I dream of California cognitive dissonance – Many Californians expect high level of services without paying the cost. The typical mortgage payment for those that bought last month was $964?

California is an odd sort of beast.  Our economy and politics feel like a speedboat going around in circles while the passengers stare at the gas needle dropping to empty.  Given this context it should be no surprise that we took the housing bubble to an entirely different level.  Many Californians suffer from a sort of cognitive dissonance whereby they desire high levels of public service yet do not want to pay for it.  We see this in polls where people desire to have higher services yet rather not pay for it.  Obviously these kinds of desires encounter reality traps once we factor in numbers.  That is why only a few days ago the Controller of the State released data showing that for the current year, after optimistic budget assumptions, we are now behind by a whopping $700 million from initial budget plans just released months ago.  When we see similar patterns play out it is understandable why some are seeing another housing rally even in spite of no evidence.  California is still a state with an incredible amount of distressed properties.  One shocking thing that I saw in the data was for last month of California sales the typical mortgage payment for those who bought was $964.

California foreclosure action

The notice of default pipeline perked up in the third quarter for California:

california nod and foreclosures

This is the highest NODs filed since Q3 of 2010.  Much of this came from banks revamping and moving forward on foreclosure activity.  Part of this desire stems from banks moving forward on their large shadow inventory backlog.  Some fascinating data on California sales for the past month:

September 2011 sales data

Median price:                    $249,000

Foreclosure resales:       33.8 percent

Short sales:                         18.7 percent

The short sale figure has been steadily growing over the last year.  The market is still largely dominated by distressed property sales.  What is interesting is that actual completed foreclosures as noted in the chart above fell again for the second quarter in a row.  The bounce in NODs however assures us that we will have more distressed sales for months to come as the pipeline fills up again.

People forget that once the foreclosure process commences it may take up to six more additional months (at least) just to sell a property in California:


Source:  RealtyTrac

What this means is that much of the Q3 NOD shadow inventory will be entering the market sometime in spring of 2012.  This is something to be mindful about.  When the NOD count starts getting into the 20,000 filings per quarter then we can say the market is starting to level out.  At this point, there is very little evidence to assume that we are going to see some sort of big bounce in housing for the state.

Home values reflect the nature of what is currently going:

home price index

No sign of home prices going up here.  Also, you have these odd perspectives based on little facts.  Some folks think that in prime areas you have truckloads of people buying homes with tons of cash.  This perception is live in Irvine California for example.  Some seem to think that of homeowners, most have no mortgage attached to their home.  This is not true:
irvine data housing

Only 16 percent of Irvine homeowners own their home free and clear compared to over 30 percent nationwide.  The typical homeowner cost of those who own is $3,000.  So why the disconnect?  Again, I believe this stems from the California mentality that people want high expectations from their surrounding environment without paying for it.  This is why you see reluctant sellers wanting peak home prices for their sale even though the bubble has long ago passed.  We have some tough decisions to make as we plug along.

This is also another reason why the typical mortgage payment for last month sales in the state was $964.  What is going on here?  People can only afford so much home and a large part of the cash sales are going to investors seeking out cash flow or investment properties, not properties in mid-tier markets that are still in bubbles. The lower mortgage payment is also helped by the artificially low mortgage rates pushed down by the Federal Reserve.

The state still has a 12 percent unemployment rate and an underemployment rate of 23 percent.  A $700 million shortfall means more cuts or taxes coming soon.  How does all of this seem like a positive for home values?

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80 Responses to “I dream of California cognitive dissonance – Many Californians expect high level of services without paying the cost. The typical mortgage payment for those that bought last month was $964?”

  • I’m starting to think that as less people in CA are owning a home, the less they will be concerned with maintaining prop 13.

    • Yep, good guess. Prop 13 MUST be reformed to something more resembling Florida’s ‘Save Our Homes’ Act… OTOH, *never* underestimate the lobbyist power of the vested interests in Sacramento.

      • IN 1974 the median price of a home in California was about $35k, the homeowners exemption was $7000 or about 20%. Many in poor neighborhoods paid no property taxes Now the median price is about $250K yet the exemption remains $7000 about 3%.

        Without Prop 13 the politicians will eventually seize everything. We are taxed enough already. 35% federal taxes, 11% state income taxes, 10% sales taxes plus property taxes on some of the most expensive property in the country.

        And, we had the best schools in California at the time and you could go to Berkeley with a 3.0 GPA. Yet now, the taxes collections are through the roof and we have among the worst schools and you need a 4.4 GPA to attend any UC.

      • Sales and income tax are through the roof in part because they can’t tax property.

      • taxes were higher before prop 13.

        that’s what paid for the great education.

      • I am interested to know more about Norcal’s comment. Fed taxes were higher in 1974, but his point is well taken. California sales tax was less, Income tax was less (was there even a CA income tax then?). It feels like government is taking more as a percentage, but delivering less. But, is that a fair perception? Am I looking at this incorrectly?

      • California’s income and sales taxes are amongst the highest in the nation, but our property taxes are not. The advantage of a property tax is that property is tangible and all these people who cheat on their income taxes(you know who they are in Glendale) will have to share some of the property tax burden. Under my idea, property taxes will go up, but people can take a deduction for the income taxes they pay, this is a backdoor way to get the income tax cheats to pay their share of income taxes.

