The high cost of commuting from the Inland Empire: 40 percent of workers commute out of the Inland Empire to go to work.
We’ve all heard of people making dramatic commutes from the Inland Empire into Los Angeles and Orange counties. Personally I know a couple of people making commutes of 1.5 hours each way. Daily. For a couple of these people the allure of a cheap and big McMansion was too loud to ignore. Especially with the unaffordable cost of housing in Los Angeles and Orange counties people have opted to move further out. What was interesting was a recent study examined the commuting behavior of those living in the Inland Empire. What was found was not surprising but the large number of commuters is startling. Beacon Economics prepared a study for UC Riverside’s School of Business Administration and found that 40 percent of workers actually leave the Inland Empire to go to work. It is a fascinating look at the massive commuting culture we have here in Southern California but also underscores the lack of affordable housing near places of employment. Of course “close†is relative at least when it comes to driving.
The morning rush out of the Inland Empire
As noted, the study found that 40 percent of workers head out of the Inland Empire for work:
“(RedLandDaily) The Inland Empire may be a great place to live, but if you want to make some money, you may need to drive elsewhere.
More than 40percent of residents from San Bernardino and Riverside counties commute to work outside the region.
The long drives pay off. Those locals tend to have higher-skilled jobs and bring back larger checks.
The findings were released last week in a report prepared by Beacon Economics for the UC Riverside School of Business Administration.â€
Of those commuting, where are they going?
*Of all those commuting out of the Inland Empire
20 percent are heading into Los Angeles County, 12 percent to Orange County, and finally roughly 5 percent to San Diego County. This underscores two main points that the research data also found:
-1. The area does not have enough jobs for those working/living there
-2. People with skills would rather commute and earn higher wages elsewhere
I doubt anyone enjoys long commutes on the 91, 60, 10, or 405. Unless you are some sort of car masochist, Southern California has some of the worst traffic conditions in the nation. There is now a term for those taking on large commutes, termed “megacommuters†or those that drive more than 90 minutes each way (or 50 miles each way). This jump in commuting is across the nation:
Source:Â Census
Of course this is largely accomplished by being in a car. Think of those taking the 90 minute drive each way from the Inland Empire to say Los Angeles County. You are spending 3 hours each day in traffic (or 15 hours a week). Say you work 50 weeks out of the year we are talking about 750 hours (93.75 additional days lost in traffic). Are people getting paid for this lost productivity? More importantly however is the reason for people taking this on. The desire for affordable housing but also, a piece of McMansion USAville.
Replicate scarcity
The above referenced article also had some interesting perspectives:
“The objective for cities in areas like the Inland Empire is to somehow entice these high-tech folks to move to the Inland Empire. We would have to create some type of Brentwood or Coto de Caza atmosphere to get them to move here,” Yates said.
“And trust me, they will relocate their business. The Inland Empire is a beautiful place to live – Suburbia USA – but we have very few places like a Coto de Caza or Brentwood. … So I think that is the problem.”
First of all, people buy tear down junk in many areas like Santa Monica not because of the brick and mortar, but for the land underneath it. Unlike parts of coastal L.A. or O.C., there is plenty of land in the Inland Empire:
Does it look like Riverside or San Bernardino counties is going to run out of land anytime soon? I think people also understate the cost of commuting. The IRS provides a standard mileage rate for commuting (55.5 cents for 2012 – up to 56.5 cents for 2013). This factors in fuel, wear, and maintenance on the car. I ran the numbers for a few scenarios:
Keep in mind this is not factoring in the health consequences for sitting in a car for so long (and also the mental toll). Also, the cost to heat a McMansion is going to run you into the hundreds of dollars since you are after all, living in an area with very high heats in the summer and cold nights in the winter. This is to say that the $200,000 price for a large home is not truly the ultimate cost of buying out far from where you work. Of course, there is obviously a market for this (hence the 40 percent that are commuting out of the Inland Empire).
The fact that the local economy is unable to support roughly half of its working residents tells you a lot regarding the sustainability of its economy. This is why any recession is usually magnified for this area. Apparently one of the solutions to the unaffordable prices in SoCal is move as far as you can until you qualify and can afford a large home. I’m sure readers have their own stories to tell about people they know making herculean efforts in their California commutes.
