California: Trailblazer in a bad economy

You know the old adage -- California always starts the trend. Well, turns out we might have also started the economic downturn that is now sweeping the country. According to the Wall Street Journal, California's real estate market appears to have been the first to go sour three years ago -- and our recession might show the way for the rest of the country. Consider:

California was also at the leading edge of the nation's recent housing bubble, which is where its current problems started. Home prices in California rose higher and faster than in most of the U.S., and started weakening earlier, in 2005. Some mortgage-holders defaulted. Others struggle along under a mountain of debt. The problems spread to the state's financial sector, which was heavily exposed to local real estate. As Californians cut their spending, job losses spread from the housing sector to retail stores and auto dealers. Now the state's unemployment rate is 7.7%, among the highest in the nation.

The WSJ notes that it wasn't always this way. California was slow to join the recession of the early 1990s (but was ultimately hit hard). So what does all this mean for the future? "It's unclear whether the state, as one of the first to enter an economic slowdown, will be among the first to emerge. Problems in the broader economy could also hit California in a second wave. Stephen Levy, director of the Center for Continuing Study of the California Economy, expects the state's economy to get worse before it gets better."

Great.

Meanwhile, there was cautious optimism Wednesday that California might not be hit by the massive budget cuts some feared because of the credit crisis.

-- Shelby Grad

Photo: A foreclosure auction earlier this year. Credit: Carlos Chavez / Los Angeles Times

Comments

[Mark Jacobs]

This shouldn't be any surprise - we've lived beyond our means much longer than the rest of the country with housing prices soaring beyond all reasonable designs. We just kept buying and the prices just kept going up. I could afford my house before the housing market started to see rising interest rates, but I saw the writing on the wall and got out. Unfortunately, I put all the equity into a retail business that did very well its first year then plummeted as our markets crashed - badly. Now, I rent a house and work from it, having transferred my business to online only. Slow but fortunately people are beginning to look inward about their own lives and that's exactly what we're set up to help them do @ manypathsbookstore.com. I've been riding the curve....let's see if the downturn actually puts me ahead of it for a change.

[PacificGatePost]

HOWEVER THE PAIN IS PAINTED OR PRESENTED, TAXPAYERS FOOT THE BILL

Billions were made through this bubble, and there is plenty of blame to be spread around, however, where will the magic come from to REALLY solve this mess?

http://pacificgatepost.blogspot.com/2008/10/leadership-missing-in-action-dont-blame.html