      • Norcal, state income taxes are high precisely because property taxes are not.

      • Where are income taxes “through the roof”??? The data I see show that income tax rates are at historical lows everywhere. I have to presume that comment is the wounded pouting of someone doing better than 70-95% of the population, and wanting services (just as DHB says), but thinks someone else should pay for them.

        Kind of the same way the OWS people think.

        As for sales taxes, in my part of the nation they’ve only gone up on luxuries. The majority of people who are struggling to afford the necessities can’t pay any more, they can only do without. Those who can still afford the decadence lifestyle of the Reaganismo era should be taxed hard. That lifestyle, and all that goes with it, is destroying this nation.

        In fact my state long ago chose to give a sales tax break to our idiot-driver neighbors to the south (Oregon), to lure them up here to spend their Portlandia Bucks. So while retail profits are propped up, and restaurant dining, and all those other features of Bubbleconomics, the tax base suffers…and we productive working types have to pay for the infrastructure these consumers use.

      • Income taxes in CA are not low. You hit the maximum tax bracket (which is basically 10%) at 40 something thousand in income. That is the absolute bottom of what might be considered a middle class income in a major CA city like Los Angeles, where the cost of living is quite high. So basically the entire middle class is having some of their income taxed at 10%, which is why income tax seems high. I doubt this is any kind of “historic low”.

        Sales taxes on CA have gone up on everything except that which is exempted from sales tax which is mostly food (even used goods bought at the thrift store are legally taxable). So the sales tax in Los Angeles with state and city taxes included is over 9%. Compare this to states that supposedly have high taxes like Massachusetts, they aren’t paying this much. CA sales taxes are basically tied for highest in the nation, noone else is paying what we do in sales tax.

        Property taxes in CA are quite low though. Prop 13 forced them to fund the government entirely through income and sales tax, the problem is that these tax bases are plenty vulnerable to recession.

    • Prop 13 should be modified to:

      1) reevaluate commercial properties more often; and
      2) repeal the exemption that allows a parent or grandparent to pass their property tax rate to their children and grandchildren who inherit the house. Few people, other than estate lawyers and realtors, know of this exemption but it is a real scam.

      • There are elderly people with low and moderate incomes with children who should not be forced out of their home due to higher taxes when the parent dies. Many do not have a high amount of home equity and if their child cannot stay in the home they will become a burden on society taking welfare etc.

      • Brian…the real scam is that if we give Sacramento one more dime they’ll squander it on stuff like in state tuition for illegal aliens. Fight for your dime!

      • Yes, completely overhaul Prop. 13. It is a joke and completely and totally unfair to newer generations. Absolutely no commerical real estate should be involved, absolutely no gifting tax rates to heirs and it should only apply to a primary residence (no investment properties). If it was truly meant to keep grannie in her house, it should only kick in after federal retirement age. PERIOD!

      • I don’t see the repeal of prop 58 as a good thing. Lets say you inherit property from your parents. You sell because you don’t want/need the property which raises the taxes on the next owner. Other option is you keep it because you need to live there. Why should the taxes be doubled just because the property was given to you? Easy to pass judgement when something doesn’t affect YOUR pocketbook. Seems to me just another form of a death tax.

      • I agree with torabora. The budgetary problems in Sacramento are not due to low revenues. The state takes in around $90 Billion dollars. On average, that’s around $6000 per employed citizen. The problem is that spending is simply too high. Services need to be cut, pensions need to be replaced by 401(k) programs, middle-management positions need to slashed, and payrolls, in general, need to be frozen until comparable private industry jobs catch up.

      • You raise an interesting point. But dismiss it before digging to its creamy center.

        Multigenerational nest sharing is becoming more common. Elders with economically sustainable housing situations due to Prop 13 may reach a point where they cannot make it on their own, but also cannot afford to move to an Elder Ghetto.

        So if, as part of their deal with younger people, who cannot afford a BubbleHut (TM) they agree to turn over the house in return for rest-of-life care and social companionship, it raises a question:

        What should happen to the property taxes? Should they suddenly skyrocket, throwing BOTH generations out on the street?

        The point of Prop 13 was to keep non-bubble people in their homes in the worst bubblebased state economy in the nation. It has been deeply abused…but I’m still waiting to see numbers showing me that the worst abusers are multigenerational households.

        It wouldn’t be hard, I’d imagine, to apply a means test to those inheriting the house. Perhaps the lower rate could stay in place so long as the elder owner lived. This would provide incentive to the younger people to extend Granny’s life. However everything I think of in terms of structures for this tax regime puts individual families under a far more rigorous test than all the commercial landowners abusing Prop 13. Far as I can tell, they are the bigger problem.

  • Is it that people don’t want to pay for services or that they don’t feel they have gotten what they paid for in the past? The collateral damage of associated and allied micro bubbles to that of the housing bubble is now beginning to show.

    • Its not an issue because taxes are less on the fallen prices also many are down sizing leaving impacted areas for areas that are affordable. prop 13 did nothing for us. As we get down to 1990 home prices it will interesting to see how the cities pay for all the civic social perks since we have a much larger population not paying for anything.

    • My thinking as well, O. We now have 40 years of expectations that always were unreasonable…but Wall Street and The Fed collaborated to make them seem normal.

      As Red Green liked to say, never write a check with your mind that your body’s not prepared to cash.

