.) than most of the real estate in the US.
O yes, the EU stockmarkets are also a good place to park your US money (like the Dutch stockmarket, up more than 100% in the last 2.5 years despite an economy that has been on the edge of recession for years).
And do you really think that the ECB will let the euro get stronger relative to the US$? Forget it, they will print their way out of this mess just like Greenspan did. Thanks to the ECB, M3 growth in Europe was and is at least as high as in the US.
Thanks to the readers who contributed to this post. IMO, this pattern is how things got so bad. People flush with funny bubble money, moved into places like Arizona and started bidding things up. I don’t think people in this state mind having Californians move here, but $300k for a place in Lake Havasu City?
Here are some related articles. Coachella Valley, Hudson Valley.
The same thing happened in the Central Valley in CA. A bunch of sleepy little ag towns were invaded by .com refugees from Silicon Valley and the Bay Area who proceeded to triple housing prices over a 3-4 year period. So I rent because I can’t afford to buy.
Its the traveling band of investors buying in the non-bubble towns screwing up the true long term supply and demand . Its been a false market .
I always thought the population thing was too overblown. so much for “everyone wants to live here.” turns out not if the price isn’t right.
I just had an “argument” with a guy on CL from Riverside. I posted this article about the SD population decline and he went off on a tangent, the gist of which is this doesn’t matter.
Actually - I believe that a lot of those numbers may be people moving out to temecula area - that’s outside SD county - so the outmigration may not be as extreme as the numbers say.
That said - I fully beleive in the bubble and I’m migrating out of state myself - party due to cost of living - but mostly for lifestyle reasons.
I know several other young professionals that have done / are doing the same - we just can’t afford to have a family here - costs too darn much due primarily to housing.
And it only takes hitting the average person with a baseball bat to point out what should be obvious to a 6 yr old child. And it will only do irreparable harm to the country’s economy due to the greed of some people and industries.
300K is a bargain for Lake Havasu City. Where else could you have hotter than hell for that bargain price. Someone could go to Needles close by. Oh yeah, my vision of what HELL is. Those people are NUTS
I’d like to visit Trona, CA some day…I think THEY are still under $100K a house. How bad could it be, right?
Use to be that they would pay you. We ought to move the homeless in SLO county to Trona. Ave price under 100k
Shortage of land, no — shortage of home buyers - yes.
Construction starts are logged when excavation on a property has begun.”
yup, when the ground is thawing early they run the bulldozers 7 days a week “get er done”
who’s buying ?
I’m on the verge of leaving CA myself. If only there were a better job market out there. I really miss Ohio. Ha ha, that probably sounds rather nutty.
I’m from Ohio–moved to SD for my husband’s work and I would move back in a second if he could achieve his careeer goals there (virtually impossible). So no, not nutty. After all, we sold our 2300 sq ft brick victorian for $180K in 2003 when we moved out here and could buy it back now for about the same.
What part of Ohio are you from? I grew up in California but I went to college at the University of Dayton. I like Dayton, but prefer Columbus. I long for a place like German Village, Oakwood or even Hyde Park in Cincinnati.
Our house was in Olde Towne East in Columbus. I grew up in Grandview Heights, though (back before its own bubble, when low-to-middle class folk lived there).
My husband is a native Sandiegan and even he would move back to Ohio (where he met me) if he could get licensed there without insane hoops to jump through. And, get this, he’s an architect. Some irony, eh?
Indeed.
lunar park, that doesn’t sound nutty to me. I left the West Coast 10 years ago for the Midwest and wouldn’t move back. It is not a high growth area here (Michigan) but I don’t care. High growth area to me equals hell hole tomorrow. As long as I can keep my job here then I am staying put. You folks on the ‘desirable’ coasts can enjoy your bubble.
Trust me, I’m not enjoying this bubble one bit! Okay, except for my very affordable rent
Wow, the SD population decrease article was a bit of an eye opener. First time since 1970 that San Diego county had a YOY population decrease. Eep.
That’s what is so troubling about this RE bubble - yes, those that have homes can sit around with a smug smile on their face and count their paper riches. Couple the increase in owning with this irrational national psychology that YOU MUST OWN A PLACE RIGHT NOW TO BE A GOOD HUMAN and people are picking up and leaving. (For the record, I am a home owner here in coastal SD, but I view it more as a curse, as I feel locked in, in a sense. My wife and I will want to upgrade once we start a family, but I don’t see how we’d be able to buy a decent sized home in our neighborhood at the current prices… my hope is that we see at least a 33% pullback over the next 2-3 years…)
Kind of reminds me of playing SimCity back when I was a young whippersnapper. I remember the citizens always seemed to either bitch that property values were too low (rampant crime, too much industry, not enough businesses/housing, bad schools, etc.), or were too high (too expensive for new folks to move in/upgrade).
And so life imitates art. Again.
