In two words:
“!VIVA MEHEEEEEEEEECO!”

We did leave SoCal last year. The high prices of housing were the #1 reason, closely followed by the influx of illegal immigration and outrageous taxes. (Side note: We left California in March of last year. On this year’s tax return we got money back from both Federal and our new home state, but we OWED taxes to California for the reason that we did not live there long enough in 2006 to pay enough taxes!! I was floored.)

It’s very sad to see what has become of CA. I was born and raised there all my life, but we just couldn’t take it anymore. And the prospect of NEVER being able to own a home (cause there was no way in Hell we were feeding into that frenzy like every single one of our friends did!) was just too much to bear. Sure, I miss my friends and family, but overall, I think this was the best decision we ever made.

What does bother me is that high housing prices really push young families away. I had a terrific childhood growing up in Staten Island; plenty of friends and everyone pretty much knew each other. Now, families of ages similar to those of my family are far and few between. Most of the families I run into have much older parents with little in common with me.

I think Prop 13 and misguided anti-growth policies are largely to blame for this mess.

When I was a child I spent five great summers in the mid-1970s at my cousin’s house in Garden Grove. It was a great place – we could walk safely to Atlantis (is it still there?) and there was still some open space. Yes, in 1974 there was at least one dairy farm in Garden Grove.

When I go back now on business I realize that the OC of my youth is pretty much gone. It’s all super-expensive houses packed together and linked with massive traffic-clogged freeways. But the weather is still nice.

Awww… c’mon. Palm Springs isn’t so bad

As I alluded to in my other post above, I have seen what happens when families leave an area too. And I got a knife in my gut for the pleasure. The realist in me says there is a brutally hard landing coming. The optimist in me hopes it is gentle, so we don’t have another early-90s-style explosion of gangs, drugs and violence.

That said, when I was in high school during the beginning of the last housing crash or 1990-1996 there was a very significant spike in crime in Oakland, where I lived. My high school became overrun with drugs and guns in just a couple of years. It was terrifying. This is one very salient negative of a housing crash. Crime WILL increase. Probably significantly.

Nothing from the always goes up group…

Always fun to watch the clubbing of baby seals though.

The fundamental mix of loans and borrowers is what caused the high prices, not desirability. Different Chris did a good job of explaining that for many people, it was an incremental change because rising prices allowed people to afford more. It was an incremental change for everyone who was not a first-time buyer, that is. First time buyers were primarily sub prime or Alt-A consumers. As Mr. Cote once put it, trade-ups were people trading in their $3000 cat for a $5000 one.

Of course you can always believe your local realtors and their soft “feel good” reasons for the runup. Basically, it amounts to this:

Of course people want to live here, it’s like the OC. This is like, the best place ever! I was like, Oh my gosh, can you believe that she even asked that?

On the other hand, the fundamentals (income, non-housing wealth, migration, household formation) do not support even rising prices. The only remaining fundamental supports are jobs and financing of the mania. However, once that trend is entrenched, it can go far beyond what any of the fundamentals can support, which is where we are now. Now that financing has broken and real estate employment is on the downswing, the mania is over. Nothing left but to pick up the pieces and reestablish affordability based on income, non-housing wealth, migration, and household formation, none of which seems to fit the bill to continue the speculation.

There’s a saying that the rats leave the sinking ship first. In this case, it’s the families. Ever wonder what you get when the families leave an area? I’ve seen it. You may not like the result.

Click on the “County by County” button and note where people live in California.

Is it all a con game…no. The capital existed because investors were confident as well. Ultimately it’s their capital that purchases the very loans that almost all lenders loan. If investors stopped purchasing that type of loan on the secondary the market, the loan would not have been given, unless a bank was going to portfolio the loan, which is not the norm.

http://tinyurl.com/2z9uls

Since the money wasn’t real (the borrower had no “skin” in the game) and the lenders suspended traditional prudent lending standards in a sea of seemingly ever-rising home appreciation, every buyer was essentially armed with more and more funny money to drive prices up, outbidding each other.

It was classic economic theory at work, AKA an asset bubble scheme…. That is, until it became clear that it was all a con game, real estate’s version of three-card Monte.

If home prices are such that young families(the ones with children who attend schools) cannot afford to live in OC, how did home prices get that high unless people wanted to live there?

Sometimes they don’t. Look at the “Valley” (San Fernando) Families galore in the 70′s and 80′s. (think Brady Bunch and Partridge family) It’s highly unlikely with the remaining housing stock that it’ll attract anyone other than poor immigrant families, and few at that. They’ll more likely be transient because they’ll go where the work is. No better in Santa Clarita (both parents work, even though schools have oodles of money. Very serious drug problems there with pot and meth.) Forget about Antelope Valley, that’s gang central. Where do you think all of the gangbangers going to Six Flags come from?

The wife used to work with the LAUSD. After what she saw, we swore none of our children would ever attend an LAUSD school… nothing personal to people whose kids are forced to go there. It is a nightmare of underqualified teachers and administration that would rather be collecting their paychecks and doing nothing. (can’t blame them, teachers’ unions allow them to)

In the end, success or failure for a school and district depends solely on the parents’ involvement. No amount of money, taxes, land, or buildings will fix that. When Mom AND Dad are required to work to support the family, the children suffer because parents cannot give their children the attention they need to be successful. This is exactly why you should all expect that if prices stay high, schools will continue to decline in performance. It’s already happened to places like Laguna Niguel and Aliso Viejo (public schools are scoring lower on average on standardized tests relative to their inland counterparts).

Anyway you look at it, the golden days are over for SoCal. Not being negative, just saying we need to seriously get down to business about fixing problems created by Prop 13 and boomer educational entitlement problems.

My question is, if we’re the 7th largest economy in the world, how come we have some of the worst educational performance? The answer’s simple… high prices distract families from concentrating on education.

Huntington Beach sold off a few elementary schools due to lack of enrollment. Those places were being torn down and houses built. They’re going to be in a world of hurt once the next generation comes along and there’s no school to send the kids to.

They’ll have to eminent domain everyone (at astronomical cost) just to rebuild enough classrooms for all the new kids…

No thanks! I’ll home school my kids…

Andrew
http://www.InvestorReviewPodcast.com

Young families are moving east in order to take advantage of cheaper bigger houses. Because real estate prices in Orange County are SO high, it’s very difficult to raise a family there, and why would you if you can purchase a cheaper, larger home in nearby counties to the east. Many people from Orange County move to Temecula, Riverside, Corona, Rancho Cucamonga, Fontana, and of course some move out of state. The Inland Empire has had such a growth in population not because of beautiful ocean views and San Diego like weather (note thet sarcasm) but because it’s cheaper alternative to living in high priced areas in California.

The people purchasing in Orange County are probably older nowadays due to high prices and potentially don’t have kids living with them anymore. Additionaly, there’s a possibility that young couples in Orange County are waiting longer to have children.

The Realtor associations are going to have a hard time spinning this into anything positive when the media keeps reporting doom. I was watching CNBC this morning and one analyst said the housing sector is in horrible shape except for a couple areas.

So, like I said before- not everyone wants to live in SoCal. I do, but only because I like the weather and the scenery. The attitude jerkoffs can jump in the ocean…

Taxes probably should go down, but wait until you hear the local goverments cry about the decline in property tax revenues onces prices crater…