Still heading for exits from California

THE ORANGE COUNTY REGISTER

The 1996 Kurt Russell movie "Escape from L.A." might be remade as "Escape from California." New data show record numbers of Californians "outmigrating" to other states. The state's population is still growing, although at a slower rate, because of in-state births and immigration from other countries. However, recent immigrants generally have lower incomes than citizens, thus lowering the tax base.
The figures come from a new calculator created by the Tax Foundation, a taxpayers' rights group. It's online at: interactive.taxfoundation.org.

MCT ILLUSTRATION

During 2009-10, the latest period available, 406,833 Californians migrated to other states, while 281,521 people came here. Net outmigration: 125,312. Lost economic activity from those who left: $10.6 billion. Given that state and local taxes take about 10 percent, that comes to about $1.6 billion in lost tax revenue – for just one year.
Let's calculate the past decade, 2000-10. During that time, 4.9 million left the state, 2.5 million came in. Net out-migration: 1.4 million. Yearly lost economic production: $146 billion. Lost tax revenues, about $14.6 billion a year. That's almost twice the $8.5 billion Gov. Jerry Brown seeks in his tax increase on the November ballot.

Of course, people who leave no longer use state services. But those who left arguably were more productive Californians. If they had wanted to subsist on welfare, they never would have departed a state with some of the most generous benefits in the nation.
"I'd attribute it to the bad business climate," Joseph Vranich told us; the business-location consultant heads Spectrum Location Solutions in Irvine. Earlier this year, he calculated that 254 businesses left California in 2011. "It seems to be at the same level in 2012," he said of the first five months of the year. "I still have alerts coming in. The exodus continues."
He said that, in addition to the bad economy, people have told him they're leaving California for a number of other reasons, including "bad regulations, traffic on the I-405, and parents don't want their kids in California schools anymore." On national tests, California schools perennially rank from 46th to 48th among states.
Iowa Gov. Terry Branstad has been trying to lure California businesses to his state. Commenting on that, California Gov. Jerry Brown's spokesman, Gil Duran, quipped to the Los Angeles Times, "This is a Republican myth that is often repeated, yet simply not true. Reputable studies have shown that businesses are not fleeing the state for the cold, empty and desolate hinterlands."
But Iowa's unemployment rate in April was 5.1 percent, less than half California's 10.9 percent. And from 2000-10, the outmigration number from the California sunshine to the Iowa corn fields was 17,575.
Mr. Duran's comment, reflecting the sentiments of Gov. Brown, shows how insulated they are from what's really going on in California.

Buyer demand high - multiple offers now bidding up prices

Jay's Notes:  Well the worm has turned.  The real estate market went from a buyer's market to a balanced market to now a seller's market seemingly overnight. As prices get bid up during the offer stage now, many investors find out that a good deal can turn into a not-so-good deal by the end of the bidding process.  Where to Invest US solved that with fixed pricing that does not allow other investors to overbid the offer price.  Also, the repairs are included in our pricing, so you don't have to worry about your repair costs going up during the rehab process.  To find out more about our investor-friendly approach with long-term owner support call me at (800) 957-1907 Ext 1.

NEW YORK (Reuters) - Kate Carpenter and her husband waited for two years before sensing the time was right to look to buy a home in the suburbs of New York.

"This is the first time homes are at an affordable point," said the freelance writer, 35.
She hopes to move her two young daughters out of their rented New York City apartment soon, taking advantage of record low mortgage rates and signs the slump is over.
Six years after the housing market began its slide, dragging the U.S. economy into recession, this year's spring season -- traditionally the busiest period for home sales -- is shaping up to be the strongest since the crash.
Sales rose more than 10 percent in April from a year earlier and may end the year up by as much as 13 percent, according to the National Association of Realtors.
Prices, which plunged by a third from 2006 according to some measures, are rising in some cities. Realtors report bidding wars, albeit more modest ones than during the bubble years, and buyers are snapping up homes much more quickly than only a few weeks ago.
"We have more buyers than we have houses to sell," said April Bolin, a realtor in Riverside, California, considered one of the epicenters of the U.S. housing crash.
"We have multiple bids all the time. I recently sold a property that had 10 offers in three days," Bolin said.
A reminder of how damaged the market remains: That contested condominium sold for the asking price of $173,000, less than half of what it fetched at the peak of the bubble.
Even if existing home sales this year touch 4.8 million, the top end of the NAR's forecasts, that compares with more than 7 million in 2005, before the crash.
"We're guardedly optimistic," said Ron Phipps, a broker at Phipps Realty in Warwick, Rhode Island, a state hit hard by the 2007-09 recession. "We've seen some really good signs. We just want them to be sustained."
WORKING OFF THE OVERSUPPLY
One of the most significant signs of recovery is the fall in the bloated inventory of homes on the market. Nationally, it has fallen to about six-months' supply, usually considered a healthy market, down from more than nine months in April of last year.
Agents attribute some of the quick drawdown to a broadening of the kind of buyers getting into the market - homeowners looking to upgrade, first-time purchasers and retirees as well as the cash investors who ventured in earlier and growing numbers of Wall Street funds betting on juicy rental returns.
Some of the cities looking at a potential inventory shortage were among those hardest hit by the crisis, including Phoenix and Miami, because investors have already swooped on many homes. In Sacramento, California, supply has shrunk to just 1.1 months' worth, according to data firm RealtyTrac.