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68 Responses to “The high cost of commuting from the Inland Empire: 40 percent of workers commute out of the Inland Empire to go to work.”
With a vanpool, it’s under $300 a month to commute. As long as your job lets out before 3:00 pm, going in and coming home isn’t bad in the carpool lane. About an hour in and 1.5/hr home.
The amount of house you get for the money is what makes it worth it. I’ve been in 7 cities between LA and SB county, and Rancho Cucamonga and Fontana are the best. Pasadena was fun and entertaining, but the tiny dumps for 2X the money isn’t worth it.
P.S. That picture that shows the IE not running out of land is misleading. Almost all the desirable property is west of the 15, with exceptions being parts of Fontana, Corona, Riverside and Temecula.
2.5 hours in the car each day sounds pretty bad to me. Why not move to another state?
Exactly. Just imagine the health effects of sitting in the midst of all those vehicle emissions for two to three hours per day, five days a week.
That is exactly the question I would love to hear an answer to. Planning your whole life around a 2.5 hr per day commute for affordable housing is ridiculous. Unless you love socal so much or have unbreakable famiily ties here, why not pack up and move somewhere else. You can get a cheaper McMansion and minimal commute many other places in this country. Your quality of life will be orders of magnitude greater.
There are over 4 million people in the IE, so 1.6 Million of them commute in. That’s a sizeable number.
I would guess it’s mostly a family issue. I don’t know anyone doing it for shits and giggles.
I think another valid reason is some people (gasp!) don’t like LA or OC. The vibe, layout, relaxed blue collar dive bars, and desert activities of the IE are more appealing to some. You just have a higher chance of making more money in the coastal counties.
There are a decent number of high paying jobs in the IE, but not enough to support the overall economy. And the competition to get them (and reduce commute) is fierce. But there are many factories in the area, with senior workers and management that pay well. Same goes for restaurants, doctor offices, lawyers, etc. But most of the jobs are low paying floor personnel.
You just said Fontana is best, you are f ing insane, it’s the most disgusting city in the IE.
The Inland Empire is a big place, and there are lots of communities. I agree that commuting from Riverside or Murrieta can be pretty awful; Chino or Upland, not so much, yet both communities are just inside the San Bernardino county line. I live in Chino. On a good day, my commute is 10 minutes to the Park-and-Ride near Raging Waters, and then a bus which takes about 25 minutes to get from there to Downtown, about 2 blocks from my office. On a bad day (like if I miss that bus), I can drive down the 10 freeway to El Monte and pick up the Silver Line there which drops me off at the same spot in LA. So, there are ways to avoid the bad commute.
That being said, I’ve had a few rough nights going home, when traffic is really bad, but that tends to be people driving much further east than I’m going. At the same time, I lived in Monrovia for many years, and sometimes the traffic was so bad that it would take just as long to drive from there to Downtown as it can take from Chino. And Monrovia is almost adjacent to Pasadena.
But, I like living where I am. It’s quiet, not particularly crowded, and everything I need (grocery store, Target, nice restaurants, movie theater, upscale shopping) is literally 1-2 miles from my house. The nearest grocery store is even within walking distance. In the summer, the weather admittedly sucks. In the winter, however, the air is cool, the skies are sunny and blue, and after a rainstorm the mountains have snow that seems to come lower than in the San Gabriels further west. Our school systems out here tend to be very good, and we pay a lot less property taxes than in LA County, which, frankly, begins about 1.5 miles west of my house.
True, the ocean is a lot more than a few blocks away, but I can live without the beach for most of the year.
The real issue is that the majority of folks living in Santa Monica don’t work. I remember, when I was young, the traffic during rush hour on Lincoln BLVD was awful. I moved back to Santa Monica for a couple of years in 2007 and was shocked at how the traffic was actually better on Lincoln than when I was a kid. I believe that in the old days a large amount of residents of Santa Monica worked in aerospace so there was a lot of traffic in the morning going south on Lincoln. Now the traffic is from the 405 and most Santa Monica residents are sleeping in. Drive around the north side between 10 and 11 am and you will see very few spaces. I think there are a lot of Hollywood wanabies. I have no proof or links to articles on the internet but I would be shocked if this is not the case…
It makes sense based on my thesis that California is most affordable to those not earning ordinary income in the state. That leaves the coastal areas for the trust fund kids, those living out of state with second homes in California, and golden handcuffed retirees.
