Monday, December 11, 2006

'This is Very New and Very Different'

From the Mercury News:

Wayne Brown gave up $40,000 in income to move from the Bay Area to Kansas. And he feels great. It got to be too much last year for the college information-technology officer: the commute to downtown San Francisco that sometimes took two hours, the housing-price spiral and the high-wire borrowing that paid for it. "I would find myself sitting in traffic," Brown recalled, "screaming at people."

When the Kansas job came up in early 2005, Brown and his wife, Teresa, sold two Bay Area homes and happily settled in a suburb of Kansas City. They have never looked back. The Browns are an example of what demographers say appears to be an unprecedented phenomenon -- even in a good economy, more people are leaving California for other states than are arriving from the rest of the country.

Between 2004 and 2005, the migration flow into California from the other 49 states started flowing the other way. Data from the state Department of Finance shows that, for the first time this decade, more people left California in 2005 for another state than the number who moved in. Mary Heim, a finance department demographer, says this particular kind of outflow will continue for the foreseeable future.
...
"Some of the people leaving are families with children because school enrollment is declining at a quicker pace than we'd projected,'' she said.
...
For 150 years, California has been seen as the Golden State of opportunity and freedom for millions of migrating Americans. Other than recessions in the 1970s and 1990s, and possibly wars, "I don't know if California would ever have been in a position where it was losing people to other states," said Hans Johnson, a demographer with the Public Policy Institute of California. "This is very new and very different."
...
A flow of migrants to other states is not a worry in and of itself -- if foreign immigration provides a pool of highly educated workers to replace them. A bigger worry is that the state's exorbitant housing prices relative to the rest of the country could act as a brake to economic growth if employers can't find workers. "It's harder to keep people here; it's harder to attract people from abroad; it's harder to attract people domestically,'' said Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto. "It's a huge potential barrier."

Nearly half of California's homeowners spend more than 30 percent of their income on housing -- significantly higher than in any other state, 2005 census data shows. "Families just can't make it in the housing market," said Dowell Myers, a professor of urban planning and demography at the University of Southern California. "Low-income families are being priced out of rentals, and middle-income families are being priced out of homeownership, and we don't know where they are going."

40 comments:

Anonymous said...

Some of the people leaving are families with children because school enrollment is declining at a quicker pace than we'd projected,'' she said.

Working families are leaving the State and are not going to come back. These are good people who have good skills and the State is replacing them with uneducated low skill labor. Weren't all those builders relying on population growth to further fuel the housing bubble. It looks like we can change the definition of single family residence to multi-family low skill workers hostels.

Hey all those houses in Lincoln Crossing can be sold to twenty illegals who can sleep on floor.

Hostels for everybody.

Perfect Storm

Anonymous said...

More people leaving the California, means less workers. Less homes being sold, means less loan officers, less realtors, less construction workers, and less appraisers.

Less all these people means even less homes will sell and then even less. Inventory will increase again this spring as all the people who pulled their homes off the market put it back on in the Spring.

All the toxic mortgages are reseting, delinquent mortgages, mass foreclosures, bankruptcys, short sales, judical foreclosures, credit card debt eating away at them, used equity lines to buy cars, boats, flat screens. Less consumer sales, even less jobs. Less and less and less and less.

Spring 2007 is going to be housing death.

50% decline by 2009. Realtors are whores if anybody wants to know.

Gwynster said...

I can say that at UCD, our pool of applicants for staff has really decreased. The campus wants 4-star talent and they are getting only getting 1 1/2 star talent applying for even the best positions. I speak from experience trying to hire staff personnel in the last 6 months. Forgot trying to recruit faculty - it's a mind-boggling nightmare.

And yes, I see lots of former realtors and mortgage employees. The best one was were the only experience the applicant had was driving farm equipment before taking his RE exams.

The scarier thought was that I just did the math this afternoon and half of faculty are retiring in the next 7 yrs! That is huge.

Anonymous said...

