"In California, the Starter Home Market has Really Disappeared"

"In California, the starter home market has really disappeared".

That statement definitely rings true in the Bay Area. How sad is that? How long can that continue? It implies that the starter home market, which is the first rung of the 'move-up' ladder, is now totally dependent on debt for its existence.

Like this article says, the thing that has been saving people time and time again in recent years, and that has allowed them to take on such massive amounts of debt and feel like they don't have to worry about it, is the market itself. As soon as the market turns flat to negative people will learn the hard lesson of debt. And now that the bankruptcy laws have been tightened that will be a very hard lesson indeed. What happens to the Bay Area housing market as a whole when the 'starter home market' totally disappears because either no one in that market can get a loan or they're too afraid of debt?

This whole thing is so out of control it isn't even funny.

Some choice quotes:

"In California, the starter home market has really disappeared," said Tamara Draut, author of "Strapped: Why America's 20- and 30-Somethings Can't Get Ahead."

Younger adults are struggling to make ends meet, Draut said, because many have student loans and start with low wages, which make it hard for them to save and build wealth.

"Definitely, this generation has resigned itself to live in debt to live in a middle-class lifestyle," she said. Many consumers are comfortable with debt, but too much debt leaves people vulnerable, living paycheck to paycheck.

Some homeowners take advantage of rising property values to take on more debt and use the influx of cash to pay other debts, such as credit cards.

"The market keeps bailing people out of trouble," Lawson said. "Because people don't really get in too bad of position, they never really learn the lesson, and a year later they turn around and get themselves in the exact same spot."

"The concern is how do we keep our middle class with the housing costs going so high?" Gruen said. "Will people move from California if they have the option? Yes they will."

"The only thing that's keeping me here is my family," he [Peabody] said.

Peabody would consider moving to another part of the country where living is more affordable if he could land an appealing job.

Other people are wedded to living here regardless of the price.

A significant market decline is the only healthy way IMO to restore normalcy and long term prosperity. Anything less than that is likely to be an artificial and ultimately ineffective intervention that will only make matters worse. Let's hope the 'man behind the curtain' can see that. And yes, for the record, I will be hurt just as much as anyone else but it's still the truth as far as I'm concerned.