I lived in Santa Monica from 2006 to 2011 The only people I knew who did not work were welfare bums. My husband had a motorcycle so his Culver City commute was very fast. The traffic was insane during rush hour. We mostly walked or took public transit.
I probably knew a few more people in Santa Monica than you do given that I was born in Santa Monica hospital in the early 60’s went to Grant and Roosevelt Elementary Schools, Lincoln Jr. High School, Santa Monica High School, Santa Monica College, etc…
I think traffic is relative. I remember being very surprised with my commute when I moved back to North-side Santa Monica. It was down to Huntington Beach. I did leave before 7 am but it was like an hour and a half at most and the traffic actually moved most of the time. Given my life long experiences on the 405 (the freeway to avoid at all costs) this was actually better than I anticipated. I would argue that the real traffic on Lincoln Blvd comes out on weekends especially during the summer. I don’t think this has anything to do with work commutes…
Lincoln is a nightmare from MdR all the way up to Wilshire, especially during the weekend. I can’t image it being much worse.
Where I work near LAX we have few commuters from the IE, but several from the Antelope Valley and many (including myself) from Ventura County. Maybe not quite as bad a commute as the IE, but pretty darn close. Most of us wake up by 4 AM every morning and get in by 6 so that we can try (and usually fail) to beat traffic by leaving by 3PM. Many folks either car or van-pool, but a good 30-40% of us idiots persist in driving solo. Hey, it’s the LA way.
Interestingly, none of us really chose the commute when we bought our homes. We all were “smart” and chose homes within an easy drive of work. But we all chose careers in the Aerospace industry. And after years and years and waves and waves of consolidation everybody sooner or later seems to end up in El Segundo. Our younger colleagues are less entrenched, without kids and often not yet owning a home and simply move when the jobs move. The older workers, though, usually stick it out as the commute grows incrementally more awful.
I’m not really complaining. Aerospace is still a good job for most of us. I’m just explaining how, even with the best intentions, supposedly rational folks can find themselves with a daily commute most would think is nuts.
Interesting, first-hand insight. Thanks.
You forgot to mention the additional 1% for Mello Roos. People who commute 3 hours a day usually don’t stay married that long. I tell people that if they want a family, move to Texas. Also, many of the people drive gas guzzling SUV’s or pick up trucks, so the cost is a lot more than .55 a mile.
What would happen to prices of more commuters were willing to to do what it takes to buy or rent closer. Would that raise costs for housing more than it is now?
There is still a lot of neighborhoods in LA that can be gentrified.
But then you have to live in a shitty neighborhood and wait for who knows how long while hoping it will get better.
Fine for the pre-hipster stage set but established adults don’t want to deal with that.
Why are so many jobs crowding into Westside LA, when that is the least accessible place from most of the rest of So Cal? Downtown is easier to get to, despite the traffic.
I work at home, and look out over the ocean from the three story McMansion I built myself. I have low property taxes and it takes me three minutes to drive to shopping centers with two large, newer competing grocery stores. Instead of commuting three hours a day, I can spend that time kayaking, working out or playing around on the computer.
I live on the North Carolina coast, and build beach houses in an island town that reminds many people of the Southern California beach towns of the 1960s. Was there any better place to live in the 60s than in some California beach town, riding around with the top down listening the the Beach Boys? Probably not, and it sure beat the heck out of commuting three hours a day.
Hurricanes have a habit of hitting the coast, such as Floyd, Hazel and Donna. This makes for a lot of rebuilding. You are right, you are busy building the beach houses. Hurricane never hit Manhattan Beach.
I could only find two of the three hurricanes you listed, the most recent being in 1960. It’s true, Blackswan, you might want to count on having to fix and re-model every 50 years or so. Do you have insurance on your home, by any chance? And yes, Manhattan Beach has no hurricanes in the last 50 years. I can’t think of any other natural disasters threatening Southern California, either. Besides, LA has a history of handling chaotic situations really well, anyhow.
