Whither Market Values in California? (Cont’d.)

Back on April 15, 2011, we did some musing on what’s in store for California real estate values. Go to http://gideonstrumpet.info/?p=1092 Since then there has been a new dispatch. Federal mortgage insurance which has been limited to $729,750 in California for some time, stands to be reduced to a maximum of $625,500 ($417,000 in the rest of the country). Which means that a reduction in the de facto federal price support for California homes will bring about a further reduction in prices.

Naturally, this has caused complaints by California home owners contemplating selling their homes. We can’t blame them for feeling that way, but let’s get serious here folks. The idea that there should be an obligation on the part of the federal government to subsidize the purchase of three-quarter-of-a-million-dollar homes is ridiculous. And we aren’t forgetting that a million bucks  isn’t what it used to be 20 or 30 years ago. Still, that’s a lot of money, and most people outside the real estate loony-tunes la-la land rightly consider a home in that price range to be pretty spiffy, even if out here three quarters of a million gets you a dinky, 50-year old, 1600 sq.ft. house that’s remodeled if you are lucky. Oh sure, you can pay a lot less, but that will put you out in the boondocks and get you a one to two hour commute to work, as well as an ambience that comes with being surrounded by foreclosed homes.

So maybe the time is coming when California will have to join the Union and give up the idea that ordinary folks are entitled to a government subsidy so they can live in three-quarter-of-a-million-dollars homes, and that upper middle-class folks are entitled — got that? Entitled! — to live in million-dollar homes thanks to a generous Uncle Sam’s subsidy. We feel bad for those who bought their homes in the last decade and overpaid for them, and who are now facing the prospect of having to eat the green weenie. Bummer.

But you can fool around with the laws of economics for only so long, and in the end you have to recognize that there ain’t no such thing as a free lunch, and that it is increasingly difficult to justify the idea that a working stiff in, say, San Antonio who does right well by living in a $200,000 house, should have to pay taxes to subsidize the lifestyle of his counterpart in Monterey who lives in a $750,000 house. That ain’t right folks. So if Californians insist on enjoying life in expensive housing, they will have to pay its going rate.

It was all captured in a quote appearing in The Tribune (San Luis Obispo) newspaper quoting a Monterey County homeowner who is worried that now she won’t be able to “sell her house in the hills for $849,000 so she can move to Florida,” where she can probably replace it for half that price. Nice stuff if you can get it, but you shouldn’t be able to get it on Uncle Sam’s tab. See David Streitfeld, More Trouble on Home Front, The Tribune, May 11, 2011, at p. A1.

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