California Dreaming – More than a third of California households have virtually no savings.

A lot of people do not equate California with poverty.  You certainly don’t think of poverty when you look at real estate values in places like San Francisco even though the homeless issue is right in your face.  The reality is that most people do not live lavish lifestyles.  In fact, a new report highlights that more than one-third of California households have virtually no savings.  These households would not have the ability to live at the poverty level for three months if one paycheck in the household was lost due to a job loss.  You also have more than 2 million young adults living at home with their parents since the rent is too high.  This isn’t the California that is presented in Hollywood movies.

California and the evaporation of the middle class

The reality is, the middle class is slowly disappearing in California.  There was a time not long ago when a blue collar worker was able to purchase a home in many California locations.  But there has been an aggressive gentrification.  Now many people feel it is necessary to go into big debt simply to purchase a crap shack.

Here is the map of the study:

one third households have no money

“(Pasadena Star News) Lars Perner, an assistant professor of clinical marketing at the USC Marshall School of Business, said California’s high housing costs have put many households on shaky financial ground.

“The cost of housing in California is exorbitant,” he said. “That’s a big part of the problem. People pay a disproportionate amount of their income toward housing.”

In places like Los Angeles close to half of renting households send close to half of their paycheck off to rent.  And for the majority that own they spend over 40 percent of their net income on housing costs.  This provides very little buffer for any emergencies.  And of course, people live day to day and the economy has been on a massive bull run since 2009.  A small recession is going to cause major ripples.  And the way California is structured supports a boom and bust economic cycle.  Tax revenues are flush in good times thanks to high taxes across the board but when things contract, the money dries out very quickly.

And inventory is down across the United States:
inventory

Housing inventory across the US is down 12 percent year-over-year but in Los Angeles, it is down 26 percent from an already low level.  So for those crap shack hunting house lusting couples, they are simply biting the bullet and buying.  Of course they are buying when everything is rosy and assume there is no correction on the horizon.

It is interesting that this shrinking of the middle class is happening virtually in all major metro areas.  My view on this is that this is being accelerated by technology.  People all want the same things across all areas: Amazon Prime, Netflix, Gyms, Whole Foods, Uber, etc.  So what happens is that lifestyle choices are more standardized across cities because of technology so people push real estate values up in similar herd like trends.

But it is troubling to know that 37 percent of California households are living on the financial edge.  And this is a figure that comes when the economy at least on paper looks good.  What happens when you get your inevitable pullback in the stock market and real estate?

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206 Responses to “California Dreaming – More than a third of California households have virtually no savings.”

  • There are no good deals out there to be had. It’s best to wait for the end of this cycle and get something at a discount. No one knows when the economy will slow down, but it is inevitable.

  • Most of the country has no savings. Further, ZIRP decimated any savers left.

    • I was going to say the same thing. The average Joe with no savings isn’t just a CA thing. Most Americans can’t save money even if their life depended on it…it’s that bad. And if you are not a saver, the odds of owning in any decent part of socal are slim and none.

    • See my comments posted separately, and the link below.

      https://www.gobankingrates.com/saving-money/americans-savings-state/

      It occurred to me that on reading the definition they gave for zero savings, that it only includes savings accounts in banking institutions (e.g. banks, credit unions). It probably doesn’t include checking accounts and 401k plans or other retirement accounts. It would be interesting to see data on how savings accounts have declined since the Fed’s financial repression came to be. I think Cheddar is right about ZURP being partly to blame. A lot of people use tapping the 401k as their emergency money.

      • Joe R,

        I am one of those. Apparently I don’t save, but I have million in assets producing cash flow every month. Keeping money in the bank when the FED doubles the money printing every few years in trillions does not make any financial sense. That is SURE STEALING of money via inflation – the most regressive form of taxation.

        Yes, I put money in IRA to save in taxes and I can access those in case of an emergency. I never had to do it so far and soon I can access them without penalty. Even now there are loopholes to avoid both taxes and fees, but I don’t have to use it.

        Apologies for using the term “money” loosely. We no longer have money, but currencies, bitcoin and dollar being some of them. The transition from money to currency was done from 1913 to 1971. Since 1971, we no longer have money. One attribute of money is a “store of value”. That can not be said about most currencies today under the control of central banks (equivalent of “Central Committee” in communist countries).

    • ZIRP didn’t “decimate” savers. The most important part of saving is denying yourself immediate gratification and putting money aside for the future. The interest rate is not important. This is just an excuse.

    • Pretty much. Worse than that, if you grab all these cash poor households living paycheck to paycheck spending 30%-50% of their take home on rent, how many of them still think they are justified in having 1-2 $300+ per month car payments…

      A good chunk of Americans suck ass at saving.

      Filter out all the people in that 37% with new iPhones and cars and then we can see who is being made house poor by high rents.

  • Los Angeles has been 60-70% renters for a long time.

    I only see more landlords and more renters in the future.

    Much like mature markets in Europe.

    • In order for this to work like in Europe we need Rent Control. Prices need to be controlled by Govt intervention. The market will not adjust “by invisible hand” until damage is done. Too late at that time.

      • Price controls ALWAYS (no exception regardless of country or what is controlled) leads to zero inventory (for grocery stores empty shelves and for RE, multigenerational cramped together in few sq. yd.). The government will NEVER use the money better than a private person.

        If you want to help people have more money to spend, tax them less. In the end, everyone has to work or there will be nothing to share – general poverty.

        If it is over your head study ECON 101 – basic common sense if you can understand what you read. I know this not only from school (MBA) but I saw it in reality for decades living in a communist country where the government practiced price control on everything. Look at N. Korea and Venezuela and you can understand ECON 101 in real life. Also don’t sell me the nonsense explanation that the US interferes in those markets (I heard this explanation before) because it doesn’t hold any water. In Soviet Russia, at the peak of their military power and empire building, stealing everything in sight, due to price control, the shelves where empty and none of the newly weds could find even a studio to rent or buy at any price – zero inventory.

        What you see today in US is not free market. It is a TOTALLY controlled market by the government and FED – another form of globalist/collectivist “market”. The more the government controls, the worse it gets; just ask those living in Venezuela today. They had a lesson in socialism to last them a century. Some learn by reading and from other countries experience; others learn only from their own experience, and others are so dumb, that they never learn anything.

      • Flyover – I love you my friend. Every time I read one of your comments (without looking at the author) I can’t help but think I wrote that comment. I think I’ve also seen you over on JtR’s blog. Anyway, good stuff and I wish other’s would take to heart what you write because it’s right on the money. The government is not here to take care of us cradle to grave. Bernie Sanders would have taken us over the cliff and then we’d really feel the burn!

  • Good article! This should cause people to pause! There is a huge discrepancy between the hype of real estate, sky-high prices, and the capability of the vast majority of people to actually afford a home in coastal California. The reality is that there is a small number of people with the means to compete for an even smaller number of properties for sale! That would seem like a very fragile market and fragile rationale to think your home is really worth anything close to what Zillow currently says!

    • California has always had a large number of poor working class people.

      The majority of people who buy coast CA real estate aren’t even from CA. They are the wealthy elite from all over.

      The working class has the inland empire, riverside, etc etc. The middle class has areas like diamond bar, garden grove, or south orange county.

      Just because you want to live somewhere doesn’t mean you can.

  • Mexicanization.

  • It is getting a little crazy … and I am a real estate bull ( over the very long term only ). I don’t believe id short therm real estate investments. Regardless, check out this east side Costa Mesa listing … about 4 years ago, this would have been priced in the 700s. I do not think this is a good deal, as 15th street is very busy, this is getting crazy …

    https://www.redfin.com/CA/Costa-Mesa/206-E-15th-St-92627/home/4591541

    • Crap shack bonanza!

    • This deal is similar. A TOWNHOUSE in Santa Monica: https://www.redfin.com/CA/Santa-Monica/1820-Montana-Ave-90403/unit-1/home/6768731

      Sold in 2015 for $750,000.

      Offered in 2017 for nearly $1.5 million.

      A doubling of the price in only two years. (Yes, there as a remodel. But still…)

    • The way the listing is worded, It’s all about the land, and not the house. A tear down to build 2 houses. I think it is overpriced too, but maybe not for the offshore foreigner to hide some money. I can’t see a builder paying that kind of money, but here in the bay area,
      mansions are being built by individuals who buy old SFR’s and build their own custom castles.

      • It is more than that. If yo loo at west side Costa Mesa, which has a significant latino population, this same property would be worth about 750K. But, on the east side, where the white population is almost universal, prices are nearly double. This same story plays out over and over again all over SoCal. Twenty years ago, the difference in price between the latino side of Costa Mesa and the white side of Costa Mesa was not that different. Now, it is incredible … almost like the world has gone backwards in diversity … a large portion of whites are willing to pay through the nose for no diversity.

    • $7,308 per month
      30 Year Fixed, 3.740% Interest
      $300K down payment…..which is pocket change for most here from what I’ve read.