  • On that ‘Days To Sell Foreclosures’ graph, note that spike for here in FL (judicial process). Believe me, that’s an AVERAGE that encompasses a HUGE variance… but they are “streamlining” it, somewhat.

    It’s frustrating. In a single day, I’ve seen HALF the auction listings quashed at the last minute, via lawyer tricks–not by the squatters, but by Duh Banks.

  • Depending on the market, only about 1/3 of all home owners have a mortgage at all. Nationally, close to 30% of homes are underwater. Areas like Las Vegas (-60% since peak) and Phoenix (-50% since peak) have suffered far worse as 80%-90% of all homes with a mortgage are underwater. As the numbers above indicate, most of these households are more than 25% underwater, breaching an important threshold where default rates begin to skyrocket. Not only this, but if these home value continues to depreciate just 5%, another wave of households will become underwater, due to the fact that homes have so little equity as it is.

    As this happens, default rates increase. As default rates increase, foreclosures increase. When foreclosures increase, comp prices fall due to the bank’s willingness to take haircuts on distressed property sales. As prices decrease, home values go further underwater, making default rates increase. Viscous negative feedback cycle until property values align with household income at the historical 2.2 ratio.


    • Many homeowners who are underwater may start to hear the clock ticking with the looming expiration of the Mortgage Debt Relief Act at the end of 2012. Many who are underwater may realize their last chance to get out without owing tens or hundreds of thousands in taxes. If prices do not increase significantly in the near future, there could be an explosion of strategic defaults to avoid massive taxes after 2012.

      • Hard to imagine the federal government not extending the Mortgage Debt Relief Act if lots of voters are still in a bad situation.

      • True, extending the Mortgage Debt Relief Act would be consistent with the “extend & pretend” strategy used so far.

  • Hi,

    I went to payorgo.com and according to their analysis my codo must increase in value 6.34% over the next 10 years for it to be worth my while to stay.

    If you were a betting man, what are the odds of that happening? BTW, I live in suburban NYC.

    • Please define “suburban” NYC. In certain zip codes, 6.34% over 10 years is plausible, so if you like the place…

    • John-Regarding your 6.34% question, I would say that 10 years is a long time. We still don’t know, with anything approaching certainty, whether we will get the deflationary or hyper inflationary ending to this crisis. If it is the latter, houses, including yours, will be wildly higher, but so will the cost of Big Macs and fries, and the fast food might be the better investment.

      If you watched the Republican debate Monday night, it offered a pretty solid clue that we will get the hyper inflationary ending. Ron Paul offered a plan to balance the budget by 2015. All the others, and President Obama, are adamantly opposed to any significant spending cuts. I try not to float to many bizarre conspiracy theories, but there is an obvious news blackout when it comes to Ron Paul. The powers that be will not allow him to get elected. So we are going to run trillion dollar deficits regardless of which party wins the election.

      The resulting hyper inflation will eventually bail out debtors, but at the same time it will destroy savers. How did that work out for pre-WW2 Germany? Not too good. Not giving advice, but if you enjoy your home and can make the payments, and can handle some more downside for a few years, I think you will be amazed at how much everything costs 5 or 10 years from now.

      • It is ludicrous to suppose we will get Weimar style inflation. Modest Inflation rates of 10-15% for a few years would be enough to relieve the strain on most heavily indebted, presuming they were not so indebted that there was no chance.

    • I’d encourage you to broaden your thinking about returns. For instance, if your condo’s location lets you earn a living while slashing your transportation costs (which account for a higher proportion of Americans’ household incomes than either food or health care)…

      …then your condo will be giving you a better return than 6.34%. Maybe not on its price…but on other savings.

      We really need to broaden our thinking about what a house is, and how it contributes to our overall household economy.

  • McClatchy newspapers estimate that Sacramento has more than 50,000 properties in the shadow inventory, but even that understates the problem. Every new or existing home bought in the greater Sacramento area since the year 2000 (and in some cases, 1997) that was bought with a purchase loan is now underwater. Even houses bought in September of 2011, if they were purchased with no-down government-backed loans.

    Those who maxed out their existing homes with heloc loans are also under water.

    Had you bought a house for cash, you would now show a loss, even if you had bought in September of 2011.

    I expect this to be the future of coastal California as well, even though this past summer I saw a 1940’s vintage shack in Santa Barbara listed for an incredible $728/sq. ft. On the other hand, properties in Santa Maria, 60 miles away, are in free fall, only lagging the Inland Empire and Central Valley by a year or so.

    And if the mother of all debt defaults occurs this winter. . .

  • This is quite off topic… but a good read with some fun CPI controlling mechanisms in Argentina’s rocky economic history.


  • Wouldn’t it be amazing if, say on December 1, 2011, all of the underwater mortgagors/trustors in this country stopped paying their mortgages? The banks would likely be wiped out in one day (considering how thin their capital reserves are now). Also, the mortgagors might finally have the upper hand and be able to force the lenders into modifications with principal writedowns.

    Maybe that’s something the Occupy Wall Street movement could get behind.