KR – I have two words for you “Earth” and “Quake”.
lol…awesome setup, I didn’t see that coming. I think you might have been a Manhattan Beach trust fund kid. I’m in Naples, Fla. now and just visited Redondo Beach for the first time in years. Even if the cost of housing was equal (Naples is much cheaper), I’d still be living here. Sadly, 60s/70s/80s Southern California is gone, once and for all.
Longest gap between storms for Naples Florida
15 years 1969-1985
How often Naples gets affected?
brushed or hit every 2.71 years
Average years between direct hurricane hits.(usually within 40 miles to include small hurricanes)
(20h)once every 7.05 years
Average MPH of hurricane hits. (based on advisories sustained winds, not gusts)
111 mph
Statistically when Naples should be affected next
1 year overdue
Last affected by
2008 Aug 19th TS Fay passesover the area with 55mph winds while moving NNE
Give me Manhattan Beach any day over Naples.
Floyd and Fran hit the NC coast pretty hard in the 1990s, but no, I don’t have hurricane insurance (wind and driven rain) on my beach houses. It’s crazy expensive, the deductibles are huge, and insurance companies will climb a tree not to pay after a storm. On top of that, thanks to the Biggert-Waters Flood Insurance Reform Act of 2012, flood insurance premiums are insane, and I’m not just talking about the coast. The Federal Flood insurance on Adams Mountain Cafe, in Manitou Springs, Co, went from $500 a year to $48,000 a year, after the August 9th flood.
I own my beach houses free and clear, but if I had a mortgage, the mortgage company would force me to pay both home owners insurance and flood insurance. Those premiums, plus property taxes, property management fees and repairs, would make owning these homes a losing proposition.
Sadly, I grew up in Redondo Beach and though it is obvious the LA of my childhood isn’t coming back I still want to live here. Hurricanes aside, Florida is humid and that is enough to keep me away!
What’s pathetic is that even commuting from Redondo Beach to Santa Monica is damned near unbearable and can also take up to 3 hours per day (if you live in South Redondo.) It’s the same if you live in the SFV or SGV. I dream of finding a job somewhere near Long Beach, Pasadena, or anywhere besides the West Side of LA, so I don’t have to play this game. Recently I gave up and got an overpriced apartment near work. I don’t even like the west side! I had to ditch the commute because I’m not the sort of person who can get up at 4:00 am. Or 7:00 am for that matter.
I don’t know what happened to concentrate a large number of the decent paying jobs into a relatively small area on the west side of town but our transit system wasn’t really designed to handle it. There is currently no effective mass transit to the area and there’s a lot of denial and resistance to building it, for reasons I don’t understand. The construction that’s been going on on the 405 hasn’t helped either.
My workplace is in Pacific Palisades – a very nice area near Santa Monica. Not really my cup of tea, but very nice. My boss gets up at 4:00 am because several days a week she has to drive to Santa Barbara where a lot of our projects are located. So, I suppose it doesn’t matter where you are in Southern California, there’s always hell to pay if you have to get somewhere for work!
Blackswan please stop these strong hints on where in NC you are – I live there too, and some of us living there don’t want a population explosion in our backyards. I read this blog because some of the posts are funny, some are insightful into our nation’s economy, etc. Not sure why you read it or why you periodically brag about your spot in NC.
I’ve made that drive a few times and it seems like a road trip! Wasn’t this area hit hard with home prices at $600K in 2005 down to $$200 in 2009? Is it back up again?
It will be interesting if support for the VMT (vehicle miles traveled) tax gains traction. I think this will be reality sooner than later in CA, seems to be a real push to get people moving back to urban cores…this tax would be no fun for megacommuters.
http://www.cnbc.com/id/100359287
http://articles.latimes.com/2013/oct/26/nation/la-na-roads-black-boxes-20131027
Gotta feel for those who bought electric cars, “doing their part”; do the right thing, not use gas, but oops no gas tax paid, here’s a new tax for ya…
I wonder if this could hurt the economy as well. Would Jane Sixpack make that “necessary” twenty mile trip to a mall today to buy another purse, or her fiftieth pair of shoes? Or decide she doesn’t need it, stay home? Interesting.