      I didn’t see what the income to qualify was but assuming 33% for a mortgage payment means one would need $250K a year to qualify for that loan…..for costa fucking mesa.

      I realize i’m the only one here that isn’t even close to that income…..but imagine writing that fucking check every month

      • Lol nice read. If you want honesty, I’ll give it to you. We used to be over that income, a Lawyer 180k plus a Finance career another 95k but we are no where near that now. Had kids, Lawyer went PT and Finance is about 105k now. Guess where most of the money goes though? Taxes… Sure the checks were about $7,600 biweekly but taxes took about 2300 off the top. At the end of the day, we live under our means so yes we get to save a decent amount and can buy most things we want but that’s also because our mortgage is under 2500 and car payments under 350, daycare another 1500. So even when people make good incomes they need to learn how to save and keep debt low.

  • Housing To Tank Hard Soon!

    • The most reliable one note singer in the industry…lol

    • based on that costa mesa home I would need housing to more than tank, it would take a drop of 80% before I could EVER hope of owning a home.

    • Been saying that since 2014. Ain’t gonna tank anyone soon.

    • Jim Taylor,

      Housing is going to tank the day you think housing prices can only go up.

      When the biggest bear turns bullish that’s when it starts.

      • House prices will increase 50% per year indefinitely. Everyone buy now or be priced out forever.

        I am the biggest housing bear.

      • And conversely when everyone thinks prices can’t go anywhere but down, you buy like you’ve never bought before. Not just in real estate, but any market.

      • For the record the 9:01 PM response was not the real me. But I will answer the question. i actually have had some thoughts that what if I am wrong and housing will just go up forever. So as you said I think these strange thoughts mean we are especially close to the top now. Housing to tank hard soon!

      • Seen this all before, Bob

        Housing to tank hard soon! Sell now and become a millionaire or buy now and become a schlup(or buy and hold for 10 years for your reward.)

    • Seen this all before, Bob

      I agree with lower case jim taylor. Housing is teetering and people like Upper Case Jim Taylor are trying to lie to cover it up.

  • With the dollar losing value and assets such as stocks and real estate at record levels, what options does somebody with a savings account have to store their money in? Real estate still makes sense because at these interest rates, you could still buy and rent out at or above the monthly mortgage and not worry about losing your home. I’ve championed real estate for the last few years and to some extent I still do because given these interest rates and the few options that people with liquid capital have. It’s one of the best options available today for investors that don’t want to watch their dollars decay in the bank. Real estate takes a dive? You still have a renter to get you through even if the asset value is temporarily in the negative. I’m just not getting it because to me, it seems that the US is going the way of the rest of the world where real estate is sky high and doesn’t budge. Sydney? Tokyo? Hong Kong? Cities like those among a few more make US real estate look like a bargain even if it’s relatively more expensive than where it was a few years back. I’m not saying “it’s different this time” I’m saying the world is different as we’re getting more and more globalized and attractive to foreign investors and that’s not something to ignore.

    • New Age,
      maybe change your name to New Real Estate Agent?

      I totally agree with you. Right now is the best time to buy….because interest rates are low! My advice to you: Don’t waste your time here convincing the bears to buy. Don’t let them stop you. Go out and buy now!

    • You always have a renter available. But at what price? Are mortgages a steal right now? Of course they are. Will your real estate investment pan out in 10 to 15 years? Highly likely. But the big question is, if you dive into the market today, will you be in the red in 3-5 years? I definitely think so. Your capital will be tied up until the Fed inflates its way out of the next bubble, which won’t be tomorrow. It’s a global market and a global bubble.

      • As long as your renter(s) can cover PITI+maintenance, who cares what happens short term? I invest long term and really don’t worry about short term. Last house I bought was this spring. And I did that knowing there’s a chance that the price could fall in the next couple of years. But I am very cash flow positive on the property and that’s what matters. That should be the only thing that ever matters when investing in real estate.

        Let’s say the price goes up 10% next year. Will I sell? No. Just like if it goes down 10%, I won’t sell. My horizon is 5+ years, so what happens between years 0-5 – whether on the upside or downside – doesn’t really matter.

      • “Are mortgages a steal right now?”
        You must be high….mortgages are overpriced by 50-70%. Have you not heard of buy low sell high? The other way around does not work so well….unless you hate your money.

    • You’re absolutely right. I’ve been saying that here on the Doctor’s site for 5 years at least.
      Buy or don’t buy. The market doesn’t care that you think it’s high. Try finding this bargain in London, never mind St John’s Wood, Paris or Hong Kong. You won’t get far.

      • try Tokyo after it experience 20 years of deflation…

        same thing… joe 6 pack ain’t affording tokyo

    • New Age, you are right up to a point. For those who have debt, pay it off. For those with money in the bank, I agree, that it loses value every year. There are still some deals outside the big cities where you can get 12% return per year, net, after all expenses. I would go for those. However, I would never borrow for these price levels, or I would borrow small amounts and try to pay them back really fast. If you don’t have the title, you don’t have too much. Something can happen with the economy worldwide and you lose everything. Keeping money in the banks is also a losing proposition due to inflation – the most regressive form of taxation.

      In the money game is not enough to have a good offense. The defense is equally important and many people miss this and they lose everything and work all their lives for nothing. At the current price levels, I strengthen my defense as much I can.

  • Government employees in Santa Monica do very well: http://www.surfsantamonica.com/ssm_site/the_lookout/news/News-2016/November-2016/11_16_2016_Santa_Monica_Municipal_Budget_Among_Highest_Per_Capita_in_California.html

    Police Chief Jacqueline Seabrook’s total compensation of $478,120 for 2015 was the highest among police chiefs in California. …

    Santa Monica also was home to California’s highest paid assistant City Attorney. In 2015, Joseph Lawrence earned a total compensation of $442,414. …

    The City’s “farmer’s market supervisor” received $140,000 in total compensation, …

    the assistant city librarian received a pay and benefits package totaling $220,000 …

    City bus drivers averaged $109,000 in total compensation.

    City Manager Rick Cole, hired in 2015, was not yet in the group’s database but Fellner said he is expected to be among the top-paid city managers in California in three years. He was hired at $329,424 a year, plus health benefits and 21 days of immediate vacation.

    • And the city will be broke in 10 years and expect the State or Feds to bail them out.

      • I agree with the first part but I don’t believe that the fed will bail them out – not in the current form. If Obama or Hilary would be in power, yes, I would expect so; they are very generous when they use other people money taken by force in order to bail out friends.

    • Gee, now those extremely high downtown hourly parking meters and parking violation fines makes sense to me – paying all those salaries.

      • son of a landlord

        Yup. The Santa Monica City Council thinks that they can afford big spending, because Santa Monica is a popular tourists destination. Lots of rich foreign tourists, and poorer Angelinos, come here to shop and spend.

        That’s why Santa Monicans voted to raise the sales tax another half a percent recently. A woman wrote a letter to the editor, saying she was glad of the sales tax increase because it meant that all those outsiders clogging the roads would “finally” be paying their “fair share.”

        Of course, Santa Monica also has exorbitant hotel taxes. The city squeezes hard on visitors.

        The city believes that it can continue big spending, because Angelinos will always want to come to the beach. Foreigners will always want to visit.

  • Yes, many Californians cannot afford coastal home prices. But the usual response is that coastal California is an international market.

    So the question is not how many Californians can afford coastal California. It’s how many Chinese, Russians, Israelis, Brits, Germans, French, Italians, Japanese, Arabs, Indians, Canadians, etc. can afford coastal California.

  • Inequality follows population density. Land is the ultimate wealth, and as the population increases, competition insures that a minority will end up owning the land.

  • LMAO, why would anyone buy in CA at this time, crazy over inflated prices that will creator 2018 or latest 2019. We have seen this before, its not like its anythig new. Well, a sukker is born every minute, and that whats buying into this market.

    • Teeter, I am with you.
      The reasons why people buy during the biggest asset bubble in history from my perspective:
      People are not very smart
      People are very impatient (I call it drive-thru mentality)
      People believe the lies of those who profit from RE bubbles
      People don’t invest the time to research
      People follow the herd (Buy high, lose it later)

      • the real list looks more like this:

        rental parity

      • Tankinsight,
        Not sure if you fully understand what rental parity means. But, if you think you do, why don’t you provide an example? My bet is you won’t….

      • I agree there are a lot of sheep in the world, but most aren’t in danger of losing a home unless they walk away. The people who will get in trouble after buying at the current peak will do so after job loss, not because they couldn’t afford the house to begin with, as was the case with the last bubble.

        On the face of it, it’s obvious what rental parity means, and you should take the tax benefits and maintenance into account when calculating it, but maybe what you’re getting at is that it can take an enormous down payment to reach that parity? However, in most of the country it doesn’t take more than 20% down, even today. And even if it does take a huge down, once you’ve reached parity, you don’t have to worry about losing the house, which is the most important consideration for people buying a primary at the peak – it isn’t about ROI. Is it a good investment? Not as good as it could be, but it’s still better than never buying at all. Many first-time buyers don’t have an inheritance or a lot of working years left before retirement.

