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Thread: time to get the hell out of California ?

  1. #1
    Banned Melonie's Avatar
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    Default time to get the hell out of California ?

    ... or maybe it's already too late !!!!



    (snip)"In June 2003, the average sales price on Merced County's Multiple Listing Service was $177,056, said Oliver. The Multiple Listing Service includes agent-listed sales of existing homes, and usually does not record figures related to new houses.

    By June 2006, the average price had climbed to $362,398. Last month, it was down to $314,908.

    But the large gap between what sellers are asking and buyers are offering means owners will likely continue to lower prices, said Oliver. When will prices stop coming down? "We're almost at the bottom," said Oliver. "We still have the winter to go through. I think in 2008 it will stop. Everyone will have gotten the message and the prices will stop dropping. I think 2009 is probably going to be a very good year for us."

    "Home prices now are back to about what they were in 2003," said Ernie Ochoa, who manages the Century 21 M&M and Associates office in Merced.

    Even those rolled-back prices are too high for most families.

    "The median-income family earns about $47,000 a year in Merced County," Ochoa said. "So it only can afford to buy a home priced about $175,000."

    Ochoa said Realtors listed 1,437 used homes for sale last month in Merced County, but they sold only 53 of them"(snip)

  2. #2
    Yekhefah
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    Default Re: time to get the hell out of California ?

    Yay for the popping bubble!

  3. #3
    God/dess Deogol's Avatar
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    Default Re: time to get the hell out of California ?

    Yay if you carry no debt.

    Yay if you do not need debt to keep on going in one's own lifestyle.

    But if one counts on a credit card, car loan, mortgage... bad times.

  4. #4
    Yekhefah
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    Default Re: time to get the hell out of California ?

    Yeah, my debt blows and times are hard in California's economy. But I don't own a house, and housing prices dropping to a more reasonable level sound like a good thing to me.

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    God/dess Casual Observer's Avatar
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    Default Re: time to get the hell out of California ?

    As California goes...so goes the nation.

    Seems apropos here.
    Idealism is fine, but as it approaches reality, the costs become prohibitive.

    William F. Buckley, Jr.

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    God/dess Lysondra's Avatar
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    Default Re: time to get the hell out of California ?

    Quote Originally Posted by Yekhefah View Post
    Yeah, my debt blows and times are hard in California's economy. But I don't own a house, and housing prices dropping to a more reasonable level sound like a good thing to me.
    Y'know it may suck not being a citizen and being unable to get financed for anything in Australia but I guess it does have it's good points - I am absolutely debt free and I own everything I have.

    Wish I'd done that when I lived in America (pity that was near impossible).


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  7. #7
    Banned Melonie's Avatar
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    Default Re: time to get the hell out of California ?

    Yeah, my debt blows and times are hard in California's economy. But I don't own a house, and housing prices dropping to a more reasonable level sound like a good thing to me.
    you might want to think this through a bit farther ...

    Housing prices falling means that local real estate tax revenues will also fall, prompting California to make up for the shortfall via other taxes (like raising California state income tax rates and/or local sales tax rates)

    Housing prices falling, in conjunction with the California homeowners having the highest percentage in the nation for ARM's, neg-am's, low-no equity mortgages etc. all but guarantees a major rash of bankruptcies in the next year or two ... which in turn will cause tons of California businesses to take losses ... which they will then attempt to make up for by raising prices.


    My original tongue in cheek point was that, even if some California homeowners begin to 'see the light' and choose to run for the Nevada border, with the current market re California housing there is no way that they can sell their house without taking a HUGE loss. However as the housing sales figures show (or should I say LACK of housing sales), the vast majority of would-be California home sellers have chosen NOT to take that huge loss and are hanging onto their properties instead in the vain hope that their property values will rise again in the future. Thus these California homeowners are essentially 'trapped' living in California and paying whatever extra money future tax increases and future price increases will demand ... at least to the point where they are forced to go bankrupt as well.