Housing is simply ridiculous around the sacramento area. You really need two incomes to touch anything. If your single your screwed. I guess you could rent for your whole life or get out. I think people have made that decision already.They are growing the economy by borrowing from the future. This will not last much longer.

HappyinSF said...

Hmmm, they sold 2BAY AREA HOUSES. That's a strange example in relation to the article. Family takes HUGE sum of money out of state. BOO HOO.

Anonymous said...

CA may be experiencing a temporary emigration (wondering if larger numbers are leaving in any particular MSAs), but I seriously doubt a large scale diaspora based on the cost of living will occur. Short of major disasters (and in many cases despite them) cities like San Francisco, Los Angeles, and San Diego will continue to have strong growth over the long term.

SF and LA are international cities with world-renowned academic research institutions, white collar employment cores with specific industries tied to them, and afford a lifestyle that most can adapt to if not completely embrace. SD, on the other hand, seems to be perpetually growing and has a strong foothold in biotech and pharma, has an ever-stronger UC feeding local companies, and arguably has the best climate in the world.

Sacramento is an armpit. Its strongest industry of late has been construction, and now that that's dust, it'll go back to being a sleepy cow-town. UCD is a strong point, but has a talent exodus and although well managed, can't seem to grow it's reputation and standing. The weather sucks, and it's biggest selling points are that it's two hours from Tahoe and SF. Yay. Can you say suburban mini mall hell? Sac is seriously going to have the big hurt put on it over the next several years. I've been stuck here for a few years because of my job and have despised every moment of it. I watched in amazement as people paid $600k+ for tract homes that were once dairy farms. I think locals have an acute sense of the pop because Sac is ground zero. I can easily think of reasons why a $600k, 3 BR condo makes sense in a nice suburb of LA, SD, or SF. I can't think of any reason why a $600k 5 BR McMansion makes sense in the middle of a tomato field in Sac. I can't thank my lucky stars that I'm going back to SoCal next year!

HappyinSF said...

Anon,
I find it quite funny that so many people are clinging to the fact that their crap town is not crap and Should be expensive based solely on the fact that it resides in California. I wish I had a dollar for everytime I've heard a Sacramentian talk about how they can drive a few hours to somewhere desirable as a plus for living in Sac. How does leaving and going to places people want to be count as a benefit to living in Sac? Sac was cheap, that was it's draw, without that you may as well live in the bay area and make a bunch more money.

paranoid renter said...

Anon 9:25

I moved to Sac about 3 years ago because of my job and really liked it. I moved from the Bay Area. Sac has a nice small-town feel to it and I like it much better than the Bay Area - which may have all the cultural stuff but it's too busy and people are too stressed.

I'm pretty sure that house prices will fall and people will leave the area as a result of job loss due to construction. But I feel the people here are the best and it's a really nice place to live. Weather may be a bit extreme but a couple of summers and you learn to enjoy the heat.

paranoid renter said...

happyinsf,

In the Bay Area you can earn more but you also burn through cash a lot quicker. A tiny 2 BR condo will set you back 500K+. You need a 6-figure income to sustain payments for something like that. Also, the traffic there is pretty bad. Try getting to any fun place on the weekends and you're stuck in traffic all the way. Jobs are far more fluid in the Bay Area - big employers like HP don't pay a whole lot more than they do in Sac. The smaller companies aren't stable...a slight downturn and you could be out on the street burning cash faster than any other place.

The only people that can really afford to live well in the Bay Area are those loaded with funny money from a company that successfully went IPO. Those in normal jobs make pretty mediocre money for the cost of living.

HappyinSF said...