        If I was in my 50’s and didn’t own property, I wouldn’t wait even one more day to buy an Orlando rental.

      • John D and tank in sight,
        see you prove my point. You CANT provide an example of rental parity in california….you are just talk and no evidence.

      • Millennial,

        There are tons of home that rent for $3200 per month and sell for $700K.

        Similarly there are tons of home that rent for $4000 per month and sell for $900K.

        That is absolutely rental parity.

        Sure it’s due to low interest rates, but those are the facts.

        That’s why homes sell. 20% down payments and low interest rates product rental parity.

      • Millennial, I think maybe you’re the one who doesn’t know what rental parity means. There are at the very least hundreds of thousands of properties, very likely millions, in California which meet the criteria. My previous property in Temecula is a good example. A great area with excellent schools, sold for $410,000 in November 2016 (prices have increased very little there since then), and with 20% down the PITI is $1,934. It is currently rented at $2,300. Even including long-term maintenance, and NOT INCLUDING THE TAX BENEFITS, it has positive cash flow.

        $420-450k is a typical price for a 2,000ish square feet 4-bedroom there now, and rents for that size place are $2,200-2,300. Look at properties in any city that isn’t within 10-15 miles of the coast or a tech hub, look at Craigslist rentals in that same area, then do the math. I’m not going to do it for you – it’s like you’re asking me to prove that clouds exist. Look around you.

  • People seem to forget that there’s no inherent right to be able to purchase a house. Prices are high but I wouldn’t bet on another 2009 style crash anytime soon. The underlying fundamentals in play then are not here now.
    If you have a stable income and are mildly flexible I would look for the neighborhood and house size and type you can afford and plan for the long haul.
    With online real estate you are competing with buyers everywhere. We see high prices but many see values they can’t resist. If you’re looking for an arbitrage opportunity you might be waiting a while.

    • The next crash is going to make 2009 look like a kids birthday party. Sure, you need a little bit of patience which most people don’t have. Let the impatient ones buy now. These buy-high people are needed and part of the cycle.

    • Realtor mantra.

    • “I wouldn’t bet on another 2009 style crash anytime soon”

      I would, it’s what California RE does and always has. This is the 4th bubble I’ve witnessed in California RE since the early 80’s. BUT the one thing that is DIFFERENT this time is we never got to a true clearing price due to massive market manipulation……properties held off the market and allowing dead beats to live mortgage free for up to 48 months.

      • Those deadbeats are long gone. They enjoyed their few years mortgage free and have long since replaced with qualified buyers. We have likely seen the most qualified buyers EVER during the past 5 or 7 years. Has this will lead to price declines between 50 and 70% is a mystery? If that ever happens, I will be buying multiple properties with the war chest that is overflowing.

      • Again, how do qualifications have much weight in mitigating because of sky high prices? As stated over and over and over again, the last downturn was largely comprised of prime buyers. Recent developments in NYC’s billionaire row showed that strategic defaults are alive and well.

      • POH, I think you have made your point with the last downturn being mostly prime buyers. The VAST majority of these “prime” buyers had little to no skin in the game. The same is NOT true today. It’s been proven time and again (on this site) that today’s buyers are comprised of cash and large downs. This can’t be refuted!

      • @LOB

        As noted several times, today’s big cash buyers (i.e. hedge funds) are using hard loans. How much collateral is backing those loans? There have been instances of Chinese “all cash” buyers defaulting on those loans. By the way, I know personally of a prime buyer who bought his property with a 5% down FHA loan in the current cycle. What about the property on billionaire’s row in NYC going into foreclosure after its billionaire buyer defaulted?

        The world’s awash in debt, but you’re one of the few who believes that little of it has found its way into real estate.

      • Lordi,
        “The same is NOT true today. It’s been proven time and again (on this site) that today’s buyers are comprised of cash and large downs. This can’t be refuted!”
        I have been on this site for a while and think you are just making this up.
        People are in more debt than ever. At the same time crapshacks have never been that overpriced. Wages have not increased in a decade.
        If anything, that proves this bubble is much bigger than last time. To me this is the mother of all bubbles. When it pops prices will easily crash by 50-70%.

      • To follow up Millenial’s post,

        Prices grew much faster in the current cycle than they did in the previous one. Very doubtful that this could have happen if much of these transactions were trully all cash.

    • https://mhanson.com/9-4-hanson-house-bubble-1-0-vs-now-never-different-time/

      Bottom line: This great working paper on what really blew Housing Bubble 1.0 debunks the popular narrative blaming ‘a bunch of low-quality subprime borrowers and loans, and ACORN’. This conclusion is especially troubling to overly-long end-users, speculators, and institutions leaning on the “weak subprime loans blew Bubble 1.0, they are gone, so it’s different this time” rationalization, as a foundation for their investment.

      • Yep. Sky high prices growing exponentially higher than what traditional incomes can support lead to bubbles and their inevitable popping. The ideal circumstances for such event are alive and well today as they were a decade ago.

    • I made most of my money in RE. Long term, I am the biggest RE bull due to the regressive taxation we call inflation. However, I made my money by always going against the heard. It is simple like that – buy when everyone wants to sell, and sell when everyone want to buy. I did not make my money in SoCal. If I would have stayed there, I would still be poor and a slave to the bank; slaves never get rich.

      My strategy ALWAYS work and I mean ALWAYS and EVERYWHERE for EVERYONE. It can be stocks or RE. I made my wealth in RE, but ask Buffet who made his wealth in stock – he employed the same strategy. To use his words – “buy when it is blood in the streets”. Emotional people call them vultures. Logical people call them level headed who have a common sense approach to investing.

      The foreigners don’t eliminate the market forces; they just make the increase and decrease bigger – the sinusoid curve has bigger fluctuations. That is all there is to it. Those are markets where you invest for appreciation/speculation. They are not good for ROI/cash flow.

      • I agree. Being in southern California, I know that if we don’t leave here, we’ll end up poor as slaves. Taxes will keep going higher and higher and the middle class is disappearing, as the doctor says. Why would we stay here and slave away.

        I don’t believe investing in stocks is any good, so we want to invest in RE. Investing in stocks is like gambling when the house knows your cards and has control over so much more than you do. I never understood why people put their hard-earned money in 401k. Do people really think the vultures on Wall St. are gonna make sure you are taken care of during your retirement?

  • I predict that a Northridge-style earthquake might be the “black swan” that pops the SoCal real estate bubble…
    And watch the social unrest that will accompany such an event as the demographics and social support expectations are way different now than they were 23 years ago…

    • @ Jose – have earthquakes in LA or catastrophic gas leaks in Porter Ranch made much of a difference in home prices? Not in the long run.

  • I think most people in this country have little or no savings. I have relatives living in other parts of the country that own moderately priced homes in relation to their income and can’t save a dime. It’s definitely harder here but not impossible. Most people don’t want to do what it takes.

    I keep a large liquid emergency fund that I watch eroding every year due to inflation. However, I couldn’t sleep at night without it. It’s amazing though how many new cars are sold (leased) each year. Excuse me while I go wash my $2K beater.

    • It always amazes me when I visit any place outside of Southern California, or the SF Bay Area too. Most people elsewhere just don’t drive new cars and don’t care. I was enjoying my old yet extremely clean beater until I got T-boned by a distracted driver, and I decided to rent (lease) a Honda this time around. It’s just a hair over $200 a month including tax, and I’m very happy because I don’t have to worry about repairs or maintenance as it’s all covered, however when thinking of what I’m paying over the duration of the lease I realized I could get a nice reliable beater for much less. When the lease is up, I’m most likely going the $2500 beater route, maybe an old BMW with a manual transmission.

      Earlier in the summer I have been tracking a few news sites and blogs reporting about automobile loans and how outstanding balances are at record highs, however delinquencies are also on the rise, signaling a possible car bubble. I even read somewhere that the average new car price is around $35K which blows my mind. All fueled by debt of course. There are some links to those articles here – https://www.daydreameconomics.com/2017/07/11/average-fico-score-hits-record/

      • When every other commercial on the radio is “Come get a brand new car, even if you went through a repo yesterday!” then you know there is a car bubble.

        I wonder if there will be another “Cash for Clunkers” program this time around.

      • There is a car bubble happening right now. I want to take advantage of all the repo cars by getting some capitol together and reselling these cars. I think you could make some decent returns especially with how bad these loans are and how quickly they are losing their value.

  • Houses still selling fast and at double what they sold for in 2011, in my neck of the woods – Sacramento suburbs. The fools buying them can’t afford to fix anything and they are turning to slums within a few months. A workmate just bought a tiny brand new house, 1 hour north east of Sacramento for half a million. He said he thinks prices will continue to rise and if he doesn’t buy now, he’ll be priced out. He’s an average income earner. These people are nuts.