    • Breaking up the banks is something we are fully behind…

    • Amazing good? So you’re saying everyone should stop paying their debts if they’re underwater? These people purchased the homes and signed the loan agreements. Why would it Amazing if they defaulted on their obligations? You make it seem like these speculators had a gun to their heads to purchase an over priced home to begin with. Without these greedy “investors” the housing bubble would not have happened and now everyone wants to ease their pain for some odd reason just because it was housing. The housing market turned into a casino and if you lose money in a casino so be it. Suck it up, take some personal responsibility and move on. Oh, I forgot, we’re living in an age where personal responsibility is an extremely rare trait.

      • Common Sense Citizen


        And principal write down?!?!?!?!?! Are you effing kidding me?!??!?

        Personal responsibility is what life can be summed up as in two words.

      • Because the banksters always pay their debts, right? Check out this segment from The Daily Show, and if you still think underwater homeowners should take “personal responsibility,” you must be a banker.


      • Relax, the contract also states that you must vacate the home if you don’t pay. That is an even trade. Both parties took some risk. Go back to 4th grade or the dictionary and look up collateral.

      • You must work for a bank.

        No one held a gun to the head of the banks/lenders and forced them to offer first, 3% down with mortgage insurance, then 1% down with mortgage insurance, then 0% down with mortgage insurance, then all the above with no mortgage insurance as long as you get a 20% piggy back loan as “down payment”, then 125% loan for home equity lines of credit, then all of the above WITH NO INCOME VERIFICATION!

        If you lend your money to someone you need to make sure that the borrow has the ability to pay you back and if he can’t, you will be made whole anyway by insurance or collateral.

        When both borrower and lender take equal risk, neither party would want the deal to default and if it did, the risk taker, the lender, would be made whole (because of prudence on the part of the lender) at least historically that is how it use to be.

        However, because the banks acted irresponsibly (due to sheer greed) with their lending standards we have a situation where those who borrowed have the upper hand. I don’t for a second blame the borrower for taking advantage of the stupid and weak, and this case the banks. At the same time, I don’t think the borrowers who want to keep their overpriced assets should ask for a bail out on the public dime.

        If anyone runs the numbers and they are better off defaulting, DO IT. You signed a legal agreement that you would pay and the agreement is, if you fail to pay, your house will be taken back. Either way, you are fulfilling the terms of the contract…..either pay or don’t pay and return the house……..contract fulfilled. Of course if the bank also has recourse after the fact, well then you had better think twice about what to do.

        A financial contract is not supposed to be about morality, it is about dollars and cents. The exception to that would be if you lend a friend 100.00 with no collateral and only trust and he doesn’t pay you back, of course it is about morality because it was a trust issue.

        When I got my first loan for a car, the car was collateral. When I bought my first 2 houses I put 5% down and paid for mortgage insurance, the house was the collateral and the mortgage insurance would make the bank whole.

      • Well said, Martin. The equating of a contractual obligation to a moral one (in the case of home loans) is one of the biggest scams in the banking business. Those who still believe in this nonsensical moral argument ought to consider that they are helping perpetuate the robbery of many via fraudulent loans this past decade.

        That makes them almost as much of a crook as our TBTF Bankers.

        But I suspect that they are really more concerned with maintaining the value of their house, rather than with any psuedo “moral” argument. It’s funny the impact money has on morality.

      • Well all the people who were dumb enough to buy during the bubble are really fraud victims. After reading Brent Whites book I agree they all should default. What will happen to all the middle aged owners who will still owe what their homes are worth or less than their homes are worth when they go to retire, and the politicians have destroyed social security do? I say walk now while you still have a chance not to starve in your old age. Many bought more than they could afford but many did not but will have no equity even in 20 years. Strategic default is the only sensible answer for some of these owners. There have been 5 foreclosures/short sales on my block, 2 job loses, 1 medical disability, and 1 where their childs medical care became too high with their mortgage, only one was too much debt refinancing for a boat etc.

    • You think it would be a good thing for the savings of the prudent to be wiped out so that housing market gamblers are spared the consequences of their former choices?

  • There’s no cognitive dissonance. Voters don’t want their taxes wasted on illegal aliens, high public salaries and high public pensions. The politicians will only listen to lobbyists. We must throw out the whole gov — never vote for another democrat or republican. They are the same corrupt, dirty lot. Gov moonbeam again??? WTF is up with that?

    • What about Lt. Gov. Gavin Newsome! I thought his political career was dead when an illegal alien released under Newsome’s sanctuary city policy in San Francisco shot a father and his 2 sons in a road rage incident, killing the father and 1 of the sons. Then Newsome got elected to statewide office. I’ve determined that there are so many political idealogues in this state that they’ll vote for anyone that agrees with their political persuasion no matter what they’ve done or what their policies have resulted in. It’s the only way I can understand the voting patterns in this state. Obviously there is no thinking going on in the voting booth.

    • Too funny, Mkkby. You’ve got a tractor trailer load of cognitive dissonance in your ‘cognitive dissonance denial’ rant, presumably inadvertent in nature. I say ‘presumably inadvertent’ since I pretty much agree with you, until you really think about it, and then it is absurd, like everything else in this country.

      You said, “Voters don’t want their taxes wasted on illegal aliens, high public salaries and high public pensions.” The reason there are so many illegals here is that the same voters that don’t want to pay high taxes and salaries for ‘legal’ resident workers, go ahead and hire illegals for house cleaning, child care, meat packing plants, late night business cleaning, lawn mowing, etc. Basically, the low paying jobs that you and I won’t do.