This is exactly what so few homeowners understand: Home equity *is* “paper riches”. There’s an enormous and widespread distrust of paper equity out there because so much “paper” turned worthless after the dot com crash. Homeowners so frequently pat themselves on the back because they wisely invested in brick and mortar (or “real assets” ). But homes are paper assets too. As with all investments, profits are only logged after a sale. Slowly, homeowners are coming to understand that they’re still holding an investment vehicle with the same risks as paper. They’re also beginning to understand that a drop in volume *is* a drop in price. Its Economics 101: When you move up in price from the equilibrium point on the supply demand curve, the demand drops. Listening to homeowners insist that prices aren’t coming down, but volume is weakening is becoming very funny.
For the record, I am a home owner here in coastal SD, but I view it more as a curse, as I feel locked in, in a sense. My wife and I will want to upgrade once we start a family, but I don’t see how we’d be able to buy a decent sized home in our neighborhood at the current prices…
This is a good point, and it should wipe all the smug smiles off of people’s faces. When homeowners want to move (for upgrade, job, health, divorce, etc.) they will realize that they are locked in by these high home prices. They can’t upgrade because the “mid” priced homes are pulling further and further away from the starter homes, and they will face a huge increase in property taxes if they move.
This bubble has been bad for most everyone, including current homeowners. I guess the only lucky ones were the ones who sold in the last six months.
The bubble has been good for those in industries that boomed due to the bubble: construction, architecture, design, lending, realty, flippers, and so on. The only others who benefited from the bubble, IMO, are those who moved from an expensive area to a cheaper one.
It’s nice that our little 1000 sq ft condo is “worth” more than half a million dollars because that would by a 3000 sq. ft. lake front home with a dock and a boat where my parents live. But it’s sickening that if my wife and I want to stay in our neighborhood (where we’ve lived for 5 years now) we’re looking, currently, at having to drop $1mm+ for a dinky 1,500 sq. ft. SFH. Meh.
In some places you can’t even downgrade. In places like CA and FL which have property tax initiatives, people who want to downgrade to a smaller or less expensive place find that by moving they lose thier property tax protections and can’t afford to move even to a less expensive place.
Happened to me, though I’m not looking to re-buy in Florida — I sold while paying $1,600/yr tax. If I bought the same place at the same price as I received, my tax would jump to $9-10K. As others have posted, until prices return to the mean, these unexpected costs will throw a lot of cold water onto retirees’ plans to move to Florida.
In live in NYC and work for the City of New York. I was astounded when I learned that one out of every three people, currently living in the City, was born in another country. One of Three!! I cannot imagine immigration slowing down too much. Gordo
NYC is a big magnet for new immigrants, but how many of them stay in NYC and buy housing? I think they move as soon as they can. IIRC, Bridgeport, CT has a lot of Haitians who bought houses after leaving NYC.
Folks from NY, NJ, CT,MA and even CA continue to move to Portland, ME and the surrounding towns. They have driven prices up to levels that most native Mainers cannot afford. Its like that bubble you can get when you put down linoleum - it moves.
And whats worse, VT and NH has been overrun by NYC/NJ/CT slime. Although they only stay a few years because they can’t adjust, they’re still nothing but problems here.
Lingus -
Check out the following blog on Vermont from Business Week last week:
Why Are Young People Leaving Vermont?
Peter Coy
My two sisters are part of the exodus of young people from Vermont that the New York Times covered recently (”Vermont Losing Prized Resource As Young Depart,” Mar. 4). I emailed them the NYT story and they had some interesting observations, which they’ve allowed me to quote.
One, who lived in Burlington, Vt., and lives in a semi-rural suburb in Connecticut now, wrote:
The reporter writes about VT as a monolith but it’s made up of three very different areas: Burlington, non-ski towns and ski towns. (Remember that old joke?: The best thing about Burlington is that it’s so close to Vermont…) The issues for each are completely different. I drive 20 minutes for milk in CT where I used to drive 2 minutes in Burlington. CT feels like a straitjacket to me, Burlington never did.
My other sister, who’s now in a rural part of upstate New York, wrote:
It’s an interesting article. My eye was caught by what the UVM pres said about VT not being able to afford its “anti-sprawl” policies if the population continues to shrink. It would seem environmentally positive for there to be fewer people, but I guess maybe that’s not the case. I look around my very small town and it would seem that I can count on one hand the number of educated young single adults living [here]. I’d never live here if I weren’t already married–you’d never find someone to partner with. The other thing that is starting to hit home is that choosing a rural location in which to raise children doesn’t guarantee you a rural lifestyle. It seems that popular culture is just as powerful here as anywhere. The kids may not be able to afford the ipods and x-boxes and whatever else has to be had these days, but they certainly are aware of them and covet them. And just like anywhere it seems a lot of them would rather be in front of a screen than out enjoying the beauty of the place their high-minded parents chose to raise them. …
I’m proud that my non-journalist siblings are more articulate than I am.
http://www.businessweek.com/the_thread/hotproperty/index.html
Hey, nothing wrong with this. This is a good thing for the country. We need MORE movement of people, to equalize housing prices. The more and more places that feel affected by this bubble, the more likely people will take this seriously.
I have seen this happening with people I know in NJ. When it’s possible to buy a nice house in a place like Raleigh, NC for $250-300k it’s very tempting to pick up and move. There are employment opportunities in some of the lower cost states and you don’t have to make as much money because housing costs as well as taxes are dramatically lower.