    • Considering the weather patterns in the San Joaquin Valley it will be rather expensive to keep running your air conditioning. Also what if the power were to go out on a hot day? How would that look to someone thinking of avoiding high prices. On the central coast I hear from hotels that they get a lot of people from Sacramento and other inland cities getting out of the heat. This does not bode well in the long run. More uses consuming energy at peak times with longer than normal periods of high temperatures could mean serious infrastructure problems down the road.

    • I live in sac too. I think there are still good bargains to be had by people from the bay area who sell their overpriced homes and buy less overpriced homes here. Once the prices start to even out here then the market will stall until inventory increases and salaries catches up. The next housing bust wont be seen until after it starts just like all the other ones except this one will start with a slumping economy. Once job losses start and companies tighten up people wont be able to afford normal fixed loans due to their higher costs and less income. As people panic to unload these homes it will force a drop in prices. It wont be as dramatic as 2008 but it will be similar to 2000.

      • Seen it all before Bob

        They are also buying “less” overpriced homes in Denver and elsewhere. When you sell your CA home for millions, the rest of the US looks extremely cheap. That is causing angst in Denver but this angst historically oscillates between Californians now and Texans during oil booms. As a word of warning, we sold our CA home in 1994 and could have purchased it back in 2010 for the same price. Boom/Bust/Boom/(when is the next Bust?)

  • I wonder if the millions who were hit hardest by Harvey and Irma wouldn’t give anything to be here in earthquake territory. I have to believe somehow the prices of land and homes will be even higher, bringing in refugees, rich and poor, to sunny California. How many million/billionaires in Miami will simply call it quits, and move here? So the question is, will these natural disasters have any affect at all on home prices here?

    • Where are the converted Texans who were asking us to come join them?

    • son of a landlord

      Billionaires with homes in Miami likely already have second homes in Los Angeles — and additional homes in New York and London, and maybe in Tokyo, Sydney, Vancouver and San Francisco too.

      • okay so there is tons and tons of supply if these people just sell half their holdings…..and I bet they are boomers…….maybe the boomers can live forever.

    • This is just panic thinking. Since prices have moved up so much, we know they should come down, but find it hard to believe the momentum can switch. Any rational we can use to say they won’t we hold onto for FOMO. Agreed lower supply around the nation, the people have to go somewhere. But I think there are plenty of places much closer to Florida, with more affordable prices than coming all the way to expensive as heck Cali. But I share your frustrations. I believed prices would tank years ago. I still know it in my heart that they will, its just taking longer to play out than anticipated.

    • Incorrect. I lived in Florida and went through Hurricane Andrew and others.ANY HOUSE built correctly had no problem I lived in such an apt complex and worked in a resort built to withstand such Cat 5 hurricanes. You had some fallen branches and maybe, MAYBE, a shingle or two, but only in those horrible homes not upgraded did you find any damage.

      Millionaires in Miami and other places aren’t living in those kind of homes. They won’t be leaving any time soon.

  • Bright Lights Big City

    “My view on this is that this is being accelerated by technology. People all want the same things across all areas: Amazon Prime, Netflix, Gyms, Whole Foods, Uber, etc. So what happens is that lifestyle choices are more standardized across cities because of technology so people push real estate values up in similar herd like trends.”

    Interesting. In the 90’s everyone wanted a Barnes and Nobles, a GAP, a Z Gallery, and an Italian restaurant.

    Either way… if this is popping up in more communities, and the middle class are disappearing, why are the well-to-do packed so thickly? If there are more cities providing the desires of wealthy …. why doesn’t the fact of wealthy people spreading out leave room for others?

    Are there more wealthy than before? So many more wealthy people that the cities are clogged with them? Help me understand. I know there are the Chinese nationals, and there are more techie millionaires, and a bunch of kids who grew up in Scottsdale and Mission Viejo….. plus the people who bought a long time ago and their kids.

    So everywhere, in every city, we are drowning in wealth? In Los Angeles, the sprawling metropolis that until a couple years ago everyone loved to hate, how have so many rich people in so many cities, in so many countries, suddenly EMERGED?

    Genuinely Curious

    • Wealth disparity and the destruction of the middle class. You also have insane concentration of industries. Silicon Valley is doing pretty well but other major American industries are dead. And even within tech, it is really just a few huge players that eat up all the rest.

  • So we looked at the stats of our desired neighborhood with our realtor. I believe average (or was it median?) price for a SFH was $725,000. Average downpayment was 7%! On the one hand, it was weirdly validating and reassuring to know that yes, homes are so overvalued that so many “regular people” cannot put down 20%. And yet, we were horrified that SO MANY PEOPLE are putting down so little on such an expensive house. What in the world does this mean for the future?

    We toured a middle class neighborhood where homes are touted as “starter” and priced between $650-$750k. Every third house was run down with rickety fences and dead, weedy lawns. The neighborhood seemed to be retirees who bought in the 80s and their adult children (and grandchildren) who cannot afford to buy their own property. Then you’d see a recent, beautiful flip sold at a huge markup to families like mine.

    • Meri,

      the mentality is just buy and if the price/value falls just walk away.

      AND when the next 2009 style crash arrives you very well might be able to live in that home for 4 years and not make a payment. I’m not like that but I know many who are AND ARE DOING IT.

  • Seems like the plan that is being geared up here…

    First: You inflate properties to make it difficult for Joe 6 Pack to buy a house.
    Second: Joe 6 Pack then is $%@!# about the price of rent going up while he is confined to his Gig jobs.
    Third: Prices start to stumble. However, Joe 6 Pack’s Gig jobs start to dry up as well.
    Fourth: Prices continue to decline and have flatten to a point where Joe 6 Pack could actually leave rental Armageddon.
    Fifth: Joe 6 Pack realizes his Gig jobs are not likely enough to get him out of Armageddon while it appears now he is in a recession again.
    Sixth: Joe 6 pack is clearly stuck in rental Armageddon as homes are now being bought up by new investors again.
    Seventh: The cycle starts over.

    • Exactly

      Joe 6 Pack, the average dude gets slaughtered in downturns in the cycle.

      Investors pay all cash at auction bargain basement prices.

      More landlords… more renters…

      Rinse and repeat

      • Yeah your right, but you make it sound like a bad thing.
        Remember, someday Jim Taylor is going to be right, make sure that you are ready.

  • Housing, healthcare, and taxes. Those embody the inflation that the FED cannot find.

  • Don’t worry CA, cuz here comes the bullet train….

    https://ibb.co/nBJ5KF

  • According to this website:

    https://www.gobankingrates.com/saving-money/americans-savings-state/

    the states with the worst zero savings percentage are Louisiana and Mississippi (48%). The best states are Vermont, New Hampshire and North Dakota, all 20% or less. Alabama is at 25% (so much for pinning it on the deep South!). California is in the middle of the pack. Cheddar Man is right that it is all over, not just in high cost states.

    Any way, if there is a shortage of housing for sale, it doesn’t matter if most people can’t afford it. It just means that those who can afford it (who are still pretty numerous, say 5 or 6 million plus foreigners and out of state interests) can fight it out over the limited number of units for sale.

  • I was talking to a realtor last week (I should say arguing with) who said, “I know things are pretty high, but there are still great deals to be had out there.” I begged to differ. Even a former meth lab shack with bars on the windows is grossly overvalued in this environment.

    She then went on to say (after I brought up 2008 of course) that it’s not going to happen again because that was a banking crisis and the mortgage market isn’t as screwed up. Even if that was the case, in 2008 you were playing with the bank’s money and could just leave the keys in the door, take a hit on your credit record, and move on. Today, yes, a lot of people are putting big money down. That only means that you’re going to lose your own skin before the bank takes a hit.

    At the end of the day, if the big banks take enough of a loss, they get a bailout. You don’t. But let’s not forget that the entire asset market is overvalued. Stocks, bonds, real estate, etc. It’s one last juiced up mega-bubble. When it pops the baby boomers pull a Jonestown at the Mexican restaurant and lace each other’s margaritas with cyanide.

    RE should track income levels over the long term. If 40-50% of your income goes to your crappy little roof, and this is average for your area, it’s going to crash. Period. No one likes the 1/3 rule. It’s no fun. You may have to live on the wrong side of Stabba Anna.

    • “She then went on to say (after I brought up 2008 of course) that it’s not going to happen again ”

      I agree with her. 2008 it is not going to happen again. 2008 was just the walk in the park, warm up time for what it is to come. This is the mother of all bubbles and the FED is out of amo. That 1% raised over a decade is not going to offer too much stimulus.

  • Once again, arrogance reigns supreme among those on this website who simply dig up all and any rationale to justify their support for real estate prices, who think real estate is everything, and who are convinced that ‘this time is different’ … that coastal real estate will never tank! You can’t possibly know what will happen! There is only one sure winner … the one who takes advantage of this craziness, sells, pockets a handsome profit, and walks away!

    • You just described me. I always act like that when the market reaches peak “crazy” like today. It is just common sense to act like that. Sell when everyone wants to buy – that is how you make the money. The fool and his money are soon separated.