I'm a paralegal who has worked for one firm over the last 5 years here in San Francisco. Me and my wife live in a rent controlled apartment on Nob Hill. We do not own a car, therefore traffic is irrelevant. We are less than a 10 minute walk to our jobs in finacial district. We are 2 blocks from Union Square shopping and less then 10 minute walk to the Metreon and the new Bloomingdales shopping center where we have recently started seeing movies in the new theater. Public transport runs 24-7 and we can get anywhere in the city quickly. we are both support staff yet we have a lot of disposible income and very stable jobs. We have followed the market in Sac because we both grew up there and have a lot of family and friends there. But the 24 years I spent there simply does not allow me to even consider paying more than 150k for a house. And it would have to be in east sac or a few other desirable, close to midtown (or midtown) locations. We make about three times what similar jobs pay in Sacramento (if Craigslist is any indicator). Oh also, the temperature range here is 60 to 80 degrees. We have the ocean, Golden Gate Park, the presidio, The HUGE organic produce market at the Ferry building (also 10 minute walk for us). I can go on and on. Sac has the candy barrel store in old Sac. Where in the Bay did you live? Bay area could mean all sorts of bedroom communities and high crime zones that would be worse or equal to living in Sac.

Anonymous said...

I think the point is that LA, SD, and SF have a "deeper" economic base than Sac. Sac's recent growth and high-flying fun has been solely fueled by construction. Contractors, homebuilding employees, loan officers, etc., etc., buying homes. It has been like a snake eating its tail. There's no depth, and now that all these people have lost their jobs, what will support the housing market? SD, LA, and SF bay area are also getting hit with the downturn, but most can just blink, gripe over being stupid for having bought at the peak, go to their nice-paying nine to five white collar jobs, and continue on with their lives.

There's no solidity, no $$$ to stand on in Sac. Of course the SF employment market has some volatility. Yet somehow, through cycles, the market maintains exclusivity. Who cares if there's a constant ebb and flow of high dollar buyers? Point is, over the long term, the housing market remains strong, as does population growth. In contrast, Sac is going to fall on its face here, and all the growth of the last five years is going to vaporize.

Sac is quaint, suburban, whatever. As a young professional, there is nothing here to keep me interested. I came here for a job, made a lot of dough, and now that the party's over I'm going back home to enjoy the spoils of my victory. Apologies for badmouthing Sac, but man, it's going to get uggg-ly here. Hey, at least there's "nice" people here. Probably don't have the education or training to support a strong economic base, but I think we can all agree that things like that aren't important to everyone. To each his own!

Anonymous said...

go kings!!! (please don't go please don't go please don't go). okay maloofs, whatever you want.

dirtdevil said...

"Weather may be a bit extreme but a couple of summers and you learn to enjoy the heat. "

Seriously, the first thing I thought of after reading that was, "after a few pokes in the eye, you learn to enjoy the stick." How do you "learn" to enjoy a week of 100+ degree heat? Of constantly burning your hand on your steering wheel? Of your air conditioning bill rivaling your food budget? Of being forced to either stay inside, go to SF or Tahoe, or mix company with all the winners hanging out at the river? And that's just the summer. Don't get me started on winter (flooding . . .).

In summary, house prices need to drop by 50% to even have a chance of attracting fresh blood to Sac. Local industry and gov workers will provide a base at those prices. Unfortunately, I think Vacaville at reduced prices is going to steal any last hope Sac has of drawing bay area folks.

This town needs to stop relying on factors outside of it. 2 hours to Tahoe. Please. Housing will be supported by SF folks. Huh? Where's the pride? Shift your attention from the kings for two seconds and figure out how to pump some money into UC Davis, devise a plan for attracting businesses (how about ag-related development and research, along the lines of ADM or Cargill--seems like a no-brainer), and generate enthusiasm for culture. Or not. Small town is always good. Unless you bought a house here recently.

paranoid renter said...

happyinsf,

SF is different than the rest of the Bay Area. I used to live around the Peninsula and South Bay. Those are really no fun relative to Sac, although SF being accessible is a big plus.

Nothing like living in the city and you're lucky you're in a rent-controlled apartment. In the South Bay, once the economy starts doing even reasonably well, rents get out of whack going up a couple of hundred every few months. However, I'm sure you would think differently about the money if you wanted to own.

Anonymous said...

