“It’s no secret that California’s regulatory and tax climate is driving business investment to other states. California’s high cost of living also is driving people away. Since 2000 more than 1.6 million people have fled, and my own research as well as that of others points to high housing prices as the principal factor.”
That’s a quote from Wendell Cox, California Makes War on Suburbia, Wall St. Jour., April 7, 2012, at p. A12.
What caught our eye is Mr. Cox’s reference to the work of Dartmouth land economist William A. Fischel who wrote as far back as the 1990s, demonstrating that California’s outlandish housing costs were the result of la-la land’s regulatory climate which Prof. Fischel showed to be the cause of the rapid and unconscionable increase in home prices. You should read his book, particularly chapter 6 which is devoted to California, and which painstakingly demonstrates that all cost factors in California home construction (land availability, labor costs, etc.) were not all that different from other places. That’s William A. Fischel, REGULATORY TAKINGS: LAW, ECONOMICS AND POLICY (1998 Harvard U. Press). What was different in California was the cost of regulation which limited construction of housing, particularly in areas where people, particularly people who could afford to buy homes, wanted to live.
Also, the California courts’ supine acquiescence in whatever local regulators did, irrespective of its consistency with the Constitution, didn’t help things. Significantly, it was California Supreme Court Justice William P. Clark, who in 1979 presciently observed in his dissent in Agins v. Tiburon, that at the rate California Courts were going, they were facilitating the creation of an economic climate in which the state’s population would be divided into housing haves and have-nots, with desirable living areas reserved for the former.
As for the California “bubble,” please don’t tell us about the fools or crooks who, working hand in glove with dishonest lenders and mortgage “bundlers” bought (or at least they thought they bought) faux-grandiose homes in the boondocks for sky-high prices they could not afford. Once you put aside those folks and the inevitable calamity their folly produced, what you get is a California housing market that is still unaffordable to too many people. We sympathize with those who were victimized by the practices that led to the “bubble,” but in the words of a sage, “You can’t cheat an honest man,” Nor, we should add, a sensible one. Sorry about that, folks, but that’s the way it is.
Our own, personal insight into these matters was influenced by two sources. As it happens we are visiting North Carolina at the moment, a place where housing prices as compared to California leave one astonished. In the better suburbs of Charlotte where we happen to be, $600,000 buys you a 3500 sq.ft., four or five bedroom, three-bath, three-car garage, brick veneer home, sitting on at least a half acre of land in an upscale suburb, like Weddington for example (renowned for the quality of its schools). You can lop off a couple of hundred grand from those prices if you settle for a lesser but still very nice suburb like Waxhaw, whereas back home in California, in the middle to lower-middle class city of Burbank, where we make our home, $600,000 will get you a 60-year old 1500 sq. ft. home with two-bedrooms, one bathroom, and a detached garage, in a neighborhood where you actually may want to live.
The other thing that caused us to reflect on this stuff, took place a few years ago. A developer of our acquaintance decided to build some low-cost housing (over here that meant a quarter million dollars a pop) in an unfashionable part of San Diego County near the Mexican border. He was informed by the county that the exaction payments alone would come to $25,000, or ten percent of the projected selling price. You can take it from there. If you are looking for a new comunity to live with, Bright Home’s valera community may be a great place to start looking and is reasonably priced! And if you’re moving into one of these homes consider checking out locksmith services similar to alpharetta local locksmith. They could give you peace of mind by having someone you can call if you accidentally lock yourself out of your home.
And please don’t tell us that the “bubble” has burst in California. Sure, prices have gone down significantly. But you need to ask yourself, down from what? In our neighborhood, that means that a nice but no-big-deal two-bedroom townhouse (that sold new in the $20,000s in the 1960s, and that hit a high of over $600,000 when the “bubble” was fully inflated), now goes for around $400,000. That’s a steep decline from the “bubble” days, but still a lot of money for what you get, and a burden on today’s ordinary home buyers because wages are not that much higher in California than elsewhere. You’re better off creating your own Californian looking home in the UK with builders bromsgrove. Buyers were willing to overextend themslves by buying pricy housing when values were going up and one’s equity kept growing. But when paying that kind of money means getting merely a place to live with a good chance of an equity decline, that’s a whole other thing.
Besides, under current tax laws, if you are middle aged and you bought a place like that in the 1980s (for somewhere between $100,000 and $150,000) that means you can still sell it and cash out a quarter-million dollar equity, move to another state where you can buy a similar dwelling free and clear, and still stash six figures tax-free for your retirement. Economically, that’s a no-brainer incentive to moving for a lot of people, and a lot of Californians have concluded just that.
What is particularly significant and worrisome, is that the middle-aged couples cashing out their swollen home equities and leaving California are being joined by young people who are moving out because they simply cannot afford housing costs in the Golden State. We find it remarkable how many of our aging contemporaries’ children have moved out of California — emulating us when we did the same decades ago when we left the East Coast for the opportunities, the climate and the inexpensive housing offered by the Golden State.
As Yogi Berra put it, “Prediction is very difficult, especially about the future,” so we will refrain from prognosticating. You can do that for yourself just as well.
Update. It would appear that Mr. Cox’s article hit a home run. It inspired a “response” from Josh Stephens, in the April 10, 2012, post of the California Planning & Development Report – click here. Why quotation marks? Because Mr. Stephens throws a hissy fit in responding (or more accurately, trying to respond to Mr. Cox’s critique of California), but it’s mostly an ad hominem diatribe directed at Mr. Cox. We have no intention of going there, but if you must do it, ask yourself this question: If Cox is as wrong as Stephens says he is, why are Californian’s leaving the erstwhile Golden State in droves? Maybe you can get Mr. Stephens to answer that one.