    • “There is only one sure winner … the one who takes advantage of this craziness, sells, pockets a handsome profit, and walks away!”

      I sell and walk away. Where do I go then? Cheap ghetto rental, move to flyover country? Timing the market is impossible. You would literally need the stars to line up for this to work in your favor if you live in any desirable part of socal.

      • Timing the RE market is very easy. Timing the stock market is harder. The stock market can move like a fighter jet. The RE market moves like a cruise ship. Its very clear the top has been reached for RE. From now on it can only go down. Wait and see or buy now and be screwed.

  • Here in our little corner of the world, homes are selling fast. But we are also noticing multiple age groups living under the same roof. Grand-parents social security checks combined with parents minimum wage paychecks will qualify for the purchase of a home for the ” new ” first time homebuyers. These are the folks who gave their homes back to the bank seven or more years ago. Now their credit is clean and they qualify for the subsidized home loans for low income families , but they can’t afford to maintain the homes and landscaping , and then they lease a new car because leasing is cheaper than purchasing.( My 18 year old vehicle is still running good ) Mommy and daddy working , latch-key kids roaming the streets , visiting guests sleeping in the garage and curbside parking is at a premium.
    As a landlord , it is becoming increasingly more difficult to maintain my properties because the tenants ( God love-em because they usually pay the rent on time ) need me to glance away at times and overlook some small violations of our rental agreements. But once that grass grows to 6 inches tall , they will get a telephone call from me to maintain the landscaping or I will hire a gardener and bill them for the work. If we have an open line of communication , we can work together , but if they continue to duck me , I will give them ” the look “. As in life and politics , compromise can make our lives go a little easier.

    • Fyi:. 3yrs post foreclosure you can buy with fha
      2yrs for a VA loan
      7 yrs conventional (shorter with certain caviots)

    • re: leasing

      You can get some incredibly cheap leases out there. Of course the dullard you’re talking about don’t do that. But if you do some homework you’d be surprised. There are some cars going for under $100/mo for 3 year leases.

      But I digress….

      Yeah I totally agree, you have to have good communication with tenants. But the best way to avoid problems is to screen, screen, screen and then screen some more. Good quality tenants tend to be problem free tenants.

  • I’ve been hearing this forever, how nobody in America saves any money and we’re all going to live on cat food (which is actually not that cheap) after retirement. Just like how global warming was supposed to put Florida under water by 2010 or whatever. The MSM makes its money off scaring people. You’ll die from heat! You’ll be starving and homeless when you retire! Everything around you might kill you! Cops will shoot you on the street for no reason whatsoever! Trump is about to start WW3! See a pattern?

    • Seen it all before Bob

      Except they were correct about the Silent Spring/DDT thing(the birds have come back), the river burning in Cleveland helped fix some major problems, and the smog in LA is much better now compared to the 70’s…….

      My big worry is the removal of private pensions. There are many more people who will be dependent on SS in the next decade. Without it, they will not be eating expensive cat food, but they will be living in tents on the White House lawn eating Soylent Green.

    • Seen it all before Bob

      Oops, hit return too soon.

      Don’t forget the sardine industry in Monterey.

      In the 70’s and early 80’s I could walk up a S. Ca beach and find starfish and sea urchins in most tide pools. I haven’t seen one since then.

      The abalone are also gone.

      Too many people with too much impact.

      • “Too many people with too much impact.”

        But, but, but…isn’t that the immigration policy of the democrats and RINOs????!!!!…allowing, encouraging as many illegals to come here???? Aren’t Trump and Session the mean/fascists/bigots for trying to implement the laws passed by Congress before they came on board????

        Yes, but the coastal elites surely benefit from the slave labor – the more slaves, the bigger the plantation. Who cares that the plantation gets ruined by too many people and the middle class gets decimated in this race to the bottom. What matters is to embrace all the millions of illegals, pay for their school, food and health and the elites to have cheap gardeners; after all it is the middle class paying for them directly or indirectly. But who cares about the deplorables?!!!…

      • I really have no idea what yuo’re talking about. Sardines? WTF?

      • Seen it all before Bob

        Hah! Landlord, You must be one of those young inexperienced newbie people to not know about the sardine economic and environmental disaster in Monterey.

        The MSM was really good about predicting these in the 70’s and we did something about it to avoid catastrophe ( The Monterey catastrophe happened in the 60;s_)
        The MSM is warning now but even after 2 major hurricanes, Trump has buried his head in the sand at Mar Lago.

        From another perspective, God is punishing us for voting in Trump after 8 years of no major disasters under Obama. After 2 major disasters like this, I am puzzled by the silence of people like Pat Robertson.

        You decide, if you believe in God, or you believe in science, the evidence is there on Global Warming

        I see steady environmental degradation on the S. CA coast compared to what I saw in the 70’s. That was my point.

        My main point regarding housing is that:

        1) Private Pensions are mostly non-existent now. That will affect housing in the next decade.
        2) Public pensions are seriously underfunded. What will happen in the next decade?
        3) Trump and the Repugnicants are constantly trying to kill SS.

        What is left for the retirees in 10 years given that they have no savings?

        It will be a wild ride.

      • Seen it all before Bob

        And Flyover, the people benefiting from cheap illegal gardeners, childcare, butlers, drywallers, framers, etc are not paying enough for these illegals. They are the top 5%.

        Watch closely. Trump relies on these people to build his empire. He won;t deport them as promised BUT will shift more of the burden for paying for them onto the middle class and cut taxes for himself and claim a victory on cutting taxes. Smoke and mirrors. Watch. Victory! I cut taxes!

      • Seen it all before B.,

        If your democrats are any better, why didn’t Hilary campaign to do something legal for once and deport all the illegals based on the existing laws? Why? Because she was even more full of illegalities than the illegals. At least Trump said the right thing, that laws are meant to be implemented or we are a banana republic.

        The fact is that both democrats and republicans are two sides of the same coin serving the globalists bankers. However, you are stuck in the democrat mode.

      • Seen this all before, Bob

        Flyover, I voted for Bernie, since he was the most honest of all of them.

      • Irony: people who treat global warming as a religion bashing people who believe in God.

        For the record, I believe in neither. Well at least no the man made part. The earth has been warming and cooling for 4 billion years. But somehow my SUV is causing it to happen in 2017. Sure, why not?

      • Seen it all before Bob,

        Bernie is always concerned with how equal the slice of the pie is till there is nothing to slice (no more pie) and everyone is equal poor.

        Bernie is a communist/collectivist/big government supporter (totalitarian). He is just a puppet for the globalists. The DNC is as crooked as RNC. DNC slapped the hands of Bernie or he would have been the nominee based on popular vote instead of Hilary. RNC
        (RINOs) slaps the hands of Trump everyday, because they are not there to represent the electorate. They represent the same globalists like DNC (Bernie).

        Trump is there to represent himself, I agree with that. However, being attacked everyday from both the left and the right he helps with the gridlock. The less the politicians do, the more the average guy has room to breath.

      • Seen it all before Bob

        Mr Landlord, though Pat Robertson has been unusually silent these days, I feel safe to comment for him. God has just punished Trump and 2 major Republican States with major hurricanes. Huh, no major hurricanes under the Obama Presidency. Or maybe it is just Global Warming

        Flyover, Bernie was forced out by the Globalists during the DNC. Trump was allowed under the RNC. Case closed.
        Bernie was close to FDR. The next election will elect an FDR candidate.
        That is if we are lucky. Otherwise, with tent cities, it may be more extreme. That is my fear.

      • Trump was attacked from day one by MSM, owned 90% by 6 individuals, all globalists. Obama and Hillary were their darlings. They were sure that based on their propaganda she will win. Trump is attacked even today, viciously. Obama did not experiment not even 1% of the attack from MSM vs. Trump. Obama was a Wall Street puppet and he was rewarded by Wall Street handsomely. RNC always opposed Trump and they still oppose him. Trump, unlike any other candidate was not PC, represented himself and told the people what they wanted to hear. The other candidates had to say what RNC approved and they had zero chance against Trump. What, you think that the globalist shill Jeb Bush had a chance against Trump? He could have spent 100 times what Trump spent and he would not have gotten 1% of Trump votes.

        I agree that the next candidate will be a populist based on the social mood. I just don’t know if it is going to be a populist from D or R. Congress is opposing Trump at every turn. If he is not doing anything of what he said he will do, I agree that he is toast. If he is doing at least 25% of what he said he will do, he will win the second term.

        We both agree, that a populist will win. Remain to be seen which one. It is too early to say. Trump performance so far is poor and he alienated most of his base. If DNC would not have been as crooked as they come, Bernie would have won the nomination because he is a populist and he would have won against Trump for sure. Hillary had no chance against Trump. DNC was blinded by their own propaganda and did not feel the social mood. The only guilty person for Hillary loss was Hillary.

  • Check this one. Home is purchased for 1.6M. It closes, then instantly resold for 1.8M. Not a single bit of work was done to this fixer. And, at 1.8M, it had multiple offers. This is a high airport noise location … so not the best.

    https://www.redfin.com/CA/Newport-Beach/1227-Sussex-Ln-92660/home/4584864

    • They even used the same pictures LOL.