Sac prices can drop 50% and not even blink ... it all starts with cheap land. now that the large 100's of acres at a time builders have walked away ... the fun is just about to begin.
Cool.
Cow_tipping.

paranoid renter said...

dirtdevil

What about tubing down the river to enjoy the heat? Do people even have time for that in the Bay Area?

Sometimes, I think it's good that people don't like Sacramento...it'll eventually make it affordable for those of us that do. :-)

HappyinSF said...

All of San Francisco is rent controlled in so much as a landlord can only legally raise rent a little over 1% a year. The exact percentage is set each year by the SF rent board. OK i just checked and it's been set at 1.5% for next year. So far we have yet to have any increase. Our apartment currently costs less than comps in Sacramento. It seems like they should have something like this everywhere.

Anonymous said...

All of you folks who are slamming Sac, why don't you get out of here and stop complaining? If you're going to live in SF, SD, LA, or wherever, it shouldn't matter to you that Sac is an expensive armpit or that it doesn't have a strong economic base. I honestly think this city will survive without you precious folks, even though you are obviously of high intellect and refined taste. You won't want to be around here when the economy collapses and the entire city is lining up at Friendship Park for meals anyway (that's going to be next year, right?) Do you want the citizens of Sac to subsidize your housing because you're such an asset to the city, is that what you're getting at? If you're looking for an armpit of a place to live that still has affordable housing, why don't you make like the Browns and move to KS?

HappyinSF said...

"Sometimes, I think it's good that people don't like Sacramento...it'll eventually make it affordable for those of us that do. :-)"

Excactly! You've hit the nail on the head. Something is crazy wrong with the universe right now that have sent Sac prices in Bizzaro World. You have just described Sacramento's history up until 2003. It was super cheap and some people liked it and that made perfect sense.

Anon,
I did leave and it sounds like that other guy is leaving too.

paranoid renter said...

happyinsf,

Is this true even for luxury apartments like the Avalon on King St? I find it hard to believe.

Also, what happens if the landlord decides to sell the place? Can he/she force a tenant out?

Sure, it's great for the renter, but this is exactly the thing that messes with free-market economics. In time, nobody will want to be a landlord. (Which is why I don't think you statement about rent control is generally true for all of SF...I can't see how a business can make money if all kinds of costs of maintenance are escalating and they are unable to increase the rent.) Then it starts to become hard for new renters to find a place.

HappyinSF said...

Did you think to google SF Rent Board before responding:

http://www.sfgov.org/site/rentboard_index.asp

Yeah, it's terrible that our 7 story building has a range of rents that still produce substantial profits each year while still proving financial security to the elderly and other long term tenants. Hasn't Sac seen what happens when everyone wants to be a landlord? Aint pretty. Yes, a person can purchase a property and kick out a tenant if they are going to live in the unit. This happens all the time where the unit remains empty for a few months and then is rented at full market. Also, if substantial renovations are completed rents can be raised more at one time, these have to be very substantial remodel and structural work. People move a lot in San Francisco, there will always be new tenants paying full market on the Unit that the new family left for the burbs.

HappyinSF said...

Looking at the ordinance it appears that construction after 1979 is exempt from rent control, so yes new projects can apparently raise rents willy nilly. Luckily ,until the next big one, most of San Francisco was built prior to 1979.

paranoid renter said...

happyinsf,

Yes that's what I was looking at too, because I couldn't imagine a company like Avalon doing business in a rent controlled area. They are notorious for having huge rent increases.

My personal opinion is that most rent-controlled apartments have "too much character" for me to want to live there. :-)

HappyinSF said...

Also, if you are talking about smaller buildings, don't you have a fixed mortage? Replacing a refrigerator or roof is going to be more expensive 10 years from now so If you start off with a lot of negative cash flow then yes, being a landlord in these cases would not make much sense. I think you are seeing that in Sac now with rents being a third of the mortgages.

paranoid renter said...

happyinsf,

You have a good point about the fixed mortgage, but the main difference is that you're living in the home so as time goes by and your income goes up (even due to inflation) you can come up with cash to pay for other things.