Long term we could see a significant decline in Northeastern population in relation to the rest of the U.S.
Even the scum of the earth are leaving - from yesterday’s North County Times:
FALLBROOK - Tom Metzger, once a driving force in the nation’s white supremacist movement, said Tuesday that he has moved from the North County community where he has lived for roughly four decades. He relocated from Fallbrook to northern Indiana about three weeks ago, but declined to say which town he was living in.
He said he soured on his former hometown because “the quality of life is going down.”
“You’ve got your lowlifes - whether they’re white or not,” and he added “It was just time for a change”.
Good riddance
Look, 50,000 people; recent graduates, middle class, rich, small business owners, young marrieds left the SANDAG area last year. Hispanics are 1/3rd of the population but 2/3rds of the school enrollment. Do the math, this is a plane crash. I could walk away with $1m after taxes but go where? We are heading towards third world status in SoCal but for those of us smart (say it, you are thinking lucky) to have seen the future are going to be those rich few in a sea of teeming masses just like in third world countries.
You are just missing the bunker, stash of food, guns and ammo then you should be set to live in that type of world.
If not that, then you will be spending quite a bit of money defending your obvious wealth.
It may go that way but it won’t be pretty for you or the other people.
$1 million! I really envy your position. Why the hell not go someplace else? With that kind of windfall you could make $40,000 a year in interest on a 4% savings account (not sure what the taxes would be), and even more on CD’s. You could take a multiyear vacation, travel the world, buy a nice home outright, and still have cash left over. I was in San Diego for a summer. It’s a nice place, but it’s not that nice. I would go for it, before the bubble completely collapses!
For tech workers in CA, there is no reason to keep their $1.5M homes and stay in CA . There are lots of info and bio tech jobs in Austin and Raleigh, NC. and comparable or better homes can be have for only $300K.
Hey Ben,
You should add the Boston Herald article to your post here.
Today’s front page
“10,000 Give up on Hub”
Not enough affordable housing
Not enough jobs
http://news.bostonherald.com/galleries/?title=PrintEditionNews
Robert Cote
With $1M after taxes, you could go almost anywhere else and live like a king. I like where I picked (ABQ, NM). Lots of great stuff here, and able to go back to CA to visit when I want. But if you have the money, SD wouldn’t be bad.
LunarPark - leave CA, and don’t look back.
I’ve turned on the one wall heater in the family room of my extremely modest 2600sq ft ranch 4 times this year. Looks like Saturday I’ll have it on for the 5th time tying the record of the last 10 winters. I have no A/C. Last summer there was 1 90 degree and one 92 degree day for the first two times in the 90s since 2000 (or 2001?). I am, as I type this looking out at the last snow on the Topa Topa Mtns, I pay less than people down below in the city pay for a 1br apt. I already live like a king, I know it and I’m not some arrogant braggart, I’m just lucky and smart. Would I purchase this same house today? Hell no. Would I be around to meet the person buying a house like this today? NFW, I couldn’t prevent myself from abusing somebody that stupid. There seriously is no place anywhere on the planet I’d rather be. I dropped off my thesis and rode my motorcycle through every state on the east coast and southern extent of the US, my family has or does live all over the world. I CHOSE Ventura County and I had infinite choice in th matter. A funeral last week brought in people from Saudi Arabia to the Philipines and Japan. My sister is in Brisbane, my other sister just moved from Oahu to Boston. My brother splits his time between Nicarauga and the FL panhandle. Two of the cities nearest me have been in the FBIs lowest crime top 5 for a decade. My backyard abutts a protected stream and golf course. the other side of the golf course is farmland and orchards. You might know those orchards as they are featured in the Disney “California Soarin’” ride. The owners son has been in my daughters’ class since 1st grade. While you were waiting in line you passed in front a picture of my old boss standing in front of an airplane I helped design. Lucky, smart? Not my call, the word is fortunate. Can everyone? Again not my call. I’m sorry that California is imploding but when I look at my aunts and uncles in Massachusetts I don’t pine for the homeland (my mom moved to Naples, FL three years ago).
This isn’t going to be a guns’n'ammo situation but it is going to be gated communities and private schools environment.
I love your comments Robert
The Boston Herald really missed out. The cover would have been better with Angie mooning everyone. Just my sarcastic sense of humor. That would be so apropos
ever been to Rio de Janeiro? travel by helicopter to keep from getting mugged.
This is nothing new. I didn’t move to LA 15 years ago because prices were high. It is still the case.
Maybe with all of the population moving away from the way to expensive coasts east and west, we will all meet up somewhere in the middle of the country
Nope. I like having the beaches nearby.
Lots of beaches in Texas — Gulf coast.
I had such a laugh when I read the San Diego UT this morning. Some “housing expert” is quoted saying that this wouldn’t affect prices at all etc. A net outflow of 43000 in one year, and mind you, this was a year ago. I wonder how many houses are empty, I don’t think the statistics show the true number. There’s no way that that the number of families can drop, more houses being build, without a huge increase in vacant homes. It’s pretty rare that you see homes demolished.