    • @ JT something doesnt seem right. The commission paid to the broker on a $1.8M sale is about $100K…. someone flipped hoping for a tiny profit?

      • Realtor bought it, and is reselling it. So, the profit after commission is around 150K

      • Buyers remorse?

      • Dont assume all listing agents get the listing at 6%. Often times it can be 4-5%.

        Also; many flippers are agents; so they only pay 2-2.5% out to the buyers agent.

      • a realtor maybe deserves 0.3 – 0.4 percent commission. Especially in a totally overpriced environment like California. You are better off negotiating for yourself. A realtor always pretends to negotiate but in reality he tries to screw you big time to get more money. Realtards are the lowest of the low.

      • @Millenial “A realtor always pretends to negotiate but in reality he tries to screw you big time to get more money. Realtards are the lowest of the low.”

        As a realtard myself, the lowest of the low, I typically find that people that make statements like this fall into one or more of a few categories:
        1. If they’ve purchased a home before, they chose unwisely and rather than realizing their own mistake its easier for them to place the blame elsewhere. Their realtard is a likely candidate.
        2. If they’ve never purchased a home before, then they simply have no clue what they are talking about. Sitting down with an actual realtard and having a “discussion” rather than basing their views on anecdotal information found on the internet is a good start.
        3. I start every interaction with people expecting to trust them. If they immediately question my integrity or trustworthiness, then that is a red flag to me because I have learned over the years that they are projecting their own character as to how they handle their affairs. I don’t want any client that feels that they cannot trust me because that ultimately means that I cannot trust them. PS: That one little tidbit of information is a life lesson, learn it.

        I do not work in the CA market, thankfully. Where I live and work, homes are a normal 250ish median. Let’s say you represent a buyer for a 250k house, maybe the buy side commission is 3%, that’s 7500k which you split with your firm. Is that enough to compensate you for the last 1000 miles you’ve driven for your client and God knows how many hours you worked evenings and weekends missing time with your own family to show your client that perfect home that just came on the market and that you know is going to have 20 offers before you even get there? Yeah, lowest of the low, Mr. Millenial.

        Then after all those weeks/months/maybe even years of work with one client and you finally get paid after splitting with your firm, think of all the money that’s left over after you pay for your state licensing fees, your required training, your MLS dues, your realtor association dues, your gas, your taxes and your government mandated unaffordable healthcare. Oh and we didn’t even get into marketing costs. Yeah, realtards are the lowest of the low Mr. Millenial.

        Good luck with your home purchase whenever that may be. And if you choose to use a realtard, God bless him/her because I’m sure you’ll be a pleasure to work with.

    • This is a fantastic way to launder money. Buy a house, sell it right away for $200K more. Presto, you just make $200K “clean” profit. I’d bet that if you did some digging you’d find a relationship between the buyer and seller.

  • you all come on over to Kerrville, where the prices are reasonable and we have a slower pace. We even have Kinky here. It is 84 degrees here now in the hill country, wind over 10mph so it is comfortable. BBQ this weekend, regular place.

  • Here’s how it played out last time. If you’re of the opinion that a nation’s wealth should be predicated on what it actually produces its’ not hard to deduce that the US (outside of weapons manufacturing and sales) offers little value to the outside world. Thank God for the US dollar’s preeminence as the premier reserve currency and prime petro exchange vehicle. I guess looking at this from this perspective real estate is virtually our only “product”. And everyone on the inside knows it. That’s why prices cannot be allowed to fall. But, as history has shown repeatedly, it’s just an illusion.
    https://qz.com/1064061/house-flippers-triggered-the-us-housing-market-crash-not-poor-subprime-borrowers-a-new-study-shows/

  • If the housing market tanks bigly before the next election, I’m betting he prezzer will pull out stops that make the last bailouts look like nothing.

    • Yes, but the bailouts, like always, will be for the cronies at the top of the financial sector (TBTF), the 0.0001% who pay for the political campaign, not for the Joe six pack. Head, they win, tail you lose – don’t you love this casino game?!!!… The more you play, the more you lose. If you don’t have a very strong financial defense, don’t cry in the soon coming reset. Don’t count on Trump or any of the politicians to have your back – defend yourself. Learn the rule of this game and practice self defense.

      • Nah, that’s just typical American pessimism keeping you from seeing the forest. It could be argued that the last bailouts benefitted many Joe Sixpacks. Regardless, if he wants to get re-elected there will have to be direct benefits, unless the reckoning comes after the election which would mean three more years of waiting at least. And this has nothing to do with expecting him to have our backs, it’s about expecting him to have his own.

      • And by the way, lib states like California will not be at the forefront of his plan. It’s delicious!

      • Besides allowing them to live mortgage free for many years without fear of eviction, how did the organic buyer benefit from the bailouts? Many who took advantage of government loan modifications fell behind in their payments again.

      • I have no idea how many people never got caught back up, but imagine there were some who did and some who are still in their home today thanks to the bailouts. Whatever the case may be, that doesn’t mean the next bailout will end up with the exact same results.

      • “Nearly 70 percent of the homeowners who applied for the [TARP] program were rejected, according to government data.”
        https://www.washingtonpost.com/news/business/wp/2016/12/30/after-helping-a-fraction-of-homeowners-expected-obamas-foreclosure-prevention-program-is-finally-ending/?utm_term=.01643caf076f

        Even one of its authors, former Secretary of Treasury Geithner, admitted that the government programs were meant to foam the runway for lenders rather than to help troubled homeowners. The programs allowed mortgages to be refinanced at a lower rate. However, only principal reductions could truly make a real difference. But that would have meant that lenders would have to write down the value of their loans — the powers to be certainly wouldn’t have liked that.

      • Okay, so to repeat, whatever the case may be, that doesn’t mean the next bailout will end up with the exact same results.

  • https://www.washingtonpost.com/news/business/wp/2017/09/12/u-s-median-income-hit-59039-in-2016-the-highest-ever-reported-by-census-bureau/?utm_term=.ec89cfc0b56e

    And this coming from the Wsh post no less!

    Thoughts?

    Median household income in America was $59,039 last year, surpassing the previous high of $58,655 set in 1999, the Census Bureau said. The figure is adjusted for inflation and is one of the most closely watched indicators of how the middle class is faring financially, as the Census surveys nearly 100,000 homes.

    The Census said the uptick in earnings occurred because so many people found full-time jobs — or better-paying jobs — last year.

    • And it only took 18 years to go up less than 1K. Imagine that. This will pay for a year’s worth of cat food, and tacos on Tuesday nights, but irrelevant when talking about real estate in Socal.

      • I wish the doom and gloom types like Jed would take 2 seconds to analyze data.

        1990-1999 the change was from $40K to $46K, in nominal terms. That is an increase of 15% in 9 years.

        Between 1999 and 2016 it went from $46K to $59K, an increase of 28% in 17 years,.

        So the rate of increase in the 90s was just slightly higher than the rate of increase in the 2000s and the first half of the 2010s.

        And compare the 90s to post 2000. The 90s were the peace decade, after the USSR blew up. We won the cold war and we had a 10 year peace dividend so to speak. Then 9/11 happened and all hell broke loose. And still, even with that, we still managed to grow incomes by 28% in the next decade and a half. All things considered, that’s not too bad.

    • it’s bullshit. The top 5% of earners so skews the data as to render it meaningless.

      50% of US jobs pay less than $31,000 a year. Also, is this all “earned income” or incomes from all sources?

      • Good observation!

        Even for the top 5%, the data is heavily skewed by the 1%, and in turn the data for the 1% is just masking how bad the data is skewed by the 0.0001%. It is a very small club, and we are not in it.

        And, yes, most of the income increase is from capital gains because of bubbles produced by the FED. We’ll see how those incomes will behave in the next tightening of the cycle.

      • “it’s bullshit. The top 5% of earners so skews the data as to render it meaningless.”

        LOL. Before you make such a stupid comment, learn what the world ***MEDIAN*** means.

        Median is the 1/2 way point. Which means 1/2 make more than the median, 1/2 make less. What you’re thinking of is the average. Which is why nobody talks about average income.

      • apolitical scientist

        How exactly does the top 5% skew the MEDIAN? The discrepancy between the average salary and household income looks to me like the effect of multiple earners per household rather than any distorting effect of wealthy outliers.

      • Seen it all before Bob

        “Interesting” you may be correct per job, but the article is for household income which may mean 2 jobs. It is a median, so truly half thee households in the US make more and half make less than the 59K number.

        1/3 of 59K for a house payment means $1640/month PITI would be the recommended amount.

        This would be about a 300K loan and a 375K house.

        Half can afford a condo in LA, if that…..

      • ““Interesting” you may be correct per job, but the article is for household income which may mean 2 jobs.”

        Not really. About 40% of households are either single people or single parents. Of the other 60%, about 1/3 of those have 1 parent (usually the mom) that does not work.

