People are fleeing California, are you?

311 Replies

@Lee S. I'm the OP and the post has nothing to do with politics, and everything to do with my curiosity about what real estate investors are thinking when it comes to investing in CA. There's a lot of changes going on in CA, yes they're due to the politics of the state, but affect people from every walk of life, and political persuasion. For instance, once the tax on water starts it will impact people that are renting out homes to students, seniors, and others in shared living environments, as well as those that own short term rentals, etc. Mandatory solar will increase the cost of all new units being built. How will those things impact investors decisions when it comes to buying real estate in CA? As a builder I like to look at what's going on in areas and the effect it could have on the local  markets. 

Sorry you don't like the post, but I've found it very interesting and fun.

Born and raised in Cali. Moved to Texas two years ago - something I NEVER thought I’d do. But incredibly happy for the move.
Miss the Beach tremendously and the gorgeous friends we have there but the opportunities here will provide my family with much more in the long run.
Hospitality- but moving into RE more now that we are here.

I am seeing a lot of comparison between CA and TX.  And people says the no. 1 destination after leaving CA is TX.  I've lived in TX for 10 years, lived in CA for 18 years.  I am giving my opinions here
  • Do you live in California? yes
  • Have you lived in California in the past 5 years? Yes
  • If so, where? Bay Area
  • Will you be staying or leaving?  Will stay.  If I move, I would move to SoCa
  • Why? I am an immigrant, no big family root in US.  So we were pretty mobile.  After lived 10 years in Houston and Austin, TX, wife and I moved to Bay Area.  I've never left since and no plan to do so in future.  May possible to move to SoCa for better weather.  We like CA because its diversity and progressive, its variety scenery and open minded people.  As an investor who have properties both in TX and Ca, I love proposition 13.  I believe Proposition 13 structured in a way to punish new comers and encourage people who has real estate to stay longer.  I heard in news that people are leaving CA.  But in reality I am seeing Bay Are is getting too crowded and draw too many people in.  Of course, I have no statistic back.  
  • What is your full time income producing job?   full time job 
Originally posted by @Lucia Rushton :

Born and raised in Cali. Moved to Texas two years ago - something I NEVER thought I’d do. But incredibly happy for the move.
Miss the Beach tremendously and the gorgeous friends we have there but the opportunities here will provide my family with much more in the long run.
Hospitality- but moving into RE more now that we are here.

 I saw this article recently you might find interesting if you haven't seen it. It's about how Dallas-Fort Worth is growing similar to the rapid rate L.A was growing at in the 70s and 80s. 

http://www.star-telegram.com/news/business/growth/...

@Ezichi Oha Sent PM for one example. UCLA Anderson just released their forecast. Looks like much of the same for bit at least. 

The California report

California employment hit another record high in April 2018. As the economy has been expanding as expected, the current forecast has not changed much since last quarter’s forecast, released in March 2018. Full employment has been less of a constraint on this growth with recent increases in the labor force.

It is anticipated that California’s average unemployment rate will remain higher than the U.S. rate and be at 4.3 percent in 2020, a consequence of a younger and more entrepreneurial workforce.

The forecast for total employment growth for the current year and the next two years is 1.7 percent, 1.8 percent and 0.8 percent, respectively, with payrolls growing at about the same rate. Real personal income growth is forecast to be 2.5 percent, 3.6 percent and 2.9 percent in 2018, 2019 and 2020, respectively.

@Jim G. , yeah prop 13 is definitely a good thing for long time homeowners and something that keeps people here. 

People are leaving, but they are getting replaced usually by higher income folks.

I know a lot of people who have said they are going to or want to leave California for years. Almost none of them have and it's a shame because California would be better off without them.

I've lived in California for 30 years and I plan to stay.

@Joseph M.

"People are leaving, but they are getting replaced usually by higher income folks."

Not sure if I agree entirely. The rich can go anywhere they please, and the really rich have multiple homes in several states including California. 

The X factor in the migration is illegal aliens. They are not mentioned in this post. California is the top state with most illegal immigrants. California is a sanctuary state, and pass by governor moon bean. I think for every 1 rich person coming in, there could be 10 illegal immigrants moving in. 

Terry

I give everybody another exhibit. The Spanish real estate market. It was really hot prior 2007. Then of course, the global crash which really hit Spain hard. Now, and for the past 3 years, prices have been rising. So much so, it is better to rent than to own. Why is this happening? People are saying, growth, foreign investment etc. But unemployment is down to a mere 17% from a recession high of 30%!!! Also Spain is considered #1 drug trafficking gateway in Europe.

So the reasons why there is rise in real estate are sometimes not rational. With 17% unemployment and no young person able to afford in Spain, you would think this shall be a buyer's market. But the concept of higher and higher prices has taken such as great hold that prices have recovered to pre-recession. Speculators are now in full control.

