The California bubble, bigger than the other ones

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Morning bloviation: Most reporting on the American economy is based on national statistics, giving the impression that all 300 million of us are in the same boat, rising or falling together at roughly the same time. Of course we all know that’s not true -- there are big differences between regional economies.

Which brings me to a story from the New York Times earlier this week on the effect of the weak housing market on car sales. Here’s what grabbed me: ‘In hot markets like California, nearly 30 percent of all consumers tapped into the value of their homes to help finance their new cars, according to CNW Marketing Research.’

Look at the chart put together by CNW measuring percentage of new-car purchases in 2007 that were made with home equity loans:

1) California 29.8%
2) Florida 19.7%
3) Illinois 14.7%

National average: 11.8%

Think about that for a second: Californians were nearly three times as likely as the rest of the country to use their homes as ATMs during the bubble (at least for buying autos). You know that stereotype of the equity-rich homeowner who borrows against his or her equity and splurges on a new car, a vacation, etc.? That stereotypical homeowner is a California homeowner. Why did Californians behave differently? Because theirs was a bigger housing bubble. They had more equity to borrow against. Their housing ATM had a higher withdrawal limit.

Does this mean that the fallout from the housing crash will be worse here? I’m guessing it does. The way I read the chart above is that California car dealers have just lost a lot more of their sales than car dealers in Chicago. Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: L.A. Times