      • Mr, Landlord,

        facepalm…..I know what fucking median means dude, maybe you should think about what “household” means as well……why would you think that means 2 people??………LOL, and it’s less than 60 fucking thousand dollars…..and that for one person is shit fucking money in 2017

        you mentioned something about stupid?

      • https://wolfstreet.com/2017/09/14/so-exactly-which-households-got-the-spoils/

        We already found buried in it that inflation-adjusted earnings from wages, salaries, etc. for full-time employed men have fallen 4.4% since 1973.

        Thankfully, the Census Bureau did not provide data on the top 1% or the top 0.1%. It would have made that chart look absurd.

      • Seen this all before, Bob

        My question is who is buying these houses? I am not a RE Agent but the last 2 people I know who told their close-to-a-million dollar houses sold them to:

        1) A couple where one was a MD and the other a professor at a UC. I can understand that. 2 PHds should be able to afford a house.
        2) The other was a Chinese National who paid cash for a house for his son going to a UC. I can understand that too.

        Are there any RE Agents here who can reveal generally who else are buying these million dollar houses?

    • yep, just like people before me stated, the WaPo article is just BS.

  • Unfortunately, the reason why so many Californians are living on the edge is because they didn’t buy property when they could have over the past 20 years.

    I finally sold my rental property this year to de-risk. Feels great, but I know prices will likely continue to go up.

    Sam

    • Huh, Californians are living on the edge in great part because the economy sucks. How many 20 year olds had the misfortune of not having been born at the right time?

      What de-risk if prices can only go up?

      • Listen, I am well into my 40s, retired, and have amassed a small fortune in real estate. However, I would throw that away if I could drop twenty years from my age. How in the world can someone in their 20s complain about someone in their 40s having millions in equity? How dumb are you? Be glad you are in your 20s. That is as good as it gets. You are better off being in your 20s and bankrupt than being 40s and wealthy. Figure it out.

      • Were you posting drunk or was my post simply way over your head as usual? The OP suggested that it’s Californians’ fault they didn’t buy property over the past 20 years. How does anybody blame a 20 year for either not born at the right time or with the right family connections?

        I don’t mind anybody making a fortune at all. It’s the self-serving belief that they did it all by themselves regardless of their contemporary circumstances (i.e. being there at the right time and place) that I find deplorable.

        Now go back to hawking real estate investment seminars.

      • It is interesting that jt offers you the choice of two extremes when I think what you’re asking for is a reasoned middle ground, no?

      • Why de-risk? Because life happens. You get older, have a family, want to simplify life, and have enough passive income elsewhere that requires no maintenance. Besides, someone paid 30X annual gross rent for my home. I’ll take it.

        The wealth gap is widening b/c of asset price growth (stocks, real estate, private equity, and bonds). You are either investing or you’re spending. Got to find a way to ride the inflation wave or else your kids will really hate you.

        Sam

    • What’s the risk if you’re convinced there likely isn’t any?

      • During the up stage of manias, losing out on further potential gains is a powerful sentiment. Greed drives many to take on larger risks and buy at sky high prices. Bubbles pop when the last buyer has been sucked in.

  • Americans are broke. Deep in debt
    http://www.zerohedge.com/news/2017-09-11/2q-credit-card-debt-soars-back-2008-highs-delinquencies-start-tick-higher

    Credit card debt is back to 2008 levels. We almost reached 1trillion of cc debt. We probably make the goal next month.

    • And as usual ZH forgets about this little thing called inflation and population growth. Adjusted for both we are nowhere near 2008 numbers.

      2008 population was 304M.
      2017 population is 326M

      $990B in 2008 = $1.15T in 2017 dollars

      So in 2008 it was $1.15T/304M = $3782 per person in 2017 dollars
      2017 it’s $990b / 326M = $3036 per person in 2017 dollars

      Like I said, nothing close to 2008 levels.But why let analysis get in the way of a tinfoil hate story from ZeroHedge?

    • As usual ZH ignores population growth and inflation. Take both into account and the cc debt per capita is 20% less today than in 2008.

  • How about those traffic congestion inducing road diets in L.A. and homeless tent cities along the Santa Ana riverbed? Surely it must be increasing the desirability factor.

    • “How about those traffic congestion inducing road diets in L.A. and homeless tent cities along the Santa Ana riverbed? Surely it must be increasing the desirability factor.”

      That is what we refer to in LA as culture and diversity.

      Just wait till the 2028 LA Olympics. It will be like traffic armageddon. How will the powers that be hide all the homeless people during the Olympics? Surely they don’t want the world to see the shameful reality that is life in Los Angeles. Need to keep up the facade that it’s all palm trees, beaches, BMW’s, tans, and boob jobs. FUNNER CALIFORNIA does not include homeless encampments.

  • I was having a conversation with a bidness acquaintance of mine. He lives in San Diego. So I asked him about the insane cost of living there and if he ever thinks of leaving. He said yeah it’s definitely insane and I could live in a mansion in the midwest vs a shack by the beach I have now. But I’m never leaving the sunshine and ocean.

    Obviously this is just one guy’s opinion. But he’s not alone in that thinking. Which is why, I don’t see SoCal r/e ever being cheap. It may becomes cheapER at some point when the next downturn happens. But anyone expecting a $200K home in La Jolla is delusional.

    • Aside from a tiny minority of exceptions, no one else is thinking that it’s going to be cheap to the extent some of you keep going on about over and over. I don’t get the point in repeating an answer to what’s already vastly well known and widely accepted. The question is about value which is far more complex and difficult to ascertain.

  • Another indicator we’re at the top is the rats fleeing the sinking ship: Landlords liquidating rental properties. Cashing out. I know every rental around my zip code and over half have sold in the past three months, or are currently on the market.

    Rentals are already insanely priced in terms of rent, and scarce (except for apartments). Now the rental supply is dwindling. Wow a double whammy.

  • Living on the edge! in light of ‘Irma’ and ‘Harvey’, just how many of the people in those natural disasters basically are reduced to the ‘clothes on their backs’? No savings, no flood insurance, no insurance at all for many renters, no car, no money, nothing! In California, just how many would be relegated to the exact same fate when the big quake finally hits? Kind of puts the whole ‘can’t afford a home or rent’ in perspective … some of your will wake up day and in a few minutes, have it all taken away with one big shake!

  • http://www.mercurynews.com/2017/09/14/tip-of-the-iceberg-more-on-the-sunnyvale-house-that-sold-for-782000-over-asking-and-what-it-all-means/

    As per the above article….this market continues to amaze! I personally find it depressing since there is clearly a disconnect between house prices and middle to upper middle class salaries in these key areas.

  • geez, 97Mio Americans are living paycheck to paycheck….

    http://www.zerohedge.com/news/2017-09-13/97-million-american-workers-are-living-paycheck-paycheck

    Housing to tank hard!

    • No shortage of eternal renters in this country. This works out pretty good for people like me. Do your self a favor, stay out of the 97M number.

    • Who needs savings? Uncle “Sugar” Sam will take care of you.

    • Landlords are only as solvent as their tenants…all indicators show extreme financial weakness for the middle class..durning this next downturn the definition of success inside of real-estate investing will be rewritten-

  • Trump doesn’t have to deport illegal immigrants. Just cut down in legal immigration from 1 million to 500,000. E-verify laws will go into effect more in California if the dreamers are legalized as a bargain chip. Thousands are leaving Ca for other states and with less legal immigration Ca will lose thousands of people and dropped down to 37 million. Guess whose housing will increase the most in the next decade, Texas. mainly because of Harvey IN Houston goes from cheap housing to 300,000 while Austin hits the 450,000 Mark. Le and OC will dropped to 550,000 or maybe as low as 450,000 by 2027. CA has low birth rates and with less people coming in as relatives are not able to get immigrants in will lose population while Texas and Florida housing will soar because of lots of population growth from other states and in the case of Texas more babies being born as well.

    • Cynthia,

      I do believe that trump will legalize the dreamers in exchange for tax reform.

      Cutting legal immigration to 500k and removing family based would help a LOT.

      Not only in reducing demand but also getting rid of the unfair advantage immigrants have in child care. Every immigrant family I know has a relative staying at home being paid peanuts to take care of their children. This lets the parents focus 100% on work and also lets them have long commutes which are disastrous for the environment, safety, and traffic congestion.

      • Maybe this was Trump’s plan all along…to get the libs so worked up over illegal immigration that they give in to his tax code change ideas so they can claim triumph over evil.

  • was just passing through North Dakota and failed to seem like home, then i realized why- not a homeless person to be seen,no tent cities, was kind of refreshing to see a place with jobs,not moving there just passing through

  • The good doctor and others here:

    Your take on the middle class is spot on. Basically, everyone wants to live near the coast due to a gorgeous ocean and mild weather. The rich can afford housing no matter how much it is. The poor are willing to sleep on the street or pitch a tent because the mild weather means they can still get by. Homeless shelters have long waiting lists and offer a horrendous quality of life.