      Hiring illegals because they work cheap, dropping interest rates to zero, running huge deficits, outsourcing our factories to China, etc. are all part of the end game, before we throw all the Monopoly play money, AKA ‘dollars’, back in the box and start over.

      If we fire all the government workers that are excessive hangers on, i.e. most of them, lol, then who will buy pizza from your pizza joint, or get their suits pressed at your dry cleaning business? Got it? A little cognitive dissonance is all that there is between us and 1933.

      • Paying someone for their labor is entirely different than offering “free” or subsidized education, healthcare, housing, food, etc.

        One is offering a job to someone willing to work, and paying with your own money. The other is offering bribes for votes with other people’s money, and it’s deplorable.

        And the argument about “low paying jobs that you and I won’t do” is wrong. After all, who did those jobs 30 years ago? Labor is labor, and its worth is based on the value of the task, not a birthplace.

        The cost of legally hiring someone has outgrown the value of their work because of bureaucratic rules and regulations. Right now, here in California, if the value someone’s work is less than $8.00/hour, they are not allowed to work.

      • Sorry Joe Average, but I don’t follow you. You said, “Paying someone [undocumented] for their labor is entirely different than offering “free” or subsidized education, healthcare, housing, food, etc.”

        If you lived in Chula Vista and a Mexican crossed the border to mow your lawn, then returned to T. J. to go home for the night, you would have a valid point. In fact, I worked with thousands of guys that did basically that in the S. D. shipyards, many with fake I.D.’s to cross the border.

        But most undocumented workers hang around on this side for years or decades. Your cognitive dissonance is preventing you from seeing how crony capitalism works.
        Those that hire undocumented workers get the benefit of someone willing to work for below market rates. The presence of millions of these undocumented workers also helps suppress wages for similarly skilled documented workers, further aiding crony capitalists.

        You’re suggesting that once we get our allotment of work out of ‘Jose’ we should kick him to the curb, or deport him. That would be immoral. Also, it would not benefit the crony capitalist. He wants ‘Jose’ to be healthy and well fed so he can be milked for more cheap labor. And since you and I are paying for ‘Jose’s’ healthcare, that is even better for the crony capitalist.

      • Jason- Illegal aliens hang around for years because they get free stuff. I’m suggesting we eliminate the free stuff. Forcing people to pay for their free stuff is what’s immoral.

        If someone wants to come here and work hard to try and make a life, I wish them the best, and I’ll help where I can.

        Lastly, to understand capitalism requires the understanding that there’s no such thing as your phrase “below market rates”. Crony capitalism is not two people agreeing on a price for yard work. It’s the regulators/race hustlers/freebie distributors who put themselves in the middle of that transaction in order to benefit themselves.

  • “Many Californians suffer from a sort of cognitive dissonance whereby they desire high levels of public service yet do not want to pay for it. We see this in polls where people desire to have higher services yet rather not pay for it. ”

    Actually, I think many Californians are tired of paying more and more and getting less and less for it. The only sector that is thriving is the public worker (and retiree) sector. In a few short years many municipalities will be paying twice for every service – once for the retirees who used to do the job, and again for the people that are actually employed currently to do the work. And still the unions are demanding more money and better retirement arrangements! Statistics clearly show that public sector worker pay and benefits outstrip private sector workers in the comparable jobs. But the Dems in Sacto keep shoveling money to gain union favor – and campaign contributions.

    The Dems in Sacto keep passing laws that make it increasingly expensive to do any public works or save money. Now, if a dollar of state money is used in a local project then union scale and work rules must be used – raising the cost of the project substantially. Under a just passed state law, if a city or county wishes to contract out library services to a private company, they are required to maintain all the existing employees at the same pay and work rules. This despite over a decade of evidence in Riverside and elsewhere that privatizing the libraries saves millions of dollars, increases patron satisfaction scores, increases library holdings (books) and provides more services and longer hours. But we gotta grease the union palms don’t we!

    Then we have the whole $10-$12B/year of CA taxpayer money that goes into providing services to illegals. (That would be a tenth of a Trillion dollars over the past decade spent in CA on services to illegals.)

    And with all these, the quality of services keeps declining through poorer individual worker performance, lax rule enforcement, ineptitude, etc. So, yeah! I want better service without paying more – something like I got just 10 years ago when state government was substantially smaller and employed fewer people. Throughout the 2000-2011 period state government has hired and raised spending relentlessly. Were things really all that bad in 2000 that we had to increase the scale of state government?

    • I’m not sure how other government employees are doing but as a local public safety officer for over 10 years I can attest to the fact that our base salary has only increased by about $8,000 in that time and I haven’t had a cost-of-living adjustment in over 3 years. Hell, we haven’t even kept pace with inflation!!! If you want to complain about not keeping up with our salaries then you need to point the finger at your bosses, the so-called 1%, whose increase in income has far outpaced all of us since the early 80’s. Listen, I understand the need to cut government salaries, but the government needs to be competitive with the private sector (and other local governments) or else you’ll only recruit unqualified idiots to teach your kids, put out your fires, and enforce your laws (while carrying guns!).

      • How dare you introduce real world evidence to the xenophobic card carrying Ron Paulites!

