California dreamin' or nightmare?

"Thousands of Californians are moving out amid a sour economy and a housing meltdown," an Associated Press story at latimes.com, takes another look at the exodus of people out of California and the growing number of reasons why:

Mike Reilly spent his lifetime chasing the California dream. This year he's going to look for it in Colorado.

With a house purchase near Denver in the works, the 38-year-old engineering contractor plans to move his family 1,200 miles away from his home state's lemon groves, sunshine and beaches. For him, years of rising taxes, dead-end schools, unchecked illegal immigration and clogged traffic have robbed the Golden State of its allure.

Is there something left of the California dream?

"If you are a Hollywood actor," Reilly says, "but not for us."

Compounding California's problems since L.A. Land last visited this topic are higher unemployment and state budget woes.

California's obituary has been written before -- "California: The Endangered Dream" was the title of a 1991 Time magazine cover story. The Golden State and its huge economy -- by itself, the eighth-largest in the world -- have shown resilience, weathering the aerospace bust, the dot-com crash and an energy crunch in recent years.

But this time, the news just keeps getting worse.

A state board halted lending for about 2,000 public works projects in California worth more than $16 billion because the state could not afford them. A report by Sen. Barbara Boxer, D-Calif., last month said the state lost 100,000 jobs in the last year and the erosion of home prices eliminated over $1 trillion in wealth.

So what do you think? Is the California dream over or just hitting a bump in the road? Hat tip to commenter Renterinmidwil for suggesting the post.

-- Lauren Beale

Thoughts? Comments?

Photo: Mike Reilly packs a few belongings into a makeshift moving trailer at his family's home in Nipomo, Calif. The family has decided to escape California's high cost of living by moving to Colorado in February. Credit: Eric Parsons / Associated Press

Comments

[peteviles]

Best line in that story: "The saddest thing I saw was the escalation of home prices to the point our kids, when they got married, could not live in the community where they lived and grew up," says former California resident Barry Hartz says. "Some people call that progress."

Think about that for a second: he's saying a housing bubble is a sad thing. It makes housing unaffordable. Housing in LA is still unaffordable. Is there a single political leader in the state who understands that the housing bubble -- I'm not talking about its collapse, I'm talking about the bubble, the escalation of home prices -- was bad for California?

Just my two cents.

[up2daterealestate]

If you look at the states where housing is expected to grow you must look in areas that have an availability of underdeveloped land along with a pro growth, low tax policy. Neither of which describe California. Of all the states mentioned above, which state imposes the heaviest income tax on its citizens? California’s rate of 9.3% earns top honors.

Let’s face it. If the business climate is unfriendly and imposes a high tax burden, what incentives are there for business to locate here, create jobs and employ people? I can’t think of any. Again, the blue ribbon goes to California.

http://www.up2daterealestate.com/2008/12/02/californias-long-term-real-estate-issues/

[tarbubble]

Pete, this is the song I've been singing for years now. I have been trying to explain this to my older acquaintances (the ones who bought 10, 20, 30 years ago) how the bubble has affected their lives and scattered their families. I'm 33. Almost everybody I grew up with here in CA now lives somewhere else - Utah, Arizona, Texas, West Virginia, North Carolina. The ONLY reason we have stayed is so that our kids can know their grandparents & cousins.

[sunsetbeachguy]

Pete:

Thanks for commenting, the housing bubble (unlike the tech bubble) was a zero sum game.

Unfortunately, comprehending the concept requires an attention span greater than 15 minutes, so elected officials won't get it, ever.

If you don't like California, please leave fast, it will be better without you and with fewer of your kind.

[fezco]

Another scary factor is not so much 'how many people' are leaving, but 'who.' CA is business unfriendly. It is hard enough for existing business to attract and retain talent. Now that businesses are folding up shop, or exporting jobs, who is going to be left? Even in the article, it is an 'engineering contractor' who is bailing.

[Nick]

I have a mixed opinion. On the one hand, I've pretty much decided that unlike my parents and grandparents, I'm not going to live in California much longer; virtually everything about the state's politics infuriates me, I'm sick of paying egregious taxes for everyone else's waste and corruption, housing prices are still ridiculous even after a 30% decline, and LA might be a very dangerous place to live in a recession. On the other hand, I'm told that California's weather and natural beauty will be plenty to keep it a desirable place to live despite everything else working against it, and thus people will always want to move out west and live the proverbial dream. I honestly don't know which will prevail in the long term, but I'll very likely be joining the outflow soon.

[Nelcisco]

Interesting, I just heard Mike Reilly's exact quote on the Savage Nation radio show, hmmm Micheal Savage must read LA Land.

I would like to think that this is just a bump on the road and that long term California in its resilience will bounce back, but all signs points to it getting worse...for now at least.

Good post Lauren and good to hear from you Pete V.

[copter]

re: tarbubble's post. My situation exactly - I'm even the same age, 33. I remember thinking in high school (in an well-off LA suburb) how ironic it was that our teachers could not afford a home in the same city they worked in. But as of ~2003 they wouldn't even be able afford a decent home in the same county!

