Why Are So Many People Moving Out Of California?

Why Are So Many People Moving Out Of California?

http://theeconomiccollapseblog.com/archives/why-are-so-many-people-moving-out-of-california

 

…for most families, the decision to leave California comes down to one basic factor…

Money.

For a lot of Californians, it simply does not make economic sense to remain in the state any longer. 

…Under the old rules, the tax burden imposed upon Californians was mitigated by federal rules allowing for the deduction of state taxes.  But now the new tax bill has made some major changes, and some experts believe that this will actually accelerate the exodus out of the state of California.  

…For many, the exceedingly high cost of housing in California is the primary reason that they have chosen to leave. 

…The homelessness issue has achieved a special distinction in Los Angeles. Having increased 50% during the past five years, “it’s supplanted traffic as the topic everyone talks about,’’ 

 

Same old story. How long can I convince my wife that the LA/El Segundo dream is still alive?

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Patience is a virtue

I’ve written over and over how incredibly wrong my time frame has been. I’ve been so wrong it hurts. In the past 20 months that I have been writing I could have made ~15% appreciation if I bought a house (not really because it would take 6% commission to unload it) or I could have made about 25% if I sunk my down payment into an S&P 500 ETF (that hurts my soul).  But you know what I have 20 months later…my entire down payment. Sitting in an account making ~0% interest….but it’s still there. Ready and waiting.

I can’t remember how bad my portfolio got hammered in 2007/2008. I dug up my 2007 and 2008 1040s it doesn’t show evidence that I lost a very much. At the time I was really active in trading and fairly successful. What I do remember is after the shit hit the fan I was ready to buy. In 2009 I bought stocks I had never even considered before and made money. WTF do I know about Ford, Citi and BofA? Not much except I knew when they were too cheap to not buy.

Today I know when things are too expensive to buy. I’ve waited this long I might as well be patient.

Despite this blog being about real estate I feel that the crazy real estate prices are merely a symptom of the disease. We aren’t dealing with the same issues that caused the previous collapse (greedy ass bankers). Oh wait….

So even though real estate may not be the first domino to fall, rest assured it’s one of many dominoes that will fall when something sets everything in motion. (at least this is what I tell myself when I cry myself to sleep for not making 25% in an index fund).

Low income in SoCal on $90k

Orange County’s low-income threshold approaches $90,000 for a family of four

https://www.ocregister.com/2018/05/08/orange-countys-low-income-threshold-approaches-90000-for-a-family-of-four/

An Orange County family of four is “low income” if it earns $87,450 or less, new U.S. Housing and Urban Development income limits for 2018 show. That’s the eighth-highest low-income limit in the nation.

San Francisco again had the nation’s highest low-income threshold. A family of four living in the city, or in neighboring Marin and San Mateo counties, qualifies as low income if its earnings are $117,400 or less.

ocr-l-lowincome-0509

We are screwed

I write this blog selfishly. I live in El Segundo, raise a family in El Segundo, have ties to El Segundo and see my life spent in El Segundo. Despite me bashing every tiny, overpriced POS house that hits the market, somedy I want to own one (if and when it makes sense). For the past three years it hasn’t made sense. The math is bad, even though in hindsight it would have worked out to have overpaid in 2015. I still think the real estate and economic world is due for a giant reset. History has proven that it always comes. Is this time different? Has the US economy escaped the confines of regular business cycles? Has real estate and home ownership reached a point where you can’t lose?

I came across this study of real estate and migration trends for California. The study began in 2016 and has been recently updated with data up through Q42017. It reaffirms my fears about SoCal. We are phucked.

Low income earnings are fleeing the state and the new people we are attracting in NorCal and SoCal are mostly high-income earners. We have failed miserably as a state in constructing enough new homes to keep up with demand. Low supply, increasing demand = rising prices until we hit equilibrium. Californian’s are notorious for the NIMBY (Not in My Backyard) chant. In El Segundo we scream foul when someone mentions building homes east of Sepulveda. Yesterday the locals in Korea town screamed bloody murder when the Mayor said he was opening a “temporary” emergency homeless shelter in K-town. Despite the fact that homelessness is a horrible issue in K-town, the neighbors would rather step over homeless people on their sidewalk than build a shelter that might attract homeless.

The report says if we continue on this track of being short on new construction home prices will continue to rise. I may balk at $1000/sqft tiny home but someone that is playing with monopoly money and stock options may not care.

Who will win? Those of us sitting on the sidelines patiently waiting for a dawn that never comes or those that roll the dice and are rewarded with 7% annual appreciation on their over-priced home? (The real winners are those that can leave the state.)