Sales Boom in 1st and 2nd Qtr - Real Estate is the Investment for 2012

 

The first quarter of 2012 was the best first quarter for real estate in five years, and pending contracts suggest that the second quarter of 2012 will be the best second quarter in five years, NAR Chief Economist Lawrence Yun said this morning at the Residential Economic Update during the NAR Midyear Legislative Meetings & Trade Expo.
Moreover, he said the second half of this year could be even better than the first, in part because of continued increases in rental costs and record affordability of homes. "Renters are getting squeezed, and they don't want to rent anymore," Yun explained. "This could be the year we see the release of pent-up demand."
Home prices have been skipping along the bottom for about a year now, Yun said, a trend that has drawn investors into the market. These investors have helped housing through a couple of difficult years and partly mitigated the dysfunctional mortgage market.
"Right now is the time to buy low," he said. "Investors are coming in to take advantage. Second homes started to recover nicely last year because of investors."
However, home values are poised for a rebound as more traditional buyers move back into the market, Yun said. In fact, this has already started to happen in areas such as Phoenix and Miami, which have seen year-over-year (March 2011 to March 2012) double-digit percentage increases in home prices.
Daily Real Estate News 

Home sales taking off

By Les Christie @CNNMoney May 22, 2012

Home sales surge 10% year-over-year in another indication of a housing market recovery.

NEW YORK (CNNMoney) -- The housing market surged in April, with home affordability at record levels.
Sales hit 4.62 million homes during the month on an annualized basis, a rise of 3.4% compared with a month earlier and up 10% from April 2011, according to the National Association of Realtors.
NAR reported that the median price for homes sold during the month was $177,400. That's a jump of more than 10% compared with a year earlier.
The housing market's improvement was widespread, as all four regions in the nation recorded gains. That's a good indication that there is a sustainable recovery afoot, according to Gus Faucher, a senior economist for PNC Financial.
"The fundamentals for a recovery have been in place for a while," he said. "Only confidence was lacking."

Related: Homebuying most affordable in decades

A decline in the proportion of distressed property sales -- homes either in default or already repossessed by lenders -- helped boost home prices. These properties normally sell at big discounts to conventional sales and drag down the overall median price.
In April, distressed properties accounted for 28% of sales, down from 37% 12 months earlier.
Pat Newport, a housing market analyst at IHS Global Insight, said he thinks the market is turning but that it will be a slow process.
"The market won't pick up much steam this year," he said. "The key issue is credit: It's still tight both for mortgage borrowers and for home builders."
There's no sign that credit will loosen up anytime soon, but the fact that interest rates are at record lows does make financing easier for buyers.
NAR chief economist Lawrence Yun notes that it's no longer just investors who are jumping into the market. "A return to normal home buying for occupancy is helping home sales across all price points," he said.
As prices stabilize, homeowners may be encouraged to put their homes on the market. Inventory rose 9.5% to 2.54 million homes in April, which is common in the spring, as sellers try to capitalize on the selling season.
Overall, the supply of homes for sale has dropped more than 20% from 12 months ago and is well down from the record high of 4.04 million in July 2007.  

Buying a home won't get much cheaper

By Les Christie @CNNMoney May 3, 2012: 11:48 AM ET

Several housing experts are predicting that this year will be the last chance for homebuyers to cash in on the weak housing market.

NEW YORK (CNNMoney) -- Buying a home may never get any cheaper than this. Several housing experts are predicting that this year will be the last chance for bargain hunters to cash in on the best deals of the weak housing market.
With home prices down 34% nationally since 2006 and mortgage rates at historic lows, homes have never been more affordable -- but it won't stay this way for much longer.
Stuart Hoffman, chief economist for PNC Financial Services (PNC, Fortune 500), said he expects home prices to flatten out by the third quarter and start climbing by next year.
A number of factors will help bolster the housing market, he said, including a decline in the number of foreclosures and continued job growth. In addition, homebuyers will have better access to mortgages as they get their finances in order and improve their credit scores.
Some economists, like Trulia's Jed Kolko, expect home prices to pick up even more quickly. Trulia's data shows that the national average for asking prices already increased 1.4% in the first quarter of 2012, compared with the last three months of 2011.