No way. A tax like that would be so onerous it might generate enough backlash to put the GOP back in power in Sac-town. People can’t instantly move to an apartment complex in Century City to avoid commuting in from Ontario. School issues, etc. Besides, gas has gone up from just under a dollar when I started driving, and I’ve seen little change in people’s driving habits with a 300% increase in gas prices. Maybe if the VMT doubled the cost per mile, but I still say it’s a non-starter.
If this happens, you can kiss the Inland Empire goodbye. I’d fold em and leave as well.
Although this is a hige invasion of privacy and freedom. And I’ve always questioned how they would do this on pre-1996 cars, they don’t have OBD-II computers. I personally love 60’s to 80’s cars but so many image driven folks in L.A. would die before buying a 76 Thunderbird.
The GOP isn’t coming back in California, and that’s coming from a GOPer. California just raised its gas tax 10% from 36 to 39.5 cents per gallon. That’s the highest in the county. In the name of “fairness,” it’ll be important that every Californian account for their environmental footprint from commuting.
The GOP could easily come back to CA. Silicon Valley and SF are filled with Libertarians. Most of the remaining hippies are Libs (Keep your hands of my weed-type people) and the tech industry is largely Ayn Randian these says. The entire area is gentrified, from Marin all the way down to San Jose – meaning wealthy people, the GOP’s natural constituency. If a GOP candidate ran for mayor of SF on a platform of removing the homeless, they’d win in a landslide because the young tech workers pretty much hate the homeless. I’d give it 20 years, but the GOP could make a comeback in the Bay.
The commute tax system has just begun and the sorry hell of it is that most people are completely oblivious to it.
Tolls.
Right now it’s just a couple of stretches on a couple of “freeways” where a congestion pricing scheme has been put in place. Soon, it will be marked as a success and rolled out to other well known roads that begin with “The.”
Eventually as the public comes to terms with the idea that it’s “normal” to pay to ride in the carpool lane, it will creep into the non-carpool lanes.
That’s your road tax and there’s no significant backlash because of the deceitfully skilled manner in which it is implemented.
Politicians and the special interests that stand to gain are filled with anticipatory glee over the “revenues” to be made from this.
I have a book called Edge Cities that was written back in the late 80’s or early 90’s. It’s all about why one suburban town explodes in growth and not another. Most of the reasons are things everyone would quickly guess. Anyway, the author, says that he did research and that all throughout history, whether it was walking through a walled city, jumping on a horse, cranking up your Model T or now jumping in your SUV, all throughout history at around 45 minutes travel time each way, from home to work or back, most people start to say, “Uh, this is getting to be a bit too much.” Tolerance for long commutes varies from person to person but this struck me as about right. My first job out of school involved a commute of 55-65 minutes and I started to hate it.
That’s interesting.
I have found that those cheaper houses in the IE stay cheaper. They do not appreciate as much as those closer to LA. OK with me if that does not bother you. I used to commute to Pasadena from Walnut for work when in my 30’s. In my 50’s, forget it.
Great inputs from those on the ground, past and present.
I’m wondering if anyone has a handle on how much of the SoCal crowded-out/displacement-to-IE mega-trend has to do with… let’s call it… The Minority Criminal Sub-class? i.e. aren’t there huge areas of LA County, and even LA proper, that were long ago “surrendered”, given up as “barrio”, “ghetto”, “Section-8-ville”, etc.?
Or does financial pressure and gentrification confine “the slums” to areas that would never be desirable anyway, because of proximity to dirty industry (petro drilling, tank farms, ports, etc.)? Kali’s extreme Lefty laws make this Floridian wonder if there are de facto “exclusion zones”… hmmm…
I think you bring up an interesting point but I would say that this is less of driver now than it was back in the 60’s, 70’s and 80’s. I remember the reason that many moved to the outlier areas in the 80’s was due to crime but I don’t think that is as much of a driver anymore. Many of the desirable and even less desirable parts of the west side that were considered bad parts are no longer affordable to anyone but the rich. I can think of at least 2 examples.