Oh and the people in the article that expect 750k+ for a 1500 sqft house in North Park… Cracked me up.
plus, factor this in. how are housing prices going to go up if people are leaving because housing prices are going up? every increase makes more people think to cash in live rich somewhere else. I’m sure for people who moved to california, it’s a big temptation to move back to where they were born. people who grew up in a place where californians wouldn’t move to(cold climes like Wis and Ohio and etc.) could find it tempting because prices are relatively cheaper.
then factor in those who would move to cali but don’t because of the housing costs. all that doesn’t bode well for california.
I’mm reading this article on what $1M will buy, if you follow the links a few of these houses are being PRICE REDUCED! just follow the links in the box.
How much home can you get for $1 million
On one of the MSNBC realty check articles, homes in a suburb of Phoenix were selling for $375/sf 6 months ago and now the land price there has droped to $40/sf. How much drop is that? 50%? 90%?
My (naive) question is, why are the immigrants staying in California? I’m sure they would like to have a lower cost of living and better quality of life as well. I know California policy on illegal immigration is not tough enough, but aren’t there other states that are lax as well?
Imagine showing up at the hospital emergency room to give birth to your baby in Montpilier. You don’t speak English, you don’t even speak Spanish. Who picks you up after running an $11,000 bill? Dad who isn’t legal either. And who waits to pick you al up? The INS. Instead you can have this: http://www.venturacountystar.com/vcs/ox/article/0,1375,VCS_238_4545891,00.html
“Prudencea Perea knows well that stretch of desert on the border where her stepdaughter died. Like many before her in her small Oaxaca village deep in Mexico, Perea traveled north to the border with a backpack of clothes and a hope for something better. Twice, Perea successfully made the journey into America and on to Oxnard that her stepdaughter never finished. ”
Read the whole story. We are killing people by failing to protect them with adequate border enforcement. Then we can talk about TB and Whooping Cough and then we can move on to auto insurance and then we can discuss bilingual education.
What most people do not realize is that by severely limiting the influx of inmigrants to this country, you are in fact choking its future. It is the desire to move ahead that has propelled this country to where it has been. It has been the refusal to follow the status quo of the people in charge by the great unwashed masses, that allowed a lot of people to rise to meet their dreams. US citizens have become complacent, and lack the motivation to make anything anymore. Everything is made in china, and all services are provided by India. It is easier if you just flip a couple of houses and make beacoup money. It is cool if you buy and sell some pets.com stock and become a gazillionare. It sucks if you actually try to start a company, and provide a product or service. No, we need to change, and we need to reverse the wal-martization of America. Once upon a time I saw how American products were the best. American made products were everywhere, and everybody wanted to be a cowboy.
The US porvides inmigrants with opportunities that are rare in their countries as most 3rd world countries have very advanced social darwinism models in place that make it impossible for those born outside certain circles to make it. Not so here for now. That is changing though, and we are letting it change for worse.
For all those making good money, specially in California, look south and see all the people there willing to do the same work as you for a 1/3 to 1/4 of what you make. Now start trembling because guess who also saw them????? Your company, your boss, etc….
Sleep tight.
The Spanish brought horses. With them we conquered a continent. We obviously need more horses today.
Don’t bother to reply. You’ve had your really really bad premise destroyed. Things change. We don’t need more non-english, non-spanish speaking pregnant 14 year olds with whooping cough and drug resistant TB showing up at the emergency ward incurring half million dollar neonatal intensive care hospital bills followed by $100k per year special education for the next 6-18 years anymore than we need more horses.
I would tend to disagree. Tell that to the Irish, French, Portugese, Chinese, English, Dutch, German, Spanish, (yes Robert, that piece of land that you are sitting on belonged at one point in time to Mexico, and before that to Spain), and if you go back enough to the polinesian, and mongols that made up the first wave of inmigrants. Those people that are coming to California, with all those nasty diseases, and whopping cough, untreatable TB, etc, are no different from your ancestors that came over in a flea infested barge from the old world, with all those untreatable diseases, like diphteria, syphilis, etc.
We are all inmigrants here. I have Irish, french, french Canadian, German, and Spanish blood in me. Telling these people that they are below what your ancestors did, is the worst case of NIMBYsm that I can think of. If your ancestors had a chance, then give them a chance.
BTW, if you retort that your family has ALWAYS been here, I would have to take Exception to that too, as the earliest known European settlements where made by the Vikings in the 10th century, and them some English in the 17th.
Also If I am not mistaken, you are an inmigrant to California, are you not? Did you not grow up in the NE? Did you not take the opportunity away from a native Californian to do what you have done?
I don’t know if Robert is against IMMIGRATION as he is against ILLEGAL immigration. Personally I think immigration is great - you should always want your country to be a place that others strive to live - but just letting anyone in can be dangerous. In the past, the immigrants that came from other lands had to endure more to get here and stay here (longer, costlier trips, for example), so in theory we’d get people who were more determine to become Americans and work to succeed.
Ideally we’d only let those immigrants come here who had a certain level of skills - intelligence, a trade, drive, etc. Something to weed out the wheat from the chaff.
What most people do not realize is that by severely limiting the influx of inmigrants to this country, you are in fact choking its future. It is the desire to move ahead that has propelled this country to where it has been. It has been the refusal to follow the status quo of the people in charge by the great unwashed masses, that allowed a lot of people to rise to meet their dreams.