My guess is that CA will become so bad that the conventional wisdom will be that anybody who stays is crazy. Sort of like in the early '90's with riots, earthquakes, Falling Down (the movie), etc. Then maybe we'll have our chance to own a decent place, start over, and make things better again.

[D]

The more people that leave the better, IMHO so, Please leave.

[TrojanDLA]

Peter Viles, where have you been and what are you doing now?

California has become prohibitively unaffordable to the "average" American. The result being that if this trend continues, California will be the poster child for the great divide that is the "haves" and "have nots".

The middle class and below will be renters while the rich will live in homes. It is a crazy day when an "entry level home" is described as a $240,000 "fixer upper" in a bad part of town. One needs to have an income of $80,000 (in today's stricter lending standards) to buy such a home. Hello? Since when did a salary of $80,000 suddenly become the minimum just to own a run down home?

Yes, I know, people will say if you can't afford it, then leave. Well, that's my point: the middle class will leave, and that leaves behind the lower class renters (bellhops and housekeepers) and 6 figured executives.

[Owl Creek]

My husband and I left California about four years ago. We now live near Philadelphia. We lowered our expenses to the point where he was able to start his own business and I was able to return to college full-time.

We live modestly, but we can afford a few nice things. For example, we just returned from a 10-day vacation in Florida. When we lived in L.A., we couldn't even afford to go to San Diego for a weekend.

Do we like the winters? Of course not. Once I obtain my degree and our household has two full-time incomes again, we would like to move back to a warm weather state. However, (1) If I can't get a job in a warm weather state, I'll just have to keep dealing with cold winters; it's really not the end of the world and (2) We don't know if we WANT to come back to California. Certainly, housing prices would have to plummet for us to consider it.

I am convinced that a lot of people cling to California because they've convinced themselves that there is no other place in the world worth living. That is absurd. Just as any individual has dozens or hundreds of potential mates, any individual has dozens or hundreds of potential places where they could happily live. My husband and I have learned that. If we do not return to California, it will be because we are happy living someplace else.

[Steve]

The California Dream is over. I left the hell hole 18 years ago and you chumps that stay do not how bad it will get. Cali was paradise up to about 1980. The reality is if you are a CA native, white, have a brain and money you are gone. What will be left is the poor and the rich, a two class society. Thanks politicians and get out while you can.

[Cal]

peteviles:"Is there a single political leader in the state who understands that the housing bubble -- I'm not talking about its collapse, I'm talking about the bubble, the escalation of home prices -- was bad for California"

Considering they not only spent all the money the housing bubble generated in taxes they planned on spending at the rate of growth the housing bubble perpetuated. It is safe to say none of the political leaders thought the housing bubble was a bad thing. It made their jobs easier.

We have to get politicians at every level able to make the hard spending choices. But everything is the friggin third rail politically in this state.

Firemen- You can't dare limit any spending on firemen, they risk their lives to save you!
Police- See firemen
Schools- What, do you hate children! How dare you suggest any sort of limit in school spending.
Taxes- You can't raise taxes, Limit spending! (See the previous 3 statements).

If I didn't have such a wonderful job working with great people I seriously wonder if I'd still be in Ca. I can't imagine why so many who have marginal living conditions and could do so much better in a lower cost of living state still live here.

[usc]

i left LA since 96 due to costs and peace of mind after my wife and i realize that it would not be a place to raise my 5 children. We live in northwest, seattle, wa with no state income tax and can deduct your sales tax at the end of the year from you Federal tax.
My five children are well grounded and are bound for graduate studies. There are no temptations. People are still generally honest, here.
I am able to purchase a ranch of over 100 acres with all the water that i may use for free and free trash. The properties are still inexpensive. From the high of real estate bubble, we only lost barely 10%. not bad for a person from IInglewood, CA.
We still visit LA twice a year. With the saving from no income tax since 96, we have save a lot from our 15% stat income tax each year from our business income.
We are able to save for our children college tuition, grad schools, invested other properties, and travel in cruises and tour groups in Europe.
With the erosion of stock market, equity preservation, and job security, retiring does not look good in CA.

[Joseph The Real Estate Guy]

I came here from a Third World Country 30 years, and now this place is getting closer to that status.

Flee as soon as you can!

[Simonian]

Things are pretty bad. I started a website to keep track of store closing sales in Los Angeles and every day is something new. I wonder how much longer it can continue, see for yourself: http://www.LiquidationMob.com

[Mike T]

"The more people that leave the better, IMHO so, Please leave"

Be careful what you wish for. When your state's tax base up and leaves because your state government is downright hostile to business owners, what will you be left with? I can't imagine it is what you were looking for when you were wishing everyone would leave.

[Cal]

http://www.latimes.com/business/la-fi-himi11-2009jan11,0,5679574.story?ref=patrick.net

""Economic cycles haven't gone away," Sands said. "Every time somebody says, 'This time it's different,' the end is near.

"People in real estate often are not very analytical. By choice, if you're in a selling business, you have to be optimistic or you'll go into depression when things go bad.

"But you have to tell the truth. If somebody has to buy a house, they're going to buy it anyway -- even if prices are going down. You tell the truth, at the end of the day you'll win.""