Foreclosures start to fade. One major factor that will drive the trend is the cooling of the foreclosure crisis. Stan Humphries, chief economist for Zillow, said that the percentage of mortgage loans 90 days or more late, a good predictor of future foreclosures, is "falling fast."
That percentage dropped 15% year-over-year to 3.1% through the end of 2011, according to the Mortgage Bankers Association. And the decline is accelerating: More than 70% of the decline came in the last three months of the year.

In some markets hit hard by foreclosures, the turnaround in prices is already underway. Phoenix recorded an 8.4% jump in home prices during the three months ended April 30, compared with the three months ended January 31, according to Clear Capital.

The Export Business in California (People and Jobs)

by Wendell Cox 05/10/2012

California Senate President Pro-Tem Darrell Steinberg countered my Wall Street Journal commentary California Declares War on Suburbia in a letter to the editor (A Bold Plan for Sustainable California Communities) that could be interpreted as suggesting that all is well in the Golden State. The letter suggests that business are not being driven away to other states and that the state is "good at producing high-wage jobs," while pointing to the state's 10 percent growth over the last decade. Senate President Steinberg further notes that the urban planning law he authored (Senate Bill 375) is leading greater housing choices and greater access to transit.
This may be a description of the California past, but not present.
Exporting People
Yes, California continues to grow. California is growing only because there are more births than deaths and the state had a net large influx of international immigration over the past decade. At the same time, the state has been hemorrhaging residents (Figure 1).

Californians are leaving. Between 2000 and 2009 (Note), a net 1.5 million Californians left for other states. Only New York lost more of its residents (1.6 million). California's loss was greater than the population of its second largest municipality, San Diego. More Californians moved away than lived in 12 states at the beginning of the decade. Among the net 6.3 million interstate domestic migrants in the nation, nearly one-quarter fled California for somewhere else.
The bulk of the exodus was from the premier coastal metropolitan areas. Since World War II, Los Angeles, San Francisco, San Diego and San Jose have been among the fastest growing metropolitan areas in the United States and the high-income world. Over the last decade, this growth has slowed substantially, as residents have moved to places that, all things being considered, have become their preferences.
More than a net 1.35 million residents left the Los Angeles metropolitan area, or approximately 11 percent of the 2000 population. The San Jose metropolitan area lost 240,000 residents, nearly 14 percent of its 2000 population. These two metropolitan areas ranked among the bottom two of the 51largest metropolitan areas (over 1,000,000 population) in the percentage of lost domestic migrants during the period. The San Francisco metropolitan area lost 340,000 residents, more than 8 percent of its 2000 population and ranked 47th worst in domestic migration (New York placed worse than San Francisco but better than Los Angeles). Each of these three metropolitan areas lost domestic migrants at a rate faster than that of Rust Belt basket cases Detroit, Cleveland and Buffalo.
San Diego lost the fewest of the large coastal metropolitan areas (125,000). Even this was double the rate of Rust Belt Pittsburgh.
Exporting Jobs
California is no longer an incubator of high-wage jobs. The state lost 370,000 jobs paying 25 percent or more of the average wage between 2000 and 2008. This compares to a 770,000 increase in the previous 8 years. California is trailing Texas badly and the nation overall in creating criticial STEM jobs and middle skills jobs (Figures 2 & 3) Only two states have higher unemployment rates than California (Nevada and Rhode Island) . California has the second highest underemployment rate (20.8 percent), which includes the number of unemployed, plus those who have given up looking for work ("discouraged" workers) and those who are working only part time because they cannot find full time work. Only Nevada, with its economy that is overly-dependent on California, has a higher underemployment rate.


Business relocation coach Joseph Vranich conducts an annual census of companies moving jobs out of California and found a quickening pace in 2012. Often these are the very kinds of companies capable of creating the high-wage jobs that used to be California's forte. Vranich says that the actual number may be five times as high, which is not surprising, not least because there is no reliable compilation of off-shoring of jobs to places like Bangalore, Manila or Cordoba (Argentina).
To make matters worse, California is becoming less educated. California's share of younger people with college degrees is now about in the middle of the states, while older, now retiring Californians are among the most educated in the nation (Figure 4).