Read the entire PDF here:

Growth Amid Dysfunction: California Migration, Current State of California
Housing Market, and California Employment by Income

 

  • Post-recession housing construction has been slow. From 2008 to 2017, an average of 73,000 new housing permits were issued per year – far lower than the average of 135,000 permits issued annually between 1991 and 2007. California has the nation’s second-lowest rate of homeownership and worst rate of rental housing over-crowdedness in the country.
  • Housing costs for homeowners with mortgages are the second-worst in the nation, and housing costs for renters are the third-worst.
  • For homeowners in California, the share of income spent on housing was 21.9 percent in 2016, down from 22.5 percent in 2014. California homeowners spend more on housing than homeowners in any other state except New Jersey.
  • For renters, housing costs have decreased from 33.6 percent of income in 2014 to 32.8 percent of income in 2016. California ranks 48th of 50 states for this metric.
  • From 2007 to 2017, only 24.7 housing permits were filed for every 100 new California residents. The U.S. average is 43.1 permits per 100 new residents. California is permitting roughly the same number of housing units as Florida, despite having approximately 18 million more residents.
  • The housing stock gap is actually being helped by the number of residents leaving the state, and the housing shortage would be even worse if there was no domestic migration.
  • The main driver for net out-migration appears to be high housing costs, since migration rates are highest for those at lower-wage levels. The vast majority of people who moved out of California were concentrated in lower-skilled, lower-paying fields — namely sales, transportation, and food preparation — which together accounted for a net outflow of more than 180,200 people from 2006 to 2016.
  • Migration trends suggest that the middle class is also being priced out of the state. Net migration of those earning between $30,000 and $49,999 accounted for 93,500 households leaving California from 2006 to 2016, or 18 percent of net out-migration. On the other hand, net domestic migration for households earning from $50,000 to $99,999 has been positive since 2010, representing 52 percent of net in-migration.

 

 

433 w Maple – Someone put Terry out of her Misery

What the hell is wrong with 433 W Maple?

We know Terry Rogers raised the priced after the previous failed listing by the other Orange County agents but still, will someone please just go offer them $1.2 mil and get it over with.

Zillow is calling it 91 days on market but it’s been on the market for 165 days!!!!!

What is wrong with it? Either they have been turning down offers or there is a horrible flaw in this seemingly cute flip. Yes it’s the front of a flag lot but to me that isn’t enough of a flaw. I must be missing something.

The flipper paid $920k in June and then listed it in November for $1.3 mil.

Even at $100/sqft remodel costs they only spent $150k. Even if they spent $200k (no fuckin way) breakeven is around $1.16 mil even after factoring in the 6% sales commission.

 

New levels of crazy in El Segundo

There’s an amazing amount of SFH inventory in El Segundo right now, the problem is that these monkey-see, monkey-do realtors are just looking over their shoulder at their peer’s and trying to one-up each other on pricing out future residents of El Segundo.

This listing by Michael Alarcon and Eric Kedatus based out of Manhattan is downright stupid. This isn’t the tree section of Manhattan assholes. And if you ever wondered where localism came from here’s a great example. Two out of town realtors think they can sell this tiny home better (not possible) or quicker (yeah right) or at a higher price than someone local with knowledge. Kooks go home! This is a disservice to their client and a disservice to anyone that looks to these two knuckleheads for information and knowledge about El Segundo. The front home is an “updated” 860 square feet! I think you can see 500 of the 860 square feet in this photo.  Look at the quality of those home depot light fixtures! No money saving LED can lights for this beauty!

So let me break it down for you. This tiny home is ridiculously overpriced regardless of any additional unit or being zoned R3. Tweetle Dee and Tweetle Dumb added the extra unit’s square footage to the 860 (I’ll guess it’s 450) and multiplied by the $1000/square foot first time home buyer figure. Does it matter that the square footage is useless or that it’s a shitty part of town? Nope, they are real estate agents and you my peasant home shopper have no choice.

This part of town is industrial adjacent. And by adjacent I mean it’s across the street. It’s also zoned R3 because this is apartment haven. So in addition to industrial neighbors you also have a ton of residents packed in this couple blocks of Sheldon at Franklin.  I’m sure you’ll feel great letting your kids ride their bikes on Franklin.

Here’s your lovely neighborhood in Smoky Hollow West.