      • Strawman I think you illustrate a point perfectly. I don’t begrudge anyone’s livliehood, but what I see from public sector employees is a deep sense of entitlement – i.e. expectations of yearly raises, COLA adjustments, guaranteed pensions (with partial or full funding by employer), subsidized benefits (med/den), to name a few. These have come to be expected, government has made these ‘promises’, in some (most) cases to gain political favor, but failed to fund them, or fully fund them. Now public employees demand that their promises be kept by raising taxes or reducing services on everyone else – most of whom do not have nearly as good of a deal. The argument about hiring quality people is hogwash. If you think the private sector is better then by all means give it a go, I mean why wouldn’t anyone jump ship to make more money if they could. The bottom line is the total compensation package provided to public employees far outweighs what is available to outsiders. Try fully funding your own retirement portfolio (without a care to how it performs because it’s gauranteed regardless), paying your full insurance premiums and taking a paycut just to keep your job and then we will be closer to an even playing field.

      • Strawman, as a local private sector employee I can attest that in the last 6 years I’ve NEVER received a cost of living increase. Salary increases have only come with promotions. I don’t have a pension, in the last 3 years have not had even a company match into a 401(k) and I have to pay my social security tax. Oh and when a cop is making nearly the same salary as an engineer , I’d say the gov’t has gone above and beyond the whole competitiveness with the private sector idea. Enough is enough.

      • While I can’t change your beliefs about public sector employees I can shed some light on how my particular sector operates. Before a citizen becomes a public safety officer in the state of California, they need to complete over 700 hours (40 hours/week for 5 months) of college level training. And that’s not counting the 3 – 5 months of on-the-job training program followed by a year long probationary period. As a comparison, if my estimate is correct, a typical bachelor’s degree requires about 120-ish classroom hours to attain. So, while we might not have the technical knowledge of an engineer, we do have A LOT of training and expertise in our particular field. It’s not a simple matter of walking into a police station, raising our right hand, swearing ourselves in, and getting a badge with great pay/benefits.

        As for expecting pay raises, I don’t know of a single officer that expects a raise in the sense of getting more money for the same work – adjusted for inflation. Notice that last point – inflation. What we expect (what all of us should expect) is that what we get paid today will keep pace with inflation for years to come or else we’re all losing income year after year.

        Regarding our partial employer-funded pensions, I can only speak for mine and it was solvent with a surplus before the local government changed their contribution/borrowing rules during the boom times and now want to blame us during the bust times. Also, it’s worth mentioning that I don’t contribute to Social Security and have not earned enough credits from previous employment to ever receive benefits…my only retirement option is my pension and any other money I invest in my non-employer matched deferred compensation plan.

        As for competing with the private sector, it would be hard to find a comparable job since law enforcement and private security vary widely in duties, however, I urge you to look up some professional investigative or consulting services and I think you’ll find the salaries fairly comparable if not higher. But it’s not just the private sector that we compete with. Nearly every city has its own public safety department and they all need to compete with each other for quality candidates…it’s no different than private sector entities competing with each other. One last point here is that our highest position in public safety is typically the Chief/Sheriff and they usually top out in the $200k – $300k range while managing departments with hundreds/thousands of employees. Compare that to similar sized private companies and I bet you’d see that we are underpaid at the higher rungs of the career ladder – hell, I think the last time average CEO pay was at the $250k level was back in the 70’s/80’s.

        Ultimately, If earning an average middle class wage, receiving basic HMO healthcare for ourselves and our families, and having a secure retirement is what passes for “a deep sense of entitlement” these days, then the 1%-ers really have brainwashed us all. Maybe we should just remove all government regulation and the let free market greed decide our livelihoods for us. Because we’re all going to be millionaires one day, right? And we certainly don’t want those pesky regulations, employee welfare plans, and taxes messing with our riches! I just hope there remains some gullible folks out there willing to do the other 99% of low pay/low benefits work so the rest of us can enjoy ourselves…

    • Of course they were or we would not have spent all that increase on prisons and prison guards. That by the way is the most powerful union lobby in the state of California. Truthful sarcasm aside please cite case number and verse for all your claims otherwise it’s just another rant. My pay was arbitrarily cut by the city I worked for a violation of contract law that has yet to be corrected. The people still working there have endured further cuts in pay, higher costs contributed to benefits and greater work loads. Writing this makes me think of your analysis as on the level of the welfare queen canard. While some are raking it in in .gov work they are mainly in the higher echelon of management.

    • So what you’re saying is that the big problem with the economy is that the only sector that has been providing middle class jobs over the past decade hasn’t yet been busted, and all those jobs with it?

      • Exactly, they have you all fighting over whats left. I agree some of the pension plans are unsustainable and have to be reworked, but public sector workers are paying more. As a high school teacher I can tell you, I have had a 20% pay cut, two raises of our contribution to our benefits (now 700 a mo) and I pay into my retirement. (the state pays only 2%) I will make roughly 36k a year when I retire in 12 years. The problem is the unequal distribution, and a government owned by wallstreet. Obama should have reinstated glass steagall, and gone with Elizabeth Warren and Volker rather than surround himself with Wallstreet people and sell us out. They caused this and we have you all blaming the teachers, firefighters etc. The 53% point the finger at the 99% as whiners but those whiners are fighting for the American Dream the bankers stole. Shelia Bair for president.

  • How can I find out when home are 60-90 days in arrears but not in ForeClosure ?