Last time I checked a couple years ago I think, LA County added 400,000 peeps and in the same time frame built virtually zero new housing. This has since changed and there is a bit more building going on in pockets like Dwtn LA but for the most part there is a severe housing shortage even if they approved every single permit today. Bottom line is there is not enough that are fleeing to have any impact on housing supply that I can see near and mid term. We are listing a townie in a 10 type school rating area and my guess is there will be 20 full price and above offers in the first 48 hours. 

According to a recent Oxfam Intermon report, "the lowest salaries fell 15 percent between 2008 and 2016" in Spain.

Spain is recovering from the economic crisis with growth of more than three percent over the past three years. But unemployment remains extremely high at 16.7 percent.

According to a monthly poll by the Sociological Research Centre published Tuesday, unemployment is Spaniards' number one concern, with corruption second.

"Many people profited from the crisis in our country," says Raquel Teles, 29, heading to her job as a waitress on Madrid's Gran Via avenue.

"All politicians steal, some more, some less."

She earns just over €1,000 a month in Spain for working "10 hours a day, six days a week," and spends €450 on rent.

=====

Spain's real-estate market, hit hard when a bubble burst in 2008, has recovered transaction levels last seen before the economic crisis even if property prices still remain lower, official figures showed Monday.

Boosted by strong economic growth, close to 465,000 property sales or purchases were recorded in 2017, "the highest annual figure since 2008," a report by Spain's national property register showed.

That represents a rise of close to 15 percent from 2016.

Spain witnessed a property boom at the end of the 1990s with dizzying price rises.

From 2008, this bubble burst as a global economic crisis slowed down the Spanish economy, preventing many borrowers from paying back their property loans.

Prices collapsed and only started rising again in 2014 when the Spanish recession ended.

In 2017, property prices increased an average of 7.6 percent in Spain compared to the previous year.  

@Terry Lao Yeah definitely. The wealthy often own multiple homes. I was reading how Taylor Swift is building a higher wall on her $25 million BH mansion because a homeless guy trespassed onto her property... but she also owns expensive property in NYC and elsewhere. Of course there are a ton of rich people that aren't household names that own a lot of property too. 

Regarding illegal immigration , this L.A Times article from last year states there are 1 million living in L.A and O.C . But that is true it's not often talked about in regards to housing. 

http://www.latimes.com/local/lanow/la-me-illegal-immigration-los-angeles-20170208-story.html

Originally posted by @Joseph M. :

@Terry Lao Yeah definitely. The wealthy often own multiple homes. I was reading how Taylor Swift is building a higher wall on her $25 million BH mansion because a homeless guy trespassed onto her property... but she also owns expensive property in NYC and elsewhere. Of course there are a ton of rich people that aren't household names that own a lot of property too. 

Regarding illegal immigration , this L.A Times article from last year states there are 1 million living in L.A and O.C . But that is true it's not often talked about in regards to housing. 

http://www.latimes.com/local/lanow/la-me-illegal-immigration-los-angeles-20170208-story.html

 Realistically CA and LA have been sanctuary state/city for 40 years. This has done nothing but diminish supply and raise rents/values as far as I can tell. Well maybe not nothing for the labor market and you can still get your lawned mowed for the same price as 1975 it seems. It is just instead of having a Japanese gardner now the gardner is from south of the border is about the difference. 

Why am I talking about Spain in a California discussion (apart from the fact that Spanish is widely spoken?)

Just to highlight that people can convince themselves that any reason for stratospheric prices is good  until it is not(i.e. Tulips, South China Sea Bubble, Railways, Great Depression and Global Economic Credit Crisis/Credit Default Swap)

Most of all, economists say, Japan's experience teaches the need to be skeptical of that fundamental myth behind all asset bubbles: that prices will keep rising forever. Like their United States counterparts today, too many Japanese homebuyers overextended their debt, buying property that cost more than they could rationally afford because they assumed that values would only rise. When prices dropped, many buyers were financially battered or even wiped out.

"The biggest lesson from Japan is not to fall into the same state of denial that existed here," said Yukio Noguchi, a finance professor at Waseda University in Tokyo who is perhaps the leading authority on the Japanese bubble.

"During a bubble, people don't believe that prices will fall," he said. "This has been proven wrong so many times in the past. But there's something in human nature that makes us unable to learn from history."

In the 1980's, Professor Noguchi said, the frenzy in Japan reached such extremes that companies tried to outbid one another even for land of little or no use. At the peak, an empty three-square-meter parcel (about 32 square feet) in a corner of the Ginza shopping district in Tokyo sold for $600,000, even though it was too small to build on.

Plots only slightly larger gave birth to bizarre structures known as pencil buildings: tall, thin structures that often had just one small room per floor.

As a result, Japan's property market in the 1980's was much more fragile than America's today, Professor Noguchi said. And when the market fell, it fell hard. Because of all the corporate speculation, the collapse wiped out company balance sheets, crippled the nation's banks and gave the overall economy a blow to the chin.