First would be the infamous “Ghost Town” which was a section of Venice that was south of Rose, west of Lincoln, north of Washington BL and east of Pacific and Washington Way (AKA Abbot Kinney). This was V13 territory and was an absolute ghetto when I was young. Domino’s wouldn’t deliver there. There was/is a housing project on 5th and Brooks smack in the middle of this area. If you looked at this area on a map you would say this is prime real estate and eventually Julia Roberts moved in and now no one can afford the ghetto shacks…
Second would be South Side Santa Monica north of Pico Blvd. and south of Olympic. This was a very bad area in the past with gangs etc. No one in their right mind would walk down Pico at night. The 10 freeway runs right through this area but due to proximity to the ocean you can’t afford to live there anymore as well. I think the desirable areas are slowly being swallowed up by gentrification.
Correction 5th and Indiana.
The West side is very desirable to live. So the developers place the money in the Councilperson’s campaign account and other places perhaps, and the gangs areas in the West side have a way of disappearing by one way or another. That 3 strikes bill also contributed to cleaning up the areas, but now Gov. Brown says that he can’t afford to keep those folks locked up, so they are BACK.
Is the employment in SoCal worth this kind of life style.???
Do you have employment where you are?
The economy is most cities is better than SoCal.
To me, no. However, CA presents to me like an odd cult/religion people are born into/join. They don’t dare criticize/question new rules/laws no matter how onerous or restrictive they become, they adapt/adjust their lives sacrificing more every year, repeating doctrine about weather, California Superiority. Their faces cloud when someone dare suggests there might be alternatives (why would anyone leave Paradise?) Those who leave are discredited, mocked (good luck with snow/heat/hurricanes/tornadoes, getting a decent job or a meal, or finding any cultural activities, pal!) Those that leave are spoke about in hushed tones, like they once they left desirable CA they fell into some fire filled pit, where they plead day and night, I made a mistake…let me back in, I’ll do anything TO COME HOME!
Your fantasy may make you feel good, but please don’t put thoughts into Cali minds. Most of us stick because our families are here. And I know many who have left here, some for other countries, and are doing fine. Characterizing Californians as idiots may make people feel better, but we’re no more crazy than the rest of you.
HaHa! Yes, many of us were born into the commute Culture. We have family scattered throughout So Cal, and are not transplants. We’re brainwashed how great we have it, and consequently wouldn’t dream of living anywhere else, cost of living notwithstanding.
I write this from my 1BR apartment, the rent here would get me a suburban home elsewhere. But where would I go on holidays?
Where there’s major international business you’ll find high paying jobs, people with money, houses that cost a lot and godawful traffic. I’ve lived and worked in the SF Bay Area and the NYC area and they’re just about as bad in these respects as SoCal. Is it worth it? Evidently to those of us who put up with it.
The particular attraction of LA may have something to do with the weather, but for many it’s just the same old ambition (and perhaps greed) that drives us all. The folks I work with who have hellish commutes are also all millionaires by the time they’re 50, so don’t cry too hard for them.
I’ve considered getting out of Dodge before, but the sad fact is that despite the attractions of flyover country I couldn’t find a job paying half what I now make if I bailed for the hinterlands. If I moved somewhere else and kept a job like mine I’d end up in an area with most of the same problems as SoCal.
So while I truly hate the traffic and the cost of housing is a continual source of irritation it’s worth it for me to stay. I suspect that everyone else in the Aerospace, Entertainment and International Commerce businesses that thrive in LA has made the same determination.
Long commutes put stress on marriages. Arriving home after fighting all that traffic, they tend to take out the accumulated hostility on the significant other……
Housing to tank hard soon!
I would imagine that the stock market would be a more likely candidate for tanking in 2014. If that is the case, then there may actually be more upward pressure on real estate. I am hands down the biggest housing bear on this site but I can see a scenario where housing holds through 2014. The fact that there really is no housing market makes it hard to predict when and how hard it will tank. I am personally dumbfounded by how well those who pull the levers were able to make this artificial recovery seem so real…
You’re pointing to the WRONG weak market. The zany one is the JUNK BOND market.
It should be THE leading wedge of failure.
Credit markets almost ALWAYS lead equities markets, FYI.
That’s why analysts who’d never by a bond in their life spend so much energy monitoring the credit markets.
Going back to the 1929 crash, the credit markets went south MONTHS before the break. You’ll find such correlations across all markets at all times.
