Sunday, December 11, 2005

Californians Infest Nevada

This article in the SF Chronicle further extends one of this blog's themes -- the eroding quality of life caused by the housing bubble.

Simply not content with destroying their own state, Californians are descending on Nevada and destroying their quality of life. And why not? We've been doing it to Oregon, Washington, Arizona, Idaho. I know it's not "politically correct" to say it and I'm not making any friends by doing so. Here's an idea, one we should have learned in kindergarten: clean up your own mess.

Some choice quotes:
Nevada...has long been a magnet for Golden State refugees fleeing what they see as an eroding quality of life amid growing congestion, burdensome business regulations and high costs. But increasing numbers of Bay Area residents like the Dunns and the Barbers have had an extra incentive to head east: large sums of real estate equity.

"The California housing market diaspora has transformed the West, and it's moving to different midtier and even larger metro areas," says Robert Lang, an urban planning expert at the Metropolitan Institute at Virginia Tech.

Reno stands on the front lines of a migration of affluence that has also affected such places as Boise, Idaho; Phoenix; and Portland, Ore., where home prices are rocketing and new ideas and businesses are taking root as newcomers buy houses that are bargains by Bay Area standards.

Although much of the windfall from rising house prices has been spent on everything from college educations and cars to kitchen renovations and European vacations, many people have simply cashed out and started over.

While couples like the Allisons seem content to retreat from the Bay Area to live in dream mansions, for others the migration to Reno represents a fantasy of a different sort: the first rung of the homeownership ladder that is all but unreachable in the Bay Area for middle-class families without sizable assets for a down payment.

A recent study by the Public Policy Institute of California found that high housing costs are forcing one-third of state residents between the ages of 18 and 34 to ponder a move from their region or out of the state.

Many of the reasons newcomers enjoy Reno sound familiar to anyone attracted to the Bay Area: the natural beauty, proximity to great hiking and skiing, good airport service. Others sound less familiar: kind people, good schools, a slower pace of life, low or nonexistent taxes, the state's conservative political bent and, of course, less expensive homes.

Some complain that there are few good wine stores, places to buy organic meats and vegetables, and even fewer dining choices. Shopping is hardly a strong suit, either: Earlier this year, Bay Area transplants were abuzz about the mere possibility that Nordstroms would open its first store in the area.

..some longtime Reno residents have bemoaned the "Californication" of their city, a vague notion that wherever California refugees mass, they bring unwanted attention and traffic, wacky political ideas and, on some level, an in-your-face affluence that spoils a pristine area.
A reader of another blog left this comment in response to this article:
I am a chemical engineering graduate of the University of Nevada, Reno so I feel I have to say something here.

These California migrants are bringing increased housing costs with them, but they are not bringing increased job opportunities for middle class people. A common complaint of young people in Reno is that the area has dramatically increasing housing costs but the job opportunities and pay levels have not improved enough to match. The real reason for anti-California sentiment is this: they increase housing costs but do not increase job opportunites and thereby reduce the standard of living of local young people.

I expect that Reno is especially vulnerable to a price crash because local wages simply do not support the $399K median house price than Reno now has. Without the continuous flow of California bubble equity, I expect that Reno cannot support house prices much above $250K.

Just another perspective. This housing boom screws us young people.


Anonymous Anonymous said...

Oh no! After ruining our own living standards, we Californias are going to ruin other states' living standards. What choices do we have? When a run-down, 50 years old house costs about $1 million in Marin, some "wise" pepoel have to look somewhere else.

Dec 11, 2005, 2:04:00 PM  
Blogger Karen said...

We ran to the east coast, where housing prices are nearly, but not quite, what they are in the bay area. In other words, we are not living in a mansion. Nonetheless, I understand the problem.

We were one of eight offers on our current home, and because we had a great deal of flexibility, we put a clause in our offer that increased our bid incrementally based on other people's offers. We won the bid, but in the process, we upped the price quite a bit.

It didn't matter whether or not the house appraised. We didn't care. We had the cash.

Unfortunately, we also upped the comps in the neighborhood, so we unintentionally made it harder for subsequent buyers. Looking back, I feel bad about this, although it didn't strike me at the time.

Now, if prices drop, we'll lose a bit of our equity, but we certainly won't be upside-down on a loan. I wonder about our neighbors, though.

Dec 12, 2005, 7:37:00 AM  
Blogger marine_explorer said...

Simply not content with destroying their own state, Californians are descending on Nevada and destroying their quality of life.

Sure, Washington residents groan about the southern invasion, but to be fair it's been done to California as well. Think the Bay Area is populated by CA natives? Long-term residents complain how the culture and values have changed as people came here following wealth and success. This is particularly acute for friends in Santa Cruz and SLO; we're all victims of this insanity.

We might see increased employment opportunities in other areas when businesses move to regions with more reasonable living costs.

Dec 12, 2005, 8:03:00 AM  
Anonymous Anonymous said...

Google for one. Last time I heard they are expanding to Arizon. Maybe that is why the housing over that region went up 55%?

Dec 12, 2005, 8:29:00 AM  
Anonymous Anonymous said...

Many of these 'refugees' are people who are trying to get into the real estate investment game. Many of them are going to get hurt badly.

Dec 12, 2005, 11:45:00 AM  
Anonymous Anonymous said...

I just spoke with a recruiter (I'm looking for a new job in the Bay Area), and the conversation turned to housing. No surprise there I guess. What DID surprise me was that this woman was utterly clueless about talk of a housing bubble and had no idea whatsoever about the issues surrounding housing (cost to rent ratio, affordability, lax lending standards, historical trends relating to RE, etc.). Her only "data point" that she quoted as to why it is a good idea to buy is what here realtor told her.

Dec 12, 2005, 1:00:00 PM  
Blogger Karen said...


You make a very valid point!

Dec 13, 2005, 9:26:00 PM  
Anonymous Anonymous said...

How long is the commute from Reno to the Bay area? 60 miles one way? Think about the extra gas consumption and burden on the freeways.

Dec 14, 2005, 6:09:00 AM  
Anonymous Anonymous said...


It is 217 miles one way between Reno and SF. Not within commuting distance.

People buying in Reno either are employed there, retired, buying a second home, or have remote work arrangements.

Dec 14, 2005, 2:56:00 PM  
Anonymous Anonymous said...

The migration of real estate investment from California to other states might signal housing prices have peaked in California. The entry barrier may become too high in California. There is more downside risk associated with investing in California than upside potential.

As far as living standards concerned, this has more to do with our fed's monetary policy than anything else. Jim Rogers, a savvy investor, once made a comment on CNBC that our fed's easy policy would weaken our US dollar and a weakening US dollar would eventually reduce our living standards. A weakening dollar would diminish our purchasing power. This would create an inflationary environment since everything we import including oil and raw materials would become more expensive. It probably took a longer period of time for other states to feel the jolt than us, Californians.

Dec 14, 2005, 10:40:00 PM  

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