427

427b

Not to be outdone we have a new home owner listing this giant the giant 2900 sqft rental at 626 Eucalyptus for $5900/month. I guess they were all out of cleaning supplies the day the camera crew was there?  They are calling it “Brand new remodeled SFR”. I guess they went with the 1970s retro counter option. Maybe if you are lucky they will replace that awesome pull out cutting board that’s missing. Those are all the rage on those fixer-upper shows.

Someone bought this place in January for $1.26 mil – $426/square feet people! Let that sink in. While chumps like you and me can only hope for $650/square feet someone bought a fixer for $434/sqft under all of our noses.  I guess they ran out of money after building that awesome island with quartz counters.

So they throw some paint, flooring and appliances in it and are going to take a gamble at being landlords.  No dollar was spared in this incredible remodel….well except on the counters, and the lawn…and the cleaning supplies….and leaving that incredible wall-heater as decor….I bet they will be the best landlords!

So whether you want to buy or rent in El Segundo have no fear you can get bent over and reamed either way.

Gettin by on $300k

Why a middle-class lifestyle now costs you over $300,000 a year

In order to comfortably raise a family in an expensive coastal city like San Francisco or New York, you’ve got to make at least $300,000 a year. You can certainly raise a family earning less as many do, but it won’t be easy if your goal is to save for retirement, save for your child’s education, own your own home instead of rent and actually retire by a reasonable age.

In this example this family has a whopping $375/month left over each month. Granted the example exemplifies saving for the future but there’s some WTF number here.

$3900 mortgage with today’s rates=~$1 million dollar home with 20% down.

They have one car payment, don’t have cell phones, nor $175 cable/internet bills like I do?  Two cells, internet and a buss pass will take care of that extra $375.

Regardless here’s a household making $300k, great at saving (don’t have internet or cable) can afford a million dollar home and just get by. I wonder how they saved a quarter of a million bucks for the down payment on their home?

Good luck. Where did you say Waco Texas is?

On this week’s million dollar listing

Take a look at the latest million dollar closing! Is that show still on A&E? Remember the douchey agents showing multi-million dollar homes in LA and getting in spats like they were in junior high?

In El Segundo’s version of million dollar listing we have this tear down single family home that closed for $1.1 million.  Down from the WTF were you drinking original list price of $1.35 mil. That’s a reduction of 19% but I call bullshit because it was never a $1.3 mil house.

Darren Pujalet was the buyers agent so you may see some flippin action after all.

Million dollar tiny homes. The ante is a million.

Ante is one million dollars. Are you in? Better not miss out!

I’m screwed. Hawthorne here I come!

632 W Maple is a developers dream with an 8200 sqft lot and a 1600 sqft home. Someone paid $1.2 mil or $756/sqft. 

686 W Palm closed at $910K. $892/sqft for a pint sized 1020 sqft house on a 5594 sqft lot on a street that can’t be found with some random HOA fees. 

308 E Maple Closed at $1.08 mil. $942/sqft for this spanish home on a tiny 3000 sqft lot.  Listed as 1146 sqft but there’s a “bonus” room with bath downstairs in the basement.

In addition to these closes a lot of the other homes on Maple and W Sycamore are now in escrow.  There’s also a handful of “coming soon” signs in town.

This gem popped up today but its’ no longer listed for sale on redfin. Maybe someone hit the buy it now button? Listed as a 1689 sqft this charmer is priced at or near $980k.   Zillow shows a little more detail and calls it a foreclosure headed for auction.

I wonder what kind of critters live in that awesome growth? You can tell all your friends you have one of the only green, living walls in town!

Wage growth vs Prices

Case-Shiller reports increase in home price growth

Experts say rising home prices won’t stop anytime soon

https://www.housingwire.com/articles/43182-case-shiller-reports-increase-in-home-price-growth

“The S&P CoreLogic Case-Shiller National Index is up 6.3% in the 12 months through February 2018. Year-over-year prices measured by the National index have increased continuously for the past 70 months, since May 2012.”

“Over that time, the price increases averaged 6% per year,” Blitzer said. “This run, which is still ongoing, compares to the previous long run from January 1992 to February 2007, 182 months, when prices averaged 6.1% annually. With expectations for continued economic growth and further employment gains, the current run of rising prices is likely to continue.”

There is no let-up to rising home prices,” said Lawrence Yun, National Association of Realtors chief economist. “The Case-Shiller Index and National Association of Realtors median home price both show gains of roughly double the average wage growth.”

So go buy a home. It’s completely logical for someone to spend 40-50% of their after tax income for a place to live. Maybe you should go lease that 7-series BMW too? Maybe your an Escalade person? Tesla model X?