    Potential Short Sales , Thanks , Robert Newsom

  • OT: Bill Seeks To Entice Foreigners To Buy U.S. Homes With Visa Offer


    The government may turn to foreigners to shore up the weak housing market.

    A bill co-authored by Senators Charles Schumer (D-N.Y.) and Mike Lee (R-Utah) aims to use the appeal of U.S. residence visas to entice foreigners to buy American homes, according to The Wall Street Journal. If passed, the bill would offer a U.S. residence visa to any foreigner who makes a cash investment of at least $500,000 in U.S. residential real estate.

    “This is a way to create more demand without costing the federal government a nickel,” Schumer told the WSJ.

    Foreign demand for American homes has been growing as prospective American buyers remain skittish. Foreign purchases of U.S. residential real estate rose 24 percent to $82 billion in the year ending in March 2011 compared to the year before, according to the National Association of Realtors.

    (more at link)


    • Great, any al-qaeda member with $500k can live in the country legally.

      • Speed it up please

        Flippers are our enemy. We had to agree to a 6 month no sale clause, on an REO property we rescinded on anyway, due to other issues. We were buying a primary residence and paying cash. (medical issue-unknown future) Flippers don’t get a leash at auction on their Grant Deed, why should we! Screw flippers and raise capital gains on them. They were/are part of the problem. (I’m a reformed Republican- now Political Atheist.)

        We have noticed in our area (Venutra County) summer pricing is over and prices are getting more affordable. I know we Americans don’t serve homes, but we’re happy to see prices come down. Housing is still overpriced. Now, we just need to find the right one. For us, buying outright is important.

        Both parties suck. DC = criminals. Rant off.

      • Speed it up please

        Sorry taz- I wasn’t replying to you. Brain Fart.

        All you R&D bickering types, o p e n your eyes. Both parties stink.

    • Rather than making things less expensive and less rules laden for small domestic RE investors, Schumer decides it is better to grant favors to foreigners. Typical.

      How about repealing the asinine EPA lead regulation that went into effect April 1st last year? How about lowering capital gains taxes on flipped properties? Instead of seeing small flippers and investors as the one of the solutions to the problem – this government sees them as the enemy and are draining all the economic incentive out of the endeavor. Who do the Dems think are employing all the laid off contractors?

  • Guys, I think we can all agree that we are heading into even crazier times than we expected. We can discuss prop 13, illegal immigrants, pension spending and the like all we want but it ain’t gonna change a damn thing.
    Let’s try to keep our humanity in spite of all this. If you have the means, do what you can to help those around you. If you are down and out, keep your dignity and try to stay out of despair. We can help each other survive. Our governments, institutions, and corporations may fail, but we people will get through this if we let go of our bitterness at the situation and help each other. It’s the only way.

  • Regarding my post above — my real point was that everybody had a $7000 exemption from property taxes in 1974 — which meant that many of the rural poor, and the inner city poor paid no property taxes on on their homes.

    Now California collects property taxes from everyone without any substantial relief for anyone, yet our services continue to deteriorate. Adding in the 11% income tax and 10% sales tax just pours salt in the the taxpaying wound.

    The bottom line is that the government is corrupt and ineffective, especially when compared to 1974. We have a serious problem with waste, fraud and abuse.

  • If public employees were paid comparably to private sector workers, then citizens could have services at reasonable prices.

    For some reason, liberals LOOOOVE the idea of public employees making huge bank and then retiring fat on the back of the taxpayer. I could care less, I don’t live in CA.

    Sooner or later, the unsustainable compensation of the unproductive public sector will become too great to bear, and the system will readjust.

    • If this is true than conservatives also LOOOOVE the idea of the top 4 execs at Lehman Brothers getting a total of $1,000,000,000 in compensation from 2000 to 2008 before the whole house blew up and 1,000’s lost their jobs…just good ‘ol fashioned survival of the fittest capitalism, righto?

  • Time to start rioting Californians!!!

    Looks like the government is trying to prop up the housing market YET AGAIN by now giving FOREIGNERS the incentive of a free VISA if they spend at least $500k on a home in the US!!!


    If this happens, I will feel like rioting in the streets

  • Norcal, please tell the truth. You aren’t paying 35% income taxes. There are so many loopholes and deductions, and that is a marginal rate anyway for those with taxable income above $380K. Probably closer to 22% when all is said and done. Same goes for the 11% in state income taxes for those making $1M or more. If you were making $1M, you wouldnt be wasting time posting on blogs.

    I do agree that the 10% state income taxes are ridiculous. You can blame the Howard Jarvis commercial property and rental income owners for this. What happened between 1974 and now? Prop 13.

    Say all you want about government waste, fraud, and abuse, etc. Some of what you say may be right, but for the most part, we have had to raise all of our taxes to subsidize the wealthy property owners. I know…Im getting a triple whammy. Just bought a place and am paying $9K/year in property taxes. I pay high state income taxes, and almost 10% in sales taxes, all to pay for some fat cat collecting his monthly rent.

    Direct your anger at the right people.

    • What you are saying is that to offset the loss of property taxes via Prop 13, high earners are paying more income taxes.

      Well, all the services and infrastructure that American denizens expect have to be paid for one way or the other, by some sort of tax or fee. There is no way around this except to cut the expenditures on these things drastically. While I agree that substantial cuts could be made without a large sacrifice in quality, there’s a baseline you can’t go below. We have made this country very expensive to operate just by the sheer weight of all the civil infrastructure we have, and if we want to remain a first world country, let alone one that can compete globally and foster new enterprise, we must spend that money.