If your main cash flow comes from rent as a landlord, you probably won't have enough to pay for maintenance costs as time goes by. I don't know how people can continue to be landlords of rent-controlled apartments beyond say 15 or 20 years.

Anonymous said...

Anyone who wants to live in a cramped, outdated, rent controlled SF apartment is crazy, IMO. I'll take a crappy house in Sac over a crappy apartment in the city any day. If I own it, I can at least make it nicer and build some sweat equity.

dirtdevil said...

What? Too much character? I think you're maybe not familiar with the SF rental market and rent control. By focusing on the Landlord's persepective most people completely miss the Tenant perspective, which in the end benefits the LL. To overly simplify, rent control in a lot of cases provides incentive for tenants to treat the property as their own, since they have some assurance that they won't be priced out by jacked-up rents. I think Sacramentans would have a hard time understanding why you would need rent control because they have not experienced the rapid upswings in the very very constrained SF market (think dot com era). Rent control normalizes a rental market that is susceptible to volatility and provides for the long term health of the local economy.

To boil it down, once a tenant moves, the landlord can price the unit however (s)he wants, with the new rate serving as a baseline control for the new tenant. Also, in certain cases, like owner/family occupied and condo conversions, exceptions to SF's in-depth landlord-tenant law kicks in. I have a high quality of life (despite living in Sac), and I would have no problem living in many, many "rent controlled" units in SF. Can't wait to leave Sac! Yes, I'll pat myself on the back for renting.

paranoid renter said...

dirtdevil,

I'm sure rent control has some pluses, but in the couple of cities that I've seen rent control, it only seems to apply to old places.

In Boston/Cambridge as long as it applied to all places, people stopped building new apartment complexes. That exacerbates the shortage of housing...you actually had to pay a broker to find you an apartment! But I think that has changed and like SF, rent control only applies to older units in Boston/Cambridge.

happyinSF said...

Well, in SF, land really is in short supply so it actually applies to 99.9% of the city. Take a drive around the city, I promise you our buildings are beautiful even if they are old.. That is, if you like high ceilings, hardwood floors, bay windows, built-in bookshelves, etc. etc. We're not talkin about section 8 housing here, we are talking about the entire city.

happyinSF said...

Well, in SF, land really is in short supply so it actually applies to 99.9% of the city. Take a drive around the city, I promise you our buildings are beautiful even if they are old.. That is, if you like high ceilings, hardwood floors, bay windows, built-in bookshelves, etc. etc. We're not talkin about section 8 housing here, we are talking about the entire city.

Gwynster said...

I've lived in LA, Burbank, Huntington Beach, Orange, Tustin, downtown LA, West LA, Berkeley, SF, Sacramento, and now Davis. I've also traveled all over the mid-atlantic states and some of the mid-west on business for extened amounts of time.

I can honestly say that while CA has it's bonuses, nothing here is worth the cost of living.

Seriously, every place has it's gems. The weather isn't as different as you think (especially true here in Sacramento) and the people are a lot more tolerant and helpful then you've been lead to believe. That last issue was really hard for me wrap my little very liberal art-chick brain around but it's true.

I've interviewed in places such as OK and KS and the wages aren't as bad as people in CA make then out.

I found that at institutions like Duke Univ, UNC, Penn State, Vanderbilt, etc., wages are even higher then the crap pay UC hands out as a salary. Figure in how much less the cost of living is there and you're actually doing much better on the economic food chain out of the state then in it.

The only reason we haven't moved is because I don't have a relocation offer in my hot little hands. The minute either Mr. Gwynster or I get one, we're out of here (as long as Happy_Renter promises to keep a steady supply of CA cabernet coming my way >; )

Also, check the comments on the Sacbee website to the outmigration numbers. Some people are seriously freaked at the though of CA loosing it's population.

paranoid renter said...