    I am absolutely debt free and I own everything I have.
    I highly doubt that there are many working class / middle class Californians in that same situation !!!

    ~
    Last edited by Melonie; 07-22-2007 at 05:56 AM.

  8. #8
    Yekhefah
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    Default Re: time to get the hell out of California ?

    Good point. I know California's a sinking ship but I'm stuck there for the time being. *sigh*

  9. #9
    God/dess Lysondra's Avatar
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    Default Re: time to get the hell out of California ?

    *kidnaps Yekhefah and feeds her meat pies and tim tams in her basement*


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  10. #10
    Yekhefah
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    Default Re: time to get the hell out of California ?

    Ewwwww, no meat pies!! Please!!

    I'll take some Tim-Tams though. Funny you mention them, I just wrote them into a screenplay last night.

  11. #11
    God/dess Lysondra's Avatar
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    Default Re: time to get the hell out of California ?

    Quote Originally Posted by Yekhefah View Post
    Ewwwww, no meat pies!! Please!!

    I'll take some Tim-Tams though. Funny you mention them, I just wrote them into a screenplay last night.
    But I got the meat pies from Brumbys!

    And awesome. Timtam screenplay!

    OH that reminds me!!! I took a picturen of an ad for you... there's a screenplay competition going on for Coca Cola in Australia right now for short movies...


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  12. #12
    Yekhefah
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    Default Re: time to get the hell out of California ?

    Grrr, I hate when they do those campaigns to make "short films" for a product. They're called ADVERTISEMENTS, people. COMMERCIALS. Let's call a spade a spade here.

    Sorry, but insidious advertising is a pet peeve of mine.

  13. #13
    madmaxine
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    Default Re: time to get the hell out of California ?

    Quote Originally Posted by Melonie View Post
    Ochoa said Realtors listed 1,437 used homes for sale last month in Merced County, but they sold only 53 of them"(snip)
    Whut up, my home county, yeehaw!

    Sigh. I miss back home sometimes but I don't miss the BS. Like the housing cost.

    Did you know the cost of living in Northern California is driving some people to suicide? NO kidding. Too much stress.

  14. #14
    God/dess Deogol's Avatar
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    Default Re: time to get the hell out of California ?

    I have heard of people committing suicide over their property taxes or rather - their inability to live in the home they bought years ago and now cannot afford.

    Some real serious shit alright.

    I simply accept that I don't own anything - the government owns it and I pay them to let me use it.

  15. #15
    God/dess Lysondra's Avatar
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    Default Re: time to get the hell out of California ?

    Quote Originally Posted by Yekhefah View Post
    Grrr, I hate when they do those campaigns to make "short films" for a product. They're called ADVERTISEMENTS, people. COMMERCIALS. Let's call a spade a spade here.

    Sorry, but insidious advertising is a pet peeve of mine.
    It didn't say you had to make a film about coke.. it said coke was sponsoring it.

    Anyway, here's the poster. I thought you might need an excuse to visit.
    Last edited by Lysondra; 12-29-2007 at 07:11 PM.


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    Default Re: time to get the hell out of California ?

    I guess this link is on-topic,

    http://volokh.com/posts/1178128104.shtml

    Considering the sheer financial rapaciousness of the California government, but I think all 50 states engage in this form of transfer payments from individuals to the state...just not sure re: all 50 states. Have run across info that the California government gains either a quarter or half billion dollars from its citizens annually via this method. Not sure as to which number is more accurate. The next question running through my mind is should this practice be defined as theft?
    Last edited by PhaedrusZ; 07-23-2007 at 04:39 AM. Reason: typos

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    Default Re: time to get the hell out of California ?

    Quote Originally Posted by Yekhefah View Post
    Good point. I know California's a sinking ship but I'm stuck there for the time being. *sigh*
    Yep. ^ IL SUKS too..