      So what will it be, a progressive income tax that is flexible and allows many deductions, and which you only pay if you actually have income, or a brutally regressive property tax that rises steeply year over year and forces people who have bought and paid for their houses, in order to have housing security, out of them?

      We can jigger the income tax, and charge more fees for services like contract protection (Ayn Rand’s idea), licenses, permits, and other government services (false alarms, first responder services like ambulances), but to raise property taxes remorselessly year over year while personal incomes are falling, is brutal and viciously unfair.

    • IN less than 40 years we went from a low taxes, high services state and a property tax system that exempted many of the poor from property taxes.

      Now we collect property taxes without regard of folk’s ability to pay, and substantial income taxes and sales taxes.

      Our schools have gone from near 1st to near last, we had the best business growth, great roads, great infrastructure, and a near free college education.

      Waste and cronyism has devastated one of the best states that ever existed.

      As far as my taxes go, sure I paid about 25% fed and about 7% state plus 10% sales taxes, but many pay a heavier freight. Its all too much compared to what my father paid, and FICA went from 1-3% and most people being done paying in MAY to paying 15% on 100K. The whole country is corrupt.

  • The timing of the uptick in NODs seems right: banks are figuring out what to do in the last quarter to massage their end-of-year numbers while positioning themselves incrementally better (they hope) for GloboCrash 2.0. They’ve been trying to stave off the inevitable, and it’s a lot like the individuals in a neighborhood, where they really don’t care what happens to others, so long as they are the last man standing with a giant-screen TV, a car that talks to them, and more than the next guy.

    In other words, this economic meltdown is stripping all the 20th century pretense bare, and hopefully taking us all to school on our individual and groups evolutionary psychology.

    It doesn’t help of course that so many people throw around terms like “government” when talking about fifty-eleven different categories of reality. I was raised with the conviction that “the government” is us. So if we sat around in the bubble years, happy to huff Happy Gas as we used our houses as ATMs to buy 63″ x 63″ marble tiles for the foy-ay, and boob jobs, and boner drugs, and Extended Adolescence Abroad for our kids, and more SUVs, and cruises from the places we were to the places where we were no better off…

    …well, we do in fact get what we pay for, and we get what we asked for. How many upscale liberal *and* conservative speedboaters did I ever meet in California who were all up in yo grill about what a criminal Dubya and Reagan and Nixon or FDR, JFK, and Nancy Pelosi were…while they were gaming the system for all they could get, often themselves committing outright fraud, but knowing that We The People couldn’t possibly pay for the legal framework it would require to set limits to their behavior.

    Let’s face it. Our national religion is a secular one, it revolves around money and things, and we are stumbling our way through an auto-da-fe of forced austerity and desert-deity punishment.

    Except for the ones who still believe they should get something for nothing.

    Over and above the financial stuff, we are facing deeply intractible parts of our minds and behaviors. Such as that we are trying to create a Silicon Age society out of our Pleistocene-wired brains on a planet older than time.

    • Outstanding comment, Compass Rose.

      While I enjoy all of your comments and think that they are the most original and best-written of anyone’s, this one is the best.

      Keep writing. You are one of the commenters here who I check this blog daily in order to read.

  • About a month ago, I mentioned this was going to happen:

    “US Set to Unveil New Relief Plan for Homeowners”


    “U.S. homeowners who owe more than their houses are worth will get new help to refinance in a government plan to be unveiled as early as Monday to support the battered housing sector, sources familiar with the effort said.”

    Don’t be fooled by the fluff propaganda. As I mentioned back then, this is nothing more than a bailout for the Fed. And it clears up a lot of the MERS fiasco. With the added benefit of trapping those few who are in a no-recourse loan, and making it a recourse loan.

    Sometimes I just gag at CNBC’s stories.

  • With all the foreclosures and short sales (and by the way, us Floridians have you beat on both measures!), it still amazes me that the banking system hasn’t figured out a way to let homeowners, who have been current with their payments, refinance to get lower rates and payments. Hmm…lets think about this…the banks continue to receive payments on the same principal amount, just with lower interest, so they don’t end up in the real estate business , don’t incur the expense of foreclosure, don’t lose a revenue stream, and don’t necessarily have to write off the loan. The homeowner gets to stay in their home, continues to pay out based on the original principal, has more monthly cash to spend to help keep the economy going, and doesn’t have to deal with any diminished equity issues until they sell organically (empty nester downsizing, relocating for work or retirement), at which time they’ve had an opportunity to hopefully recoup some of the lost equity. Just imagine if we’d been doing this for the past 3 or 4 years…I’d be housing prices would be a lot stronger than they are.

  • The elderly will not be forced out of their homes if Prop 13 is repealed. A reverse mortgage will take care of their needs. Of course, their heirs will lose out, and that is what Prop 13 is really all about. And how many elderly folks are there left that were retired when Prop 13 was initiated?

  • even in this down turn we’ve had for the last three years it seems that wall street and their banks have done pretty well.yet many people on main street are suffering. you would think that wall street and their banks would be suffering just as much as main street.is prop. 13 causing all this mess in california?really?so my question is.why has wall st banks been doing so well for the last three years with so many foreclosures on their books?

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