Sunday, May 21, 2006

"Where Will Our Children Live?"

I found this article in the Sacramento Bee (login required) today entitled "Scraping by on Mortgages". We should all know by now that because of the utterly insane run-up in the prices of houses in California the typical Californian commits well over half of his monthly income to paying the mortgage (as opposed to the traditional roughly 30% or less). You would think, like the SacBee, that would indicate that California is the most financially stressed state in the Union. But somehow, almost miraculously, month after month as far back as I can remember, DataQuick concludes (always the last paragraph) that "indicators of market distress are still largely absent".

Some choice quotes:
Last year there was no place where people stretched their pay harder to buy one than California. A new analysis [by Moody's] of housing and financial data portrays the state’s homeowners as the nation’s most financially stressed.

Moody’s survey shows the growing financial pressures on California households by ranking 10 more Golden State areas in the nation’s top 11. All are places where housing prices have skyrocketed ahead of wages since 2000. The findings have implications in a state where nearly three-fourths of recent homebuyers have adjustable-rate mortgages that are scheduled to take even bigger chunks of their monthly pay.

In all, 28 of the first 50 slots on Moody's list are in California.

"My house payment is a little over half of my income," said Jason Thompson, a heavy equipment operator who feels both proud and stressed to be a 21-year-old California homeowner...he said his financial stretch is "not very nice, especially when gas is $3.30 a gallon."

Salinas Mayor Pro Tem Jyl Lutes said being squeezed at home makes people less public spirited and more likely to reject bond issues for schools and infrastructure. A cruel natural selection of rising home prices also is pushing people out of hometowns and farther from lifelong associations and jobs. "We lost 900 kids this year in the Salinas school district," Lutes said. "Where I teach, a small district, we lost 30. It has that ripple effect. It hurts everything."

Earlier this year, a San Francisco-area business association, the Bay Area Council, released a poll showing that 40 percent of Bay Area residents have seriously considered leaving. The reason: housing's big bite from their salaries.

"A poor family in Louisiana is actually doing a lot better than a poor family in California," said Deborah Reed, research fellow with the Public Policy Institute of California.

None of this is new in a state where both gushing happily and fuming over rising home prices have become part of the psyche. ‘We had a campaign 25 years ago called, ‘Where will our children live?’ said Leslie Appleton Young, chief economist of the California Association of Realtors.
Where will our children live? Why do we not even care, really? Does profit take precedence over our kids? I think this is more than enough reason to completely remove the profit incentive from real estate. It's about time; things have gotten too out of hand.

If nothing else works, boycott housing.


Blogger goldengas said...

Housing prices are dictated by supply and demand. Government controls supply via zoning, planning, and enviromental regulations. Government benefits from escalating prices through increased taxes. It drives out lower income people and replaces them with higher level earners. Eliminate government control over housing and prices will come down to realistic levels.

May 21, 2006, 3:48:00 PM  
Blogger scurvy trader said...

goldengas is right. Northern California is a special place and people want to live here. The more people that want to live here, the more demand for housing. We could pull a Tokyo and just start building ultra-dense housing but at the cost of greenspace and recreation. It's most growing cities it's a fine balancing act. In SF and Sacramento, it's a lost cause. The local governments don't want to re-zone anything nor do people want any real change in their neighborhoods. So supply can only grow at a glacial pace while demand continues to increase. Only a drop in demand will bring things back to equilibrium. Sadly, the only things that will cause a drop in demand are all very very bad.

May 21, 2006, 5:43:00 PM  
Blogger marine_explorer said...

"Northern California is a special place and people want to live here.

Not to sound too facetious, but we could replace N. CA with San Diego, OC, Santa Barbara, SLO, Monterey, Portland, Seattle, and Vancouver. I've seen all those places described as "special" in realtor write-ups. I suppose this place is special enough, but with many people leaving the SFBay, and residential re investment tapering off, will supply be tight forever? Let's wait and see.

May 21, 2006, 6:43:00 PM  
Blogger fredtobik said...

"It drives out lower income people and replaces them with higher level earners."

or another way to say it.

"It allows the U.S. to remain competitive in a global economy."

May 22, 2006, 10:58:00 AM  
Blogger Woody said...

Ths thing about kids just shows how greedy the older generations have become. They are not even concerned with "allowing" their own children to experience life and adulthood they way they did. They prefer to hoard. Then when their kids need a house mommy and daddy can lord over them by helping them buy something. Thanks mommy and daddy! Don't worry we are all taking your attitude to heart and will apply it fully when you enter the nursing home!

May 22, 2006, 11:10:00 AM  
Blogger anon149 said...

This comment has been removed by a blog administrator.

May 22, 2006, 11:43:00 AM  
Blogger anon149 said...

or another way to say it.

Huh? Not at all. They are talking about people here, who need to be here in the US, who do things like fight fires, police the streets, clean, repair, etc. That has nothing to do with globalization. So we are going to export our retail sales positions to India? Police? Road repair? House cleaning? Plumbing? Teaching? Nursing? Gardeners? Just so that we greed folks can enjoy ever escalating house prices?

May 22, 2006, 11:44:00 AM  
Blogger anon149 said...

‘We had a campaign 25 years ago called, ‘Where will our children live?’ said Leslie Appleton Young, chief economist of the California Association of Realtors.

Back in the 70s people foresaw this terrible situation brewing. They were able to "connect the dots". But apathy reigned supreme and so nothing was really done. 25 years of nimbyism later, look where we are. Now the "haves" adopt callous attitudes of indifference towards the "havenots".

May 22, 2006, 11:50:00 AM  
Blogger marine_explorer said...

"It allows the U.S. to remain competitive in a global economy."

How is that--by increasing overhead locally?
On the contrary, if locations with less overhead attract bright people, these areas will be quite possibly better prepared in the future to develop competitive ideas. High home prices might look great to owners, but we need to consider long-term fallout.

May 22, 2006, 1:43:00 PM  
Blogger Downturn said...

I thought everyone wanted to live in either Boise, Salt Lake City or El Paso. What's going on here??

May 23, 2006, 3:18:00 PM  
Blogger B. Durbin said...

Within the last few days, they released a report of the percentage of worker's incomes that go toward housing. Some places in California averaged in the 60% range, something that is very, very frightening.

What surprised me is that Sacramento averages in the mid-30s, only slightly above the sane level. And yet we're still considered 57% overvalued. I'd have to see how the poll was conducted to understand if this is self-reporting or not.

May 23, 2006, 7:51:00 PM  
Blogger Still Waiting in Sacramento said...

I am very skeptical of the statistic that 34% of income is spent on a mortgage payment in Sacramento. I agree with b. durbin's comment; I would like to see how this poll was conducted. It doesn't seem accurate to me.

May 26, 2006, 3:03:00 PM  

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