    The middle class cannot afford expensive housing and is not willing to sleep on the ground in squalid conditions. So there will be no middle class.

  • This may have been covered but…the article sheds light on the capacity of people to pay their bills timely and efficiently. Savings rates are neg, household wealth is neg and incomes are neg all in relation to soaring housing costs. Landlords are only as successful as their tenents. If a corection arrives (regardless of how/where) the defenition of a successful landlord will be rewritten.

  • I live in Nor Cal. I am approaching 40 and have watched CA change so much in my short time. Formerly nice areas are exploding with homelessness and crime.

    Also, those areas that used to be nice are more ‘ghetto’ and have a lot of hispanics. I don’t mean that as an insult to hispanics at all, it is simply an observational fact.

    Also there is violent crime in areas that did not use to have any.

    My final observation is that it smells like cannabis everywhere. When I grew up a small percentage of people smoked weed ( and I dabbled like most people ) and I didn’t smell it everywhere. Now everyone loves cannabis and it is pitched as ‘mother’s milk’ by everyone. Seems that most people smoke it or have plants in their yards.

    These are facts, surmise what you will from it. You can’t bash my observations as politically leaning because they are not. They are pure unadulterated observations without a value judgement.

    Now for the judgement part…CA is such a broken state, anyone who thinks otherwise is not paying attention or is on drugs. It sucks, and I am ‘successful’ and have made some good money and financial independence, I feel for everyone else who is working class. This is a wasteland. I might have to take the family and escape.

    • This is what happens when a country has open borders and votes for Democrats. Disaster.

      • Didn’t see anything improve in 8 years under Bush, Jr. Could it be that corporations, not political parties call the shots?

      • I was talking about CA specifically, where it has been Democrat rule for 20 years. And yeah Aaaahnold was a “R” on paper but he was pretty much a rubber stamp for whatever insane bills came from the Dem house/senate. There is no Republican party in the state anymore for all intents and purposes.

        And yes, I agree Bush Jr. was no better than Obama with regards to illegal immigration.

    • Truth right here. Born and raised CA, left ~11 years ago and the changes blow me away and, IMO, none of them are for the better. I think being away from CA makes the changes more impactful when I go back, as opposed to those who live there and adjust to the subtle changes that happen on a daily basis – kind of like when you havent seen a friend or family member in years and you’re thinking (as they are as well) Damn they look old!

      As said above, people are willing to pay a lot of money to live far away from the ghetto, but the CA pols keep importing and spreading the ghettos everywhere (except where THEY live). Pay 800K for a house next to a bunch of illegals blasting their crappy mariachi music 24/7? I dont think so. Obviously there are those who ARE willing to pay those prices and those people chose poorly.

      • Very true about adjusting to subtle changes and growing desensitized. Even when we leave CA for week trips and return it is shocking what we have grown accustomed to. I was at Home Depot tonight and my wife and I were blown away by the massive number of dreadlocked idiots wearing their cannabis shirts and shirtless zombies in the parking lot yolked on meth. These bozos did not used to be everywhere. Granted they’ve been around in CA but they had their pockets and sort of stayed there. Now they’re everywhere. It represents like 80% of the citizenry. I’ve lived in So Cal by the beaches (Solana beach, Del Mar, La Jolla, LA) and would never ever ever go back for any amount of money, I always preferred Nor Cal because it was more down to earth. Well, Nor Cal is wacky town now. Too many freak shows from the Bay Area (I lived in SF too) have moved to the hills and now once pleasant family communities in the woods are like The Hills Have Eyes. No joke it is getting bad here. Really bad. Walking Dead all over the place. Fortunately they don’t wander up driveways with Don’t Tread on Me flags, which is smart of them..at least they have that much survival instinct.

      • NorCal fella – I’ve lived in lower foothills east of Sacramento for 14 years and it has definitely changed. Drugged out freaks, more break ins and car windows smashed. Placerville particularly has become the town of the walking dead. Such a shame – we moved here to get away from the criminals.

      • You live in an area (much of nor-Cal, coastal Washington/Oregon, Los Angeles) that caters more and more to homeless and drug addicts every year – as in actually creates city ordinances that allow them to crap on the sidewalk in front of businesses. It’s Mecca to them, and southeast cities do their part by busing their homeless to the west coast, so of course you’re going to see them everywhere. My suggestion is to move somewhere less liberal if you want to see fewer of them.

        I live in a conservative so-Cal bedroom community and that kind of thing doesn’t happen here. The only people in the Home Depot parking lot are there to load building material into their pickups.

      • “except where THEY live”

        Exactly. I’d love someone to ask Nancy Pelosi or Chuckie Shumer how many DREAMers live in their neighborhood. I’d bet large sums of money the answer is 0 for both,.

      • Nor Cal, we’re on the same frequency. Another thing I’ve noticed when I go back to CA is that even if youre in the top 5-10%, while youve got it good – or better than anyone else – the water in their “moat” is slowly receding, and those zombies are slowly getting closer and licking their lips. Dsygenics playing its hand as it were.

        Planet needs a reset of its human population, otherwise . . .

  • Norcal Fella ,
    right there with you trying to escape as I write this, yes it has turned worse, the brightest of us left this country before ’05 was not in position to do so then now much closer, might pick up lil land, build couple crapshack rentals before I leave kinda hedge the bet ya know?

    • Beeman, for our family leaving is not what we want to do, we are being forced to. We have great family and friends here that are too set in their ways to pull up the tent stakes and move on, but I think objectively CA is at critical mass. That is unless you are one of the illegals grifting off the system or a felon that was released into the streets after AB109 etc.

      For the rest of us, the quality of life here is terrible. In the meantime, we are on our little 5AC farm in the mountains with solid perimeter fencing, akitas, a big garden, 40 chickens and large water stores. That and combat experience with the weaponry to boot. Even my wife can mow someone down with an AR from 200 yards and operate our backhoe to bury them. No joke.

      “Prepping” is no longer a fringe movement of the right, it is very basic logic if you are a CA resident that is not mentally ill or on drugs. We live in a real tinder box. Californians here that mock ‘flyover’ country are such idiots. It is an armpit here and there is no place for families, the working class, etc. Reading sophomoric Californians on this board bash “flyover” country are suicidal morons. The real led Zeppelin is CA. Sorry, is what it is, these are just facts at this point.

      I wish you a quality escape. I plan on divesting of my CA real estate soon which at this point is only my primary residence and a mid sized apartment complex I managed to buy 10 years ago. It has been an incredible cash flow vehicle for me but longterm I don’t want to own any CA real estate.

      The trajectory of this state is obvious. Can any CA of sound mind really refute my logic? Seriously. And I am not a “CA hater..” I once had tremendous pride in this state and its people. I don’t wish it ill at all because there are a lot of wonderful people here, it’s just that the shitty ones are the vast majority.

  • Food stamp usage is down 1.3M since Trump took over. Lowest number since 2010. And given the population has increased significantly since 2010, as a % of the total population, the number of people on welfare is back to pre-recession levels.

    How do the doomer and gloomer types explain this? 1.3M fewer people on welfare in less than a year. But the economy is in taters and the worstest mostest baddest depression ever is about to hit?

    Hmmm….

    Or maybe things aren’t quite as bad as ZeroHedge would lead you to believe. Nahhh, that’s crazy talk.

  • Did anyone see the Money best places to live? Most of them were in fly-over country. Only 2 of the top 100 were in California.

  • The debt is consuming the working class and part of the middle class and driven them closer to extinction in California but it is the only way to survive here for many.
    The cost of housing is so out of line with what most jobs and careers actually pay that people have no other choice if they are going to stay here. I don’t think people really want their debt but they feel entitled to a standard of living and as the rent and cost of everything here skyrockets that middle class standard is harder and harder to maintain.
    Families especially have a harder time renting a bedroom or studio and saving money.
    The truth to most of California NorCal and SoCal is that there is a lot of rich people and people with money that have no problem with the cost of living here and they profit off of it through owning rentals and businesses,etc. Then the large population of Mexicans and other immigrants know how to work the system here to get Section 8 which pays 90% of their rent and then they get feee health care, food stamps and then work for pay under the table untaxed or report very low incomes so they pay barely any taxes if any.
    The working and middle classes are left holding the bag paying top dollar $3,500 rent, getting taxed out the ass for everything and their income. The millenials and people 40 and under have it the worst and are paying top dollar to live here or they are forced to relocate. The boomers were able to get in when real estate was cheap and even though many boomers have debt I would say the majority are doing alright.
    I call it “Boomer Life”, owns house they bought for cheap and also a vacation or rental house, pulling a boat up to the lake with a brand new big truck and cruising the classic car on the weekend or maybe taking the wife’s BMW up to the casino to blow a bunch of the rent money a millennial paid them and then a week to Maui or wherever a few times a year. That’s boomer life. A far cry from the millennial middle class chump working 6 days a week just to give 50% or it to pay rent and then max out a credit card to pay for everything else and making a car payment on a 10 year old used vehicle.

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