Hey, I’d have no problems with immigration (or illegal immigration) were it not for our current welfare state. I can barely afford to raise a family, let alone with the bleeding hearts on my back to increase taxes to pay for this influx. This is not the same world from our parent’s generation.
John Law, Robert Cote-
I’m sure for people who moved to california, it’s a big temptation to move back to where they were born. people who grew up in a place where californians wouldn’t move to(cold climes like Wis and Ohio and etc.) could find it tempting because prices are relatively cheaper.
Bingo!
I’m looking at moving back to Illinois, where I am from, right now. I can get a SFH in the best school district in the Chicago area (there really aren’t any private schools in the Midwest, excpet for religous schools, the prep school thing jusst isn’t done there, rich neighborhoods use tax dollars to fund good public schools) for $370k. In the best school district in town. Think about that.
Here I’d have to pay $900k for a comparable place, plus fork over $30,000/yr in private school tuition.
Things like this make the Midwest really attractive.
Like Robert, I love California. I’m willing to make sacrifices to stay here. Pay extra. Put up with a smaller/older house. Endure a longer commute.
But the mistake Robert is making — it’s one that many 40-something California homeowners make — is that the lifestyle he enjoys will vanish forever absent a massive correction, for two reasons.
First, the illegal immigrants really are fundamentally changing the character of the state. This isn’t a racist observation, it’s just a fact. They are excellent people and will undoubteldy be good for America in the long run. But in the short run, they are a huge burden. Illiterate or semi-literate. Uneducated. Without health insurance or social security benefits. A strain on public facilities such as schools, hospitals, etc.
Second, implicit in Robert’s comments is yeah, it’s hard, but people are willing to sacrifice to live here. That’s true, but the situation has now reached a point where, even with sacrifice, it is simply IMPOSSIBLE to afford to live here. The number of people who earn in excess of $150k is vanishingly small, especially when you look at the 20- and 30-something age group. But you need to earn that much to live in even a run down middle class community. You want to live on the golf course, like Robert? Forget it.
This is the one thing that established homeowners like Robert really don’t understand. Maybe they comprehend it intellectually, but they don’t really feel it down in their bones, so to speak.
For example, I’m guessing that Robert is around 45 years old. His house sounds like it is worth @$900k, maybe a little more. He bought it 10 years ago, when he was 35.
I’m 34. I have a good job with a salary of $120k per year. Suppose I want to buy Robert’s house next year. Do I have a cash 20% down payment of $180,000, almost twice the FDIC insurance limit and more than one and a half times my gross salary? Nope.
Do I have savings for emergencies in ADDITION TO my down payment savings that will enable me to make six months’ worth of payments if I lose my job/get sick/whatever? In this case, that would amount to about $45,000? No, I do not.
Can I afford a mortgage payment of $4,400/month? No, I cannot, especially when you consider that my student loan payments are $1,200 per month.
Do I expect my salary to increase to, say, $200k in a few years, making those mortage payments easier to handle? I certainly hope so, but I doubt it. It’s taken me a long time to get to $120k, and I’ve seen plenty of people in my line of work get fired/laid off/have to work for less. It could happen to me. I’m not counting on regular salary increases.
And suppose I could afford these things? Would I chain myself to a huge mortgage like that for the next 30 years, just becuase the weather is great here? No way.
I love California. I am willing to make some sacrifices, like live in a smaller house, in order to stay here. But these days, the sacrifice is just too great.
Bravo!
“…and I’ve seen plenty of people in my line of work get fired/laid off/have to work for less. It could happen to me. I’m not counting on regular salary increases.”
This is especially true when you consider that in order to climb the income ladder, one has to move from company to company to do it as well. The reality of the past 10 years for professionals (engineers, finance, etc) in large corporations has been up or out. This often requires a move elswhere and it might have to be out of California. If one is reasonably intelligent, then buying an overpriced house is a major risk for any upwardly mobile professionals since they may have to sell it in 2 to 5 years anyway.
I’m also from Chicago (Oak Brook area) and we’re the same age and income level basically. I had to move to San Diego with my wife who’s a pharmacist for the Navy. I sold my nice 1700 sq foot townhouse in Hinsdale, IL and now I rent a similar sized house in Mira Mesa for double what my mortgage was in IL. Yet, that rent is literally half of what it would cost to buy the house I’m renting in SD. That is seriously F’d up.
Not to mention that most of Mira Mesa is pretty darn cruddy and no way in heck a non-Californian would send their kids to the public schools.
True. I dont’ have kids…yet. Every time I drive past that High School on Mira Mesa Blvd, I cringe. The High School I went to in the south suburbs of Chicago is ten times nicer and better and my parents didn’t have nearly the amount of income my wife and I have. It’s very disheartening at times.
Excellent. 46, and paid $220k for my $1.4m pied a terre. Not my fault. Bought at the bottom and lower from the bank and then got them to knock off an extra 10% in escrow. I’m fully aware of the direct and indirect effects of the prices of housing. I’m not unaware nor am I unsympathetic. Even were I to cash out or sell at a deep discount it wouldn’t help. The only thing to do is stay and fight.