Originally posted by @Vinay H. :

Why am I talking about Spain in a California discussion (apart from the fact that Spanish is widely spoken?)

Just to highlight that people can convince themselves that any reason for stratospheric prices is good  until it is not(i.e. Tulips, South China Sea Bubble, Railways, Great Depression and Global Economic Credit Crisis/Credit Default Swap)

 IDK jack about Spain but I don't think it is the West Coast port for goods and birthplace for ideas/inventions for the rest of Western Europe. 

Originally posted by @Vinay H. :

Why am I talking about Spain in a California discussion (apart from the fact that Spanish is widely spoken?)

Just to highlight that people can convince themselves that any reason for stratospheric prices is good  until it is not(i.e. Tulips, South China Sea Bubble, Railways, Great Depression and Global Economic Credit Crisis/Credit Default Swap)

Sounds good, but why not just use California 2008 as your example instead of Spain 2008?

I know of a lot of people in CA that want to leave but it's almost exclusively because of the cost of living. It's definitely expensive to live here, but it's expensive because it's so desirable. I have lived in SoCal my entire life and I have no intention of leaving. To me California is the best place to live!

  • Do you live in California? yes
  • Have you lived in California in the past 5 years? yes
  • If so, where? Santa Monica
  • Will you be staying or leaving? Staying!
  • Why? I can't see myself living anywhere else. I love it here.
  • What is your full time income producing job? I'm a wholesaler/investor and run a few businesses on the side as well.
Originally posted by @Matt R. :

 IDK jack about Spain but I don't think it is the West Coast port for goods and birthplace for ideas/inventions for the rest of Western Europe. 

If California is now the birthplace of civilization, then I guess it is immune to the things that happened to those insignificant places like Tokyo, Barcelona, London and Sydney.

California is great again - no doubt. The question is - is it too Great for the middle class....?

Originally posted by @Roxie Kim :

Sounds good, but why not just use California 2008 as your example instead of Spain 2008?

People get emotional when they talk about their own family, state, country etc> it is better to use Spain, Tokyo as examples, so people can follow the rational arguments as opposed to blurt out "I was born here and I will die here"....

I believe some people can tell you that what happened in California in 2008 had nothing to do with California itself. It was malfeasance on the East Coast Banksters ....

I see people mentioning San Francisco as the comparison to what happened in London / Sydney, and then using that to draw a conclusion about a mass exodus from the entire state. California is geographically as large as the entire country of Japan. So, that's like saying because prices are ridiculous in Tokyo, that all of Japan is going to empty out (which is clearly not going to happen).

Ultimately, yes it's true that SF prices are not sustainable, and the prices have been driven up by speculators, and foreigners trying to park money in assets out of their country.  Even high paid engineers can no longer afford to buy, so it seems likely that it's approaching a peak. But you've already seen the reaction to that, which is that people (and companies) simply spread out. New Google / Facebook / "Insert Tech Company Here" have been migrating south to Santa Monica, Venice, etc. We have an emerging "Silicon Beach". So, San Francisco's loss is LA's gain. And yes, those same companies and more are also moving to places like Dallas, so San Francisco's loss is also Texas' gain. The point is, there is a TON of room to spread out in California. It's not simply that your choices are "pay $3M for a 1bd condo in SF, or move to TX". 

As to the original question:

  • I Live in Los Angeles (north, inland a bit from Malibu)
  • Yes, moved here in 2011
  • Staying - tons of amazing lifestyle perks - the beach, the mountains, the weather, camping, biking, snowboarding, surfing, rock climbing, etc.
  • Full time day job, REI on the side.
Originally posted by @Lee S. :

 That's ok, couldn't pay me to live in fly over country either.

   I live in the Sierra foothills less than 2 hours due east of SF and I can ride my bike the 70 miles to Yosemite Valley or the 130 to Tahoe from my front door, done both.  Unfortunately this also puts me in the land of #MAGA but I tolerate it.

Not sure why it matters on a RE forum.  Maybe I'll start a counter thread "how much would I have to pay you to live in fly over country" to prove, well, nothing.

Uh... @lee s...  I hate to break it to you, but you do live in Fly Over Country.  

Actually, you live in the very worst of flyover country because, based on the above description, you are no where near a real airport.  

But that probably won't matter when THE BULLET TRAIN is up and running. LOL.  (revised estimate to build, as of March 2018, $77.3 Billion.)

DL

#MAGA 

Side note: 

Spain did used to own all of LA, SD and SF and some peeps were able to keep the original Spanish land grants. One keeper was Dominguez and he owned all of the South Bay in LA. That family did live in Redondo Beach and he named a dozen streets after his daughters, Victoria, Maria, Lucia etc... then named a dozen more streets after his daughters birth stones, Diamond, Ruby, Emerald etc. Then as a little extra bonus gave one of his daughters as a wedding present who married a dude named Carson, they got the land for the City of Carson.  It must be nice like that right....