26 Aug 2006

California’s Rich Against Everybody Else

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The spectacular scenery, a typically booming economy, and a climate which permits you to grow lemons and avocados in your backyard makes Californians seem rather spoiled to the rest of us. Californians typically express their appreciation for all their good fortune by the cultivation as a local art form of cloaking an unlimited sense of entitlement in the rhetoric of idealism.

How do you keep the other fellow (who actually owns the land) from doing anything with it that might deprive you of the pleasure of looking at it undeveloped? You just come up with an appropriate worthy cause: protecting some purportedly endangered amphibian, rodent or weed; avoiding sprawl; maintaining open space; and voila! You get to keep out the riff raff, and be spiritually enlightened too.

Today’s Wall Street Journal describes the plight of the Mexican immigrant worker in Monterey County renting out a room in the 1000 sq. ft. house that cost him half a million dollars, and still spending 70% of his income on his mortgage payment.

Meanwhile, Reuters describes the accelerating middle class exodus from idyllic coastal California to the baking hot interior Central Valley (renowned for its 110 degree temperatures) in search of affordable housing.

OAKLAND, California – Father Mark Wiesner has grown accustomed to wishing parishioners bon voyage as they flee the San Francisco area’s high housing costs for California’s Central Valley, where developers are increasingly transforming farms and ranches into a new suburbia.

“So many young couples I marry have to go to Modesto or Tracy to start their married lives,” said Wiesner, a Catholic priest in Oakland on the San Francisco Bay. “They simply can’t afford to stay here in the Bay area and to buy a single-family dwelling.”

Tracy and Modesto are 50 and 80 miles east of Oakland respectively. Both have seen blistering growth in recent years amid a middle-class exodus from California’s famed coastal urban centers in search of affordable housing.

Analysts say the middle-class flight will press on even if coastal home prices sag amid a national housing slowdown. Home prices near the state’s coastline would need to collapse to make buying a home there possible for many households.

Barring a collapse, ever more Californians will call the state’s Central Valley home because homes there are relatively affordable. July’s median home price in San Francisco was $771,000, compared with $438,000 in San Joaquin County roughly 60 miles to the east, according to real estate information service DataQuick Information Systems.

Southern California is seeing a similar exodus to Riverside and San Bernardino counties, known as the region’s Inland Empire, from Los Angeles, Orange and San Diego counties.

“Having been in the house market in Los Angeles, I can tell you a house with little bit of privacy and space to call your own is pretty hard to come by,” said economist Christopher Thornberg of the consulting firm Beacon Economics. “For many people getting out to that Inland Empire is the only way to really have a backyard for the kids.”

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