Debt investors are simply more cautious — and the first to pull in their horns. Also, shifts in Fed policy occur in the credit markets FIRST.
So, drop all stock market guessing — and just follow the BIRD DOG: the credit markets.
These days that means the Junk Bond/ High Yield debenture market.
The Fedsury has utterly juiced the Treasury and RMBS markets.
Blert – I think I don’t necessarily disagree with you other than I would say “buy†versus “byâ€â€¦
That aside, I think as you have said this time is different because of the bond “market†manipulation. I agree that watching what little of the current bond “market†which may not be directly manipulated “by†not “buy†the Fed/treasury might be helpful. However, this is not really the point I was trying to make. I think I was attempting to argue that the stock market has a higher likelihood of collapsing in 2014 than the housing market and this is coming from the biggest housing bear on this site.
You keep posting that same comment on every thread, irrespective of the thread’s topic.
IMO, houses will continues to rise in price. Why? Hyper-inflation. I can’t see how hyper-inflation can be avoided with all this money-printing.
With hyper-inflation, money plummets in value, while tangible goods (food, fuel, housing) goes up, way up. This is because tangible goods have inherent value, as opposed to worthless fiat currency.
The irony is that … rich people don’t work! They tend not to have to be at an office cubicle every morning at 8:30 am. So … a lot of the housing near the jobs is occupied by people who don’t ‘need’ to live there. These are the same NIMBY folks who block mass transit expansion through their neighborhoods. The world is backwards.
Yup.
Better said as the rich don’t COMMUTE.
Hollywood stars come to mind. They actually work, after a fashion; commute, not so much.
Ditto for the rentier class. They drive from property to property. If they do commute, it’s to a nearby subdued office.
One of my clients was the biggest landlord (commercial) in the state. You would not believe how humble his office was — and how humble his (obviously) personal assets were. He spent most of his energies trying to hide from Forbes so that they’d not nominate him for the 400.(!)
I’ve seen that behavior up and down the line with extremely wealthy landlords.
However, I could not say that they didn’t work.
The reality is that the rich tend to work insane hours — really NEVER leaving the ‘job.’ That’s how they made so much money in the first place.
You must be thinking of trustifarians. Those kids are a LOT rarer than you might think — starting with inheritance tax laws. To duck them, one must spend large on attorneys — a bleeding that never lets up. (They invented the system — get it?)
Only in Hollywood movie scripts (The Great Gatsby) do the wealthy find life boring — and investment opportunities uninteresting.
I give you Gates, Buffett, et. al.
I will grant you, they don’t commute. They also can’t sit still. Active management of assets is a JOB in and of itself — and should be respected for being such.
Only Communists think that the lucre just jumps into your lap. Such is fantasy.
There is ONE crowd where that is true: Royals. But, how many royals are there?
“By” not “buy” the way. I actually personally know quite a few trust fund babies. These kids are now in their 40’s and 50’s. Most of them have had things that some would call jobs now and then and some of them needed the job to… ahem… support unforeseen “expenses”. These are children of land developers, move producers, business owners, etc. You would actually be hard pressed at times to pick out these guys in a crowd but trust me they are there. The funny thing is that the bigger the fund the more f’ed up their life seemed to become. Not sure if there is a correlation there just a personal observation.
BTW, in California one loses ones Proposition 13 property tax shield the second you sell out.
What this means for retired folks is that they’re trapped. Their property taxes would EXPLODE the moment they moved away. (As in 6x current levels)
Read further up this thread for comments from ex-Californian retireds where this is of the essence — and why they can’t move back.
“Read further up this thread for comments from ex-Californian retireds where this is of the essence — and why they can’t move back.”
Did you read their posts? I don’t think any of them mentioned anything about wanting to move back.
You don’t “lose” Prop 13 coverage. The house tax evaluation gets reassessed due to its new sale price. It’s STILL under Prop 13. Your taxes at this point while higher ( due to the new sales price) are not going to rise any faster than a house that was not sold. It’s still the same rate just based on a different price. You’re just NOT paying the old owners tax amount.