Denying Housing Choice
It is fantasy to believe, as Steinberg claims, that there are enough single family (detached) houses in the state to meet the demand for years to come. More than 80 percent of the new households in the state chose detached housing over the last decade. People's actual choices define the market, not the theories or preferences of planners often contemptuous of the dominant suburban lifestyle.
In contrast, however, the regional plans adopted or under consideration in the Bay Area, Los Angeles and San Diego would require nearly all new housing be multi-family, at five to 10 times normal California densities (20 or more units to the acre are being called for). New detached housing on the urban fringe would be virtually outlawed by these plans. And, when Sacramento does not find the regional plans dense enough, state officials (such as the last two state Attorneys General) are quick to sue. If the "enough detached housing" fantasy held any water, state officials and planners would not be seeking its legal prohibition. To call outlawing the revealed choice of the 80 percent (detached housing) would justify the equivalent of a Nobel Prize in Doublespeak.
At the same time by limiting the amount of land on which the state preferred high density housing must be built, land and house prices can be expected to rise even further from their already elevated levels (already largely the result of California's pre-SB 375 regulatory restrictions).
Transit Rhetoric and Reality
Transit is important in some markets. About one-half of commuters to downtown San Francisco use transit. The assumptions of SB 375 might make sense if all of California looked like downtown San Francisco. It doesn't, nor does even most of the San Francisco metropolitan area. Only about 15 percent of employment is downtown, while the 85 percent (and nearly all jobs in the rest of the state) simply cannot be reached by transit in a time that competes with the car. Even in the wealthy San Jose area (Silicon Valley), with its light rail lines and commuter rail line, having a transit stop nearby provides 45 minute transit access to less than 10 percent of jobs in the metropolitan area.
A recent Brookings Institution report showed that the average commuter in the four large coastal metropolitan areas can reach only 6.5 percent of the jobs in a 45 minute transit commute. This is despite the fact that more than 90 percent of residents can walk to transit stops. Even when transit is close, you can't get there from here in most cases in any practical sense (Figure 5).

SB 375 did little to change this. For example, San Diego plans to spend more than 50 percent of its transportation money on transit over the next 40 years. This is 25 times transit's share of travel (which is less than 2 percent). Yet, planners forecast that all of this spending will still leave 7 out of 8 work and higher education trips inaccessible by transit in 30 minutes in 2050. Already 60 to 80 percent of work trips in California are completed by car in 45 minutes and the average travel time is about 25 minutes.
For years, planners have embraced the ideal of balancing jobs and housing, so that people would live near where they work, while minimizing travel distances. This philosophy strongly drives the new SB 375 regional plans. What these plans miss is that people choose where to work from the great array of opportunities available throughout the metropolitan area. These varied employment opportunities that are the very reason that large metropolitan areas exist, according to former World Bank principal planner Alain Bertaud.
People change jobs far more frequently than before and multiple earners in households are likely to work far apart. Similar intentions led to the development up to four decades ago of centers like Tensta in Stockholm, which ended up as concentrated low income areas (Photo). It California, such a concentration would do little to improve transit ridership, even low-income citizens are four to 10 times as likely use cars to get to work than to use transit.

Tensta Transit Oriented Development: Stockholm
All of this means more traffic congestion and more intense local air pollution, because higher population densities are associated with greater traffic congestion. Residents of the new denser housing would face negative health effects because there is more intense air pollution, especially along congested traffic corridors.
Self-Inflicted Wounds
Worst of all, California's radical housing and transportation strategies are unnecessary. The unbalanced and one-dimensional pursuit of an idealized sustainability damages both quality of life and the economy. This is exacerbated by other issues, especially the state's dysfunctional economic and tax policies. It is no wonder California is exporting so many people and jobs. California's urban planning regime under SB 375 is poised to make it worse.
Wendell Cox is a Visiting Professor, Conservatoire National des Art

Survey: Now is the TIme to Buy

Thirty-three percent of Americans say they expect home prices to rise in the next 12 months, the highest level in more than a year, according to Fannie Mae’s March 2012 National Housing Survey of consumer attitudes about the housing market.
The number of people who say now is a good time to buy is also on the rise, increasing to 73 percent—also the highest level in more than a year. The percentage who said it's a good time to sell a home also increased one point to 14 percent in March.
Meanwhile, more Americans expect rental prices to rise and are projecting an increase by 4.1 percent over the next year, the highest number recorded to date.
“Conditions are coming together to encourage people to want to buy homes,” says Doug Duncan, Fannie Mae’s chief economist. “Americans’ rental price expectations for the next year continue to rise, reaching their record high level for our survey this month. With an increasing share of consumers expecting higher mortgage rates and home prices over the next 12 months, some may feel that renting is becoming more costly and that home ownership is more compelling house choice.”
Source: “Americans’ Expectations Align to Encourage Home Buying,” RISMedia (May 6, 2012)