Short interview, but a good one.

[Laker]

"...Sen. Barbara Boxer, D-Calif., last month said the state lost 100,000 jobs in the last year and the erosion of home prices eliminated over $1 trillion in wealth....."

Sen Boxer is one of the dumbest elected officials in the state. She cannot comprehend that the $1 trillion in housing wealth was simply an illusion. In fact housing in CA is still over priced (2003 levels in many areas) so that means there is still delusional wealth that needs to "disappear" before we are back to normal levels.
People see that their kids could not afford to leave in the same neighborhoods. The sad part is that most buyers of 1990's can't afford their own homes today,....

Out politicians were happy to spend all the money generated from the super inflated sales prices. They gain both by property taxes, and by home equity extraction that went directly into people spending the money buying crap and generating nice sales tax revenue. It is quite amazing to see how a family of combined income of $50,000-75,000 was pulling equity to the tunes of $50,000 EVERY YEAR from their house and use that money to spend. Now this cash cow is dead, and that is why all the consumer spending is down. Many jobs created from 2000 to 2007 were based on that money...
Our government will do anything they can to swing the pendulum and bring back equity to people's houses so they can continue pulling money and spending.

Peter is wondering "...I'm not talking about its collapse, I'm talking about the bubble, the escalation of home prices -- was bad for California?...
"
NO. There is no state politician that can acknowledge that. Even on the federal level, you might count that number of congress people that do understand that on one palm hand. not a joke.

[eternal summer]

is anyone else's heart fluttering seeing peter (viles) commenting....i am seriously crushing!

i remember these same stories in the mid 90's when i left for the east coast after the earth quake (only to return after the east coast had a "blizzard of the century"). it upset me to think about all the awful things here-with traffic & high cost of living/impossible to run own business being at the top of the list. "this is what some people call progress" is priceless! that is exactly how it spins down here in the south bay beach city realtors minds-ugh! i had a breakthrough realization on why the realtors bother my so much-the lack of connection in their part of this economic disastor! THEY WILL JUST NOT ADMIT THAT THEY HAD ANY PART IN IT! it's so frustrating!!!!

[el pez]

I came back to CA after many years away, and yes, it does feel a lot more like Brazil than it did when i grew up and lived here before as an adult... On the flipside you can make decent money here in LA and there is a lot of economy to get yourself into compared to many other places... Maybe if I have kids I'll bail again, I dunno. My cousin and his wife moved to Colorado- great schools, huge beautiful house- they don't miss CA at all. Very liberal politics and porous borders are maybe not such a great thing for the state after so many years- we have a tremendous tax burden and middle class flight for years now. But the sun and weather are amazing... I don't miss cold and humidity...

[sunsetbeachguy]

Mike T:

Please leave CA now. It will be better without you.

Your warning sounds suspiciously like the perma-bull real estate talk exaggerating the consequences of a reasonable state of affairs.

[356man]

Really, this is getting to be a tired thread. High taxes, high cost of living, illegal aliens, bad schools, etc. etc. Enjoy Philly, Seattle, Colorado, whatever, wherever. As a "smart, CA native, white male" I'm staying put. The more of you whiners that leave, the better.

[Tim K.]

In my line of work I directly see a change in the future residents of California. Typically, California college graduates can choose their first job from opportunities all over the country. If they are going to relocate to another region, this is when they do it. In the past, many California college graduates would choose to work here in Southern California or maybe up north in the San Francisco area - typically about half of them loved the California climate and developed contacts in this area during school. In the past few years, that's changed dramatically. I would say the number who would have chosen to stay locally was dropped by at least 50%, maybe even 75%. They are the *most* mobile group of people, and they are choosing better job opportunities and better standards of living right out of school. The only ones that remain behind are the ones who have family here.

It's quite sad, because the local businesses require a steady influx of talent to keep growing, and younger blood has always been an essential part of that. But more and more businesses I deal with complain they just can't get the talent they once were able to get about 10 years ago. This has hurt many, many local companies. About the only successful NEW companies in California are largely funded from ex-internet boom companies, but that talent pool was a finite one-time event.

I agree with other posters here - California will probably soon resemble other warm climate countries in central and south america, where the wonderful climate still attracts the ultra-rich and the super-poor. The ultra-rich can afford to barricade themselves in and avoid the public, and the super-poor can't afford heating. In almost every warm-climate country you notice this dichotomy. I'm afraid we've been heading down this path for a while now and it might be too late to reverse its course.

[el guapo]

One positive side effect, to my way of thinking is that there will be a lot less "keeping up with the joneses." Prices will continue to come down on housing and people may be more honest with themselves about how much they make and whether they need a BMW or $200 jeans. This means more happy hours and less "bottle service" in the bars, etc. Myself, I can do without a lot of the pretense. Reality will intrude on just about everyone and the middle class won't feel as if they're failing by not being able to keep up with their neighbor's phantom wealth. Living within your means will be "the new black." And it's a lot healthier than sweating out your huge debt obligation every night because you got your priorities screwed up and joined the rat race.