Gwynster,

Have you looked at the crime stats? I've lived in Durham, NC and there is constant fear of being mugged if you're alone and it's late at night.

Agree the weather is no big deal (other than the occasional hurricane which usually doesn't affect Durham) and there's lots of fun stuff to do around there - beaches where you can actually get into the water are about 2 hours away.

I'd pick Sacramento over Durham any day.

HappyinSF said...

Gwynster,
I agree, I always assume that the people who claim California is the only place worth living have either only traveled to crappy places or have not traveled at all. There are 49 other states many have the same combination of coast line, national parks, mid to large cities, etc. Also, how much of California is utilized by the average citizen? My family from Sac only go to Disneyland and Tahoe/Reno. they're not hiking through the Marin headlands, wine tasting in Napa or climbing halfdome. They are happy to go to the malls and spend there pensions/pay at thunder valley.Further the few people I know who have moved from SF to Sac only make it back to SF a few times a year at most. People generally don't do all the things that they say they have access to out of town. I have friends in East bay even who never make it over.

happyinSF said...

wait, I guess the point in there is that people generally don't travel that much so you should make sure where you call home caters to you interests and maybe not factor in what you can do hours away from home. And if you mostly love malls and chain stores you should probably move somewhere much cheaper than Sacramento.

paranoid renter said...

I agree that there are some negatives to being in Sacramento. For me personally, the biggest peeve is the chain restaurants popping up all over the place. In that respect, I think the Bay Area really shines. The shopping choices are also much better in SF.

In terms of hiking and other outdoor activities, I think the Sacramento area has plenty of choices. In terms of culture, it falls far short of SF, but there _are_ things to do.

However, there are people I know in the Bay Area who hardly have the time to do anything fun. All they do during the week is work/commute and on weekends they're resting from exhaustion and catching up with chores.

Sam Tehrani said...

This is a great story and I can relate. I left the bay area along with my $120k salary to work in Kentucky making $45k/year. The cost of living is so cheap that I feel like I've made the best decision of my life!!

The bay area is fantastic but the cost of living is too high.

Gwynster said...

Funny, NC is my top choice with Nashville as Number 2. If either Duke or Vanderbilt handed me an offer, I'd be packing up the cats, telling Mr. Gwynster to tighten his seatbelt, and hitting the freeway.

That being said, I moved to Sac in 93 and loved it. For my kind of lifestyle it was great and affordable. The affordability is gone and soon I will be too.

As to crime - do you realize that stockton/modesto/sacramento is the autotheft capitol of the US? Check it out. Sac actually has lousy crime stats. I looked into it after my car was stolen from my driveway in East Sac.

And yes I'll miss the shopping in SF but now a days I can get anything I really want with a credit card and a webpage so I find myself not heading into the city nearly as much.

Those that know me on this blog know that I work in the social sciences now and one of my groups here focuses on socioeconomic studies of specific cultures. I've been watching the outmigration from CA for the last 3 yrs from data collections.

CA is rapidly depleting it's most valued resource - human intelligence - due to economic pressures. I can tell you that the families we track are, for the most part, are doing well after relocating out of CA. The families are exhibiting more stabiliy, warmth and support, and economic sucess. Hard to beat the data.

paranoid renter said...

gwynster,

You might want to look at the per-capita homicide stats in Durham.

Auto theft is petty compared to that.

Gwynster said...

I had a little time and grabbed the 2005 data from the FBI's site. I put Sacramento and Durham side by side and posted the numbers on my website.
http://gwynsters.blogspot.com/

I'm not saying that Durham doesn't have crime. What I am saying is that Sacramento's crime score is much higher then us locals realize. I also firmly believe the greater Sacramento is going to see significant increases as the bubble continues to burst.

Anonymous said...

I'm another who's lived in Durham and Sacramento. Durham has a lot of murders per capita but mostly they're black on black and happen in black parts of town. If you're white and live in a white part of Durham (it's a very segregated city) you're no more likely to be murdered than you are in Roseville or Woodland.