I’m in much the same position - I’m waiting for the prices to drop until I can afford them. No biggie - I can rent till then - and I can’t be priced out of the market long term because I *am* the market.
Once financial gravity takes over there is NO market for Robert’s palace on the hill at that price - he’ll still be sitting pretty no matter what it’s worth and I’ll be buying with a strong cash position once the weak are in chapter 13 and the banks want strong credit and cash.
Houses will once again sell for below real value - which is when the next generation of Roberts will swoop in like the vultures we are and set up for our palaces on the hill.
Double bravo…it took a lot for me to bite my toungue and not lash out at Robert’s arrogant, self-serving narrative, but you saved me the time…and were way nicer than I would have been.
I want to slap some sense into each and every one of these smug 40-somethings + that say…”oh, but the sunshine is worth it”. Worth what? The mortgage on your (now) $1.5M house is $1500 a month or less and your taxes are offensively low and protected by prop. 13. Why in hell WOULD you move to the NE with a deal like that?!
How many of us making $150K/year + want to raise a family living barely better than immigrants? The old timers have not a single clue how bad it is right now for young families - and how many are truly scrambling for the door (myself and over half of everyone I know included).
Bitterness explains you inability to be civil. It doesn’t excuse it, just explains it.
When you caveat five-paragraph life histories with “I already live like a king, I know it and I’m not some arrogant braggart, I’m just lucky and smart”, expect some of us to give less-than-civil responses.
You are neither smarter nor luckier than any of us, unless you consider being born 15 years earlier than any of us folks down below a stroke of luck. Timing, pure and simple allowed you to live the way that you do. And now you want to build a gate around your community and deny others/immigrants the same opportunities that you had? Typical boomer mentality…
Bitter and unrepentant is no way to get ahead. Which of lucky and smart do I need to do something about as if I had control of either? Just because you don’t get it doesn’t mean you have to lash out in frustration at others.
I honestly wish to thank you for your contributions. You’ve thrown up in stark contrast our differences that no amount of posting by me could demonstrate. You attitude and your circumstances, my attitude and my circumstances. Coincidence? I know it isn’t coincidence.
wow robert, you really pulled out the stops to deign condescend on that last one.
Robert: Just remember that your job can be done better and cheaper by foreigners that want to move ahead…. And will work 20 hrs a day at slave labor rate! IF you do not believe me, ask any High tech support guru where his job went. India or China. Or in your case look south of the border. You are fast approaching the point of unemployability, where no one will even give you a call back after the interview, and written next to your resume is: Too old, old dog can not learn new tricks….
Interesting article from the SF Chronicle
Bay Area home sales fall for 11th straight month
Kelly Zito, Chronicle Staff Writer
Thursday, March 16, 2006
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Bay Area home sales tumbled in February for the 11th month in a row and prices appreciated at their slowest rate in two years, as the region’s real estate market showed further signs of cooling.
The median price for a single-family home in the nine-county area was $637,000 in February, up 12 percent year over year, but well below November’s peak of $656,000. A total of 6,206 condos and houses changed hands, nearly 17 percent below last February’s tally, according to real estate information firm DataQuick.
In part, experts attributed the current slowdown to the previous large number of transactions that had been spurred by rock-bottom interest rates. Now that rates are rising, the pool of potential buyers has shrunk.
“The market could go into a lull phase for a while where prices flatten out because we’ve pulled a lot of (sales) activity from the future,” said DataQuick analyst John Karevoll.
Karevoll, whose monthly reports are based on filings with county recorders’ offices, expects annual appreciation rates to sink into the single-digits by later this spring.
E-mail Kelly Zito at kzito@sfchronicle.com
I am not surprised by this news on San Diego. For all of the home owners cheering the price increases, I wonder if they have considered what happens to the economy of an area when all of the young people move away.
That said, I see always see a lot of comments from people saying that they are getting ready to move out of CA. I am very curious what type of jobs/careers people have that they can uproot so easily. The people that I know that have moved to low cost areas are making a fraction of what they made in CA, and have generally been unable to find jobs in their field. A trade off I guess, but it just seems that most of the jobs are in CA, for better or worse. (Of course the job market here over the last few years has been built on people buying and selling homes to one another, but that is a another story).
I’m moving - IT geek.
I can’t speak for everyone, but my background is in accounting and finance (CPA) and I have worked mostly for large manufacturing firms in the telecom and automotive industries. The compensation is San Diego is actually slightly less than what I’ve seen for similar positions in Chicago, where I’m originally from. Then again, SD is notoroius for low pay from what I’ve heard. They claim it’s because everyone wants to live there…oops, not anymore
International music business. I spend 8-9 months away from home (12 months this year). My place in LA was like a vacation home - a very expensive one with ridiculous income taxes to boot. Someday I will change careers - but with a big enough savings to buy a home in cash in a more realistic market.
- TG In London (with my company paying my rent!)
JWM-
Exactly. Exactly. That is the thing that the older generation simply does not understand. Everyone’s employment situation is A LOT more volatile today.