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  18. #18
    God/dess Paris's Avatar
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    Default Re: time to get the hell out of California ?

    Quote Originally Posted by Yekhefah View Post
    Yay for the popping bubble!
    I *kinda* feel the same way. Yes, I'm annoyed that the market is slow, but I have my house listed at $40k below the appraised value, so it should sell soon. My neighbors started taking their houses off the market because they couldn't afford to sell as low as I am selling.

    And who wants to live in Merced, anyway?
    Last edited by Paris; 08-15-2007 at 03:57 PM.


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    God/dess Paris's Avatar
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    Default Re: time to get the hell out of California ?

    Quote Originally Posted by Melonie View Post
    Housing prices falling means that local real estate tax revenues will also fall, prompting California to make up for the shortfall via other taxes (like raising California state income tax rates and/or local sales tax rates)

    Housing prices falling, in conjunction with the California homeowners having the highest percentage in the nation for ARM's, neg-am's, low-no equity mortgages etc. all but guarantees a major rash of bankruptcies in the next year or two ... which in turn will cause tons of California businesses to take losses ... which they will then attempt to make up for by raising prices.


    My original tongue in cheek point was that, even if some California homeowners begin to 'see the light' and choose to run for the Nevada border, with the current market re California housing there is no way that they can sell their house without taking a HUGE loss. However as the housing sales figures show (or should I say LACK of housing sales), the vast majority of would-be California home sellers have chosen NOT to take that huge loss and are hanging onto their properties instead in the vain hope that their property values will rise again in the future. Thus these California homeowners are essentially 'trapped' living in California and paying whatever extra money future tax increases and future price increases will demand ... at least to the point where they are forced to go bankrupt as well.

    This is the beauty of investing in real estate. It lacks the volatility of the stock market because you can't just sell you investment with a phone call or a mouse click, making real estate one of the most stable investments a person can make.

    People are stubborn and greedy and seek instant gratification. When a person can't sell their home for what they percieve the the value of that home is, they feel personally affronted at a "low ball" offer and decide to stay put. This stops the market from going into a free-fall in the way that stock markets can crash over very short periods of time.

    I fully understand the problems with the market today is the fact that mortgages were handed out like candy over the last ten years or so, and now people who really couldn't afford to purchase a house unless they got an ARM or interest-only loan are beginning to see the problem with trying to finance "lifestyle". But, the vast majority of home owners are responsible with their purchases (well, maybe not in "image conscious" California), so they can wait out the storm or have enough equity (like I do) to unload a property at a price that the market will command.

    Eventually, the dip in inventory will lead to higher prices and every thing will be back on the upswing again.

    Add in the sinking dollar and you'll soon see foreign investors checking out the bargains that can be had in the US to push up the price of real estate once again.

    I also wanted to add, that just because an appraiser says a property is worth a certain amount, doesn't make it so. Sure, and appraiser says my home is worth $310K, but if no one will buy it at that price, what difference does it make? If I purchased my home for $140k (this is my actual example) and now have it on the market for $250K, I'm not taking a huge loss if I can't sell it at the theoretical price the appraiser put out there. I'm making a profit of $110K. That sounds great to me! Sheesh, why would I complain at making that kind of profit on my home?

    The issue is that the lenders and banks and municipalities (gaining property tax revenue) could only gain from inflated appraisals from the refinancing business. Call it what it is: UNSECURED CREDIT. That is what is the root of the housing problems today. Not the fact that the market is making an adjustment.


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  20. #20
    Banned Melonie's Avatar
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    Default Re: time to get the hell out of California ?

    When a person can't sell their home for what they percieve the the value of that home is, they feel personally affronted at a "low ball" offer and decide to stay put. This stops the market from going into a free-fall in the way that stock markets can crash over very short periods of time.
    Unfortunately, there's an inherent fallacy in this 'hold out' approach. It's essentially the same issue which is central to subprime mortgage backed securities, to CDO's, to hedge fund shares etc. That issue is avoidance / refusal to 'mark to market' the actual value of the asset (or more precisely the loss of value). However, this only works as long as ALL of the holders of similar assets take the same 'hold out' approach.