I’m a lawyer. I graduated from school 10 years ago this May. I keep in touch with 5 or 6 of my classmates and have some vague idea of what maybe 20 people are up to. Every single person I know has had at least 3, and usually 4, jobs since getting out of school. And this is a top five school, these are the best and brightest, no marginal slackers here. I’ve lived in NYC, Chicago, and LA. A friend has worked in Dallas, NYC, Chicago, back to NYC, and now Charlotte. His salary has gone up and down with each move. People routinely go from $200k/yr to $100k and back again — actually, make that $50k if you go to work for a state government.
I myself had to temp for $12.00/hr upon getting out of school. My salary has gone up, but not in a terribly meaningful sense, until fairly recently.
It wasn’t like this 20 years ago, when guys like Robert were starting out. No one had to work as a temp back then. Robert has probably only changed jobs once or twice. And I bet someone who he worked with at his first job is still there. These days, we’ve all changed jobs a million times. I don’t know a SINGLE PERSON who I worked with at the law firm I started at, except for one of the senior partners. Everyone else I worked with now works somewhere else, and a few people moved to distant cities.
The labor market is far more volatile these days. This makes people our age extremely risk-averse. Like you, I would never dream of taking on $800k in mortgage debt, not in a million years, even if I could technically “afford” it. We really do view the market in a very different way from the preceeding generations.
I’m in accounting and finance (CPA) and have worked largely for manufacturing firms in the telecom equipment and automotive industries. In my own experience, staying much longer than 4 years means being most likely being stuck in a staff level position without any decision-making responbilities..i.e., sub $100K positions. If I expected to move beyond that, I had no choice but to move to a different company/industry. It’s a bit like corporate inertia. Upper management seems to not want to promote from within as much as they should. It has always puzzled me. They could save more money on search firm fees which are VERY COSTLY.
Regarding Robert, I hold no ill will towards him. In fact, I often read his posts and from what I gather, he is also a housing bear. That being said, he fully admits that he doesn’t have to fret about what is likely happen to home values. If I were him, I might feel the same way. The people I have the most problem with are those in his age group who have no clue about the housing bubble and try to push my wife and I into buying.
“And this is a top five school, these are the best and brightest, no marginal slackers here….I myself had to temp for $12.00/hr upon getting out of school. My salary has gone up, but not in a terribly meaningful sense, until fairly recently.”
You went to a “top five” law school, are ten years out, and make $120K? How bad were your grades in law school?
actually all of Connecticut- outside of Fairfield county is priced no higher then Portland Me. or most of Vermont. Median home prices in the Hartford metro area are 239K -about the same as Portland. And eastern Connecticut is less- so the term ‘CT Scum’ is a bit of a reach. Yes New Yorkers and northern NJ refugees, as well as Bostonians and NOVA & DC escapees- and some CA formers relocate to CT especially to Windham, Tolland and New London counties CT- (the eastern counties of the state)-away from Fairfield county CT- which is very pricey. The rest of Connecticut is surprisingly cheap for the east coast corridor.
That’s mainly because it has so little to recommend it. The parts of CT that are too far from NYC to be reasonable commutes have always seemed to me something of a no-man’s land. None of CT is really close enough to Boston, Providence has only recently undergone something of a wobbly renaissance, and no matter what happens with the economy nationwide the Hartford/Springfield, MA area comprise an economic sinkhole. (I was born in Springfield so I think I have a right to take a poke at it.) Even coastal CT east of New Haven, quaint and historic though some of it may be, just isn’t that economically robust. Not that there’s anything wrong with that, really, but that sort of life isn’t for everyone. I can’t see myself living there, although it would be cheaper and less inconvenient for the spouse and me to visit family in the Boston area (we’re in NYC now.) No offense to anyone, but I don’t even like driving through CT, it’s just awfully dull.
I prefer to give TheLingus the benefit of the doubt and assume that by “CT scum” he means the folks who live in the southwest parts of CT that are really suburbs of NYC.
So what’s wrong with Fairfield County? It’s beautiful. The dogwoods, the LI Sound …
Having held about 10 jobs (temp and perm combined) in a span of 10 years ( I am in IT), I want to throw my 2 cents in about this job stability vs. owning a home situation. My first job temping 10 years ago my supervisor told me ‘long gone were the days of working for a company for 15-30 years’. Since then I know she was right and I came to accept that. But that is the reality and we have to accept it. Thats just the way it is and will be. Of course buying at the peak doesnt make any sense right now, but if prices come down to a reasonable income to mortgage ratio, are we to not buy a home simply because of fear of what the future might bring? I say no, and thats exactly what I did 3 years ago. I admit, was lucky the timing was right when I decided to buy, but regardless I knew I needed a ‘home’ base because I just started a family and that was important for me. Now I look as my career as second to family life. Jobs will come and go. Hec, I was laid off 3 months after I bought my home!. But I bounced back, tempd and then landed another gig. Life goes on. Dont live in fear of what if? which is different form planning for what if?
Robert-
I don’t think this is “your fault.” I do thnk that one of the reasons why things are so difficult for my generation is the selfishness of the Baby Boomers, but that’s a macro issues. I don’t blame you personally for any of this, you are a nice guy.
All I am saying is that sometimes people don’t understand that the path they took to success is no longer available to those who follow. The best example I can think of is when my co-worker saw me brown-bagging my lunch and said “saving up for a down payment, eh?” Man, he just didn’t get it. He was genuinely trying to be nice, but I still wanted to kill him. Yeah, sure, if I brown-bag it every day, and cancel the cable service for good measure, maybe I can save $3,000 per year or so. At that rate, in just 20 years, I’ll have enough for a 20% down payment on a place in San Bernardino! I get the same feeling when perusing realtor.com and seeing a things like “walking distance to Greenleaf Elementary” and “Great Starter Home” for modest bungalows listed at $900k.
There is a real disconnect between the popular conception of housing and the reality. One of the reasons why I value this blog so much is becuase it paints a more accurate picture of how things really are. A $900k “starter home” is a freakish caricature of reality. But it’s all we ever see in the media, and all we ever hear from our parents and older coworkers. For example, the boss at my last job was shocked to hear that I don’t own a home. I never mentioned it to him, but one day we were carpooling to work when my car was in the shop; we often rode together becuase we live about a mile apart. He picked me up in front of our dilapidated apartment building and asked whether I was planning to move, seeming puzzled about why i was still living there. He wasn’t being obnoxious, just genuinely puzzled. When I told him that I was priced out of the market, he was shocked. This is the norm. People like you who do understand are a small minority.
It’s what makes discussions about the market so maddening. I can see that it is insane, all of the numbers that people throw around are total bullshit, yet the older generation just doesn’t get it. They don’t seem to realize that no one has a 20% down payment of $180,000, it is impossible for the average person to save that much no matter how often they brown-bag it. This is not sustainable. But the older people always say “well, it’s always been tough, I had to keep driving my old Monte Carlo for two years longer than I had planned” etc. It’s like we are speaking two differnet languages, it makes it hard to communicate.
Joe,
I have been out of school and working ten years. I have $250K saved for a place. Never bought ’cause I have moved 3 times for work and the markets been high. I make $80K a year - good $ but not astronomical. It’s not easy to save for a house or other goal but can be done. Also for a couple it is even easier to save if there are two income. Patience.
Again stereotypes and misinformation on geographic areas remain. Portland ME has a median home price the same as metro Hartford CT (around 240K)
Burlington Vermont is the same. The only part of Connecticut that is super pricey is Westport, Greenwich, Darien, all in Fairfield county CT-which is basically an appendage of greater NYC- fact is many X New Yorker refugees as well as escapees from DC No VA DC and California have relocated to central CT-but especially rural eastern CT counties of Windham, Tolland and coastal New London county-and to a lesser degree Litchfield county (northwestern CT) where housing is surprisingly affordable- Calling CT ‘Slime’ is unfair- since most of the state has median house prices the same as Vwemont and southern Maine.
I wouldn’t say Westport is super pricey. You can find reasonable housing under 1m. I would include New Canaan, Wilton and Weston in the mix of wealthy towns.
All of the towns on the Gold Coast have super pricey estates that could run 10m+. But they also have places real people can live.
sorry for that repost
Seymour-
Funny, I don’t see it that way at all. IMO, jobs outside of CA pay almost as much for those in CA. For example, doctors and lawyers in LA don’t make that much more than those in my native Chicago.
My cousin in Kenosha, WI is a truck driver, and he makes almost as much as the truck drivers out in Fontana make. I know becuase I interviewed a bunch of them last year. But my cousin paid $130k for a lovely house on a half acre in an idyllic community just 15 minutes from work, the guys in Fontana all paid $300,000 for stinking hellholes in the godforsaken desert of Victorville 1.5 hours from work.
My mom is a nurse. She thought of moving out to California a few years ago and called some headhunters here. The salaries werne’t that different.
I don’t think that people in SoCal really earn more. Those in the entertainment industry, sure, and if you sell Porsches and Bentleys for a living you’ll do much better here, but orinary jobs don’t seem to pay that much more.
I find the intergenerational warfare arguments a waste of time. Each generation plays the hands dealt it, for better or worse. Some will have it better in some ways than others, but there’s absolutely nothing to be gained by begrudging them for it.
Everyone here should consider themselves smart and lucky. Why? We’re on the verge of some of the biggest economic “events” in modern history, and we know about them beforehand. That kind of knowledge makes fortunes. Future generations will look back and marvel at the opportunities we’ll soon have. Don’t waste them!
Bravo!!!
Especially Robert Cote. He’s so much smarter than everyone else, he will certainly one day rule his VERY OWN elite coastal enclave!
My husband andI are from backe east… you know, where there is a real yard with your house? I’d move in a heartbeat, but hubby is here for an acting career. Meanwhile, he works in the hospitality business (w/ a hotel) and justifies by saying he wouldn’t make as much somewhere else, because people tip better here and the pay is better. Go figure. We’re renting now and used to own a townhouse 7 years ago… Which now in hindsite we should have kept. We paid 135k for it, sold it 3 years later for around the same. Needless to say, we are kicking ourselves for not holding on to it. It’s a constant “discussion” between us.
Just a side note, has anyone done business with Realtytrac.com? Wondering if it would be worth it to go through them.
Good luck to everyone during this bubble.