    But eventually, one or two homeowners on your block, like one or two holders of MBS's and CDO's, or like one or two hedge funds, will find themselves forced into a corner such that they MUST sell their asset to raise necessary cash. When that happens, that sale establishes a new and lower market value for the asset. Then the assessors / appraisers / ratings services will immediately apply that new and lower market valuation to all similar assets.

    When that happens, there really isn't much difference between 'holding onto' a devalued asset or selling the devalued asset for whatever price the market will actually bear from a financial standpoint (other than not being able to deduct the loss in value from your taxes). You can't borrow against the devalued asset. Thus continuing to 'hold onto' a devalued asset is, in the most cold and objective sense, a form of self-delusion on the part of the asset owner.

    In your specific case you were lucky enough to have purchased your asset at a point in the 'distant' past where the recent 20% devaluation in real market value still leaves you with a tidy profit. But is today's market's 20% devalued pricing level a 'fair valuation', or is it still an inflated level that has farther to fall before achieving 'fair valuation' ? If other homeowners on your block were to continue to 'hold out', will the real market value of their asset continue to decline ? This is exactly the same situation that the hedge funds are finding themselves in.

    And like the hedge funds, the other homeowners on your block who are playing the 'hold out' game better pray that they can make good on their mortgage commitments, taxes etc. because if anything should happen that forces them to liquidate they will soon discover that they've been bankrupt for a while now - but simply avoiding acknowledgement of that fact by refusing to 'mark to market' the devaluation of their home.

    Add in the sinking dollar and you'll soon see foreign investors checking out the bargains that can be had in the US to push up the price of real estate once again.
    This will undoubtedly happen at some point. However that point will require that the combined cost of purchasing the property plus financing the property plus paying taxes on the property plus maintaining and insuring the property is significantly below the going market rate for rental in order for this 'investment' to be profitable. And while the falling cost of purchasing the property will indeed improve this equation, rising interest rates, rising property taxes, rising insurance and maintenance costs, and also a declining after-tax income level for many renters all degrade this equation. The REAL question is what sort of an additional decline from current real estate market pricing levels will it take to make this equation balance ... because THAT price is what will determine the 'fair value' of the property.

    A nasty wrinkle will also materialize eventually in that local gov't budgets REQUIRE that X dollars of tax revenue be collected in order to meet their spending commitments. As the market price of housing declines, there is no correlated decline in the spending commitments of local gov'ts. If anything, those spending commitments will increase as the indirect result of former homeowners losing their jobs. At minimum, this will mean that if the assessed value of the property base in a particular city declines by 10% or 20% or 30%, the property tax revenue collections must remain the same in total dollar terms. This merely serves to degrade the investment equation further, because having to pay say $10,000 a year in property taxes on last year's $ 320K house vs having to pay the same $10,000 a year in property taxes on a currently revalued $250k house vs having to pay the same $10,000 a year in property taxes on a future revalued $200k house comprises a steadily rising percentage of 'expenses'.

    Now factor in what is happening with local gov't spending in California, where spending commitments will continue to rise due to increasing white collar unemployment, increasing population of low skill level immigrants who consume more gov't services than their taxes pay for etc. This situation yields an equation where last year's $320k house and $10,000 property tax yields this year's $250k house but $11,000 property tax and will yield next year's $200k house but $12,000 property tax. California has of course compounded this problem by passing legislation limiting the annual rate of property tax increases, meaning that actual property tax collections have been lagging market prices of housing for years, thus property taxes will continue to increase in future years in order to play 'catch up' even if local gov't spending were to stabilize (probably no 'fear' of that happening though LOL !)

    !.
    Last edited by Melonie; 08-16-2007 at 02:28 AM.

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