Blert, you just summarized what I have been saying for years. Long time owners who greatly benefit from Prop 13 will not sell their property strictly because of the low taxes they are paying. The fact that they can gift the property and its Prop 13 tax basis to heirs adds even more pressure to stay put. There is no argument, Prop 13 greatly affects the supply/demand imbalance and results in higher prices…especially true in some highly desirable areas.
London may start taxing foreigners to sell real estate to curb home prices there. If it passes, checkers says foreigners buy US and other real estate instead, chess says it might curb worldwide foreign purchases of real estate, including in the US, as people may think US would be next to implement it. Who knows. Wouldn’t put it past desperate govts sitting on a bunch of foreign (possibly corrupt) money.
http://www.businessweek.com/news/2013-12-04/london-assembly-votes-in-favor-of-foreign-property-investor-tax
Strange….
The current British government is doing everything in its power to ramp real estate prices to the moon… things like providing the down payment!
Go to Max Keiser… He’s got PLENTY to say about the insanities of British maladministration.
The gain or loss from the sale of real estate has a source where the property is located. If you sell your California real estate and move out of state, the gain is taxable by California. The gain is taxable by California even if the real estate is sold when you are a nonresident. from Franchise Tax Board page.The Foreign Investment in Real Property Tax Act (FIRPTA) requires a FIRPTA withholding tax of 10% of the amount realized on the disposition of all U.S. real property interests by a foreign person. A buyer of U.S. real property interest from a foreign investor is considered the (transferee) and also the withholding agent. The transferee must find out if the transferor is a foreign person. If the transferor is a foreign person and the transferee fails to withhold, the buyer may be held liable for the tax. The seller must report that sale of the real property interests by filing a U.S. Federal Tax Form 1040-NR or Form 1120-F.
It’s common to depict those who move far outside of Orange County and Los Angeles areas as being motivated by the draw of a “McMansion” but increasingly it’s about locating any affordable housing whatsoever. I personally find it suspect that every single new developmen* in centrally located portions of LA/OC are priced in the mid $700Ks (or more!) for single-family homes. Seven years into the economic recovery a lot of these new developments sit partially vacant for years on end. Who’s underwriting the risk of offering brand new developments for which a significant portion sit on the market for years on end afterward? Might this suggest that Southern California is home to some sort of development fraud and/or perverse system of building incentives?
Increasingly in SoCal land near train tracks and adjacent to busy roads are being tapped for development despite the fact that there is almost no room for a greenbelt (setback). Brand new condos and “apartment homes” often command in excess of $500K in many areas of LA/OC. I know one such development that broke ground just before the financial crisis of 2008. It took years to complete the development and now, some six years later, if you drive past at 8:30 p.m. at night (or live nearby) you will see that almost half the lights are entirely out. There is still a sign out front advertising these “new” condos. They’re three feet from a noisy street, and they’re still severely over priced despite the fact that they remain nearly 50 percent vacant. All the while, centrally-located apartments that are 40-70 years old — most of which FAIL to meet modern seismic building standards — are commanding in the LA/OC areas prices that were once only reserved for home mortgage payments! I would agree that in the 1980s and 1990s the motive for relocating to the Inland Empire and elsewhere on the outskirts of Orange County and Los Angeles was the search for bigger and more luxurious housing — the ’80s were the “me” (material) decade, after all. But in my view, the expectation of finding a “steal” on a McMansion hasn’t been the main drive of the outflow to these areas in the 21st Century. Low and median-wage singles and young families, increasingly, are commuting further and further into LA/OC to work because they can’t afford to live independently (without roommates or doubling up with other family members) otherwise. (And with the steep rate of student loans, combined with the outsized cost of housing in LA/OC, we’re also seeing more adults — college grads — in the “boomerang” category: living at home, attempting to save money with Mom & Dad.)
It puzzles me to no end who is underwriting the risk for developers who erect quarter-million-dollar homes amidst working class neighborhoods in non-affluent areas of Los Angeles County and North Orange County. Doesn’t it occur to them that those who can afford to spend ~$800K on a home might choose to live in a more affluent community near better schools? With trends like this, it’s no wonder so many Southern California families have been forced to make a choice between centrally-located housing (or rent) that studies have shown are consuming in excess of 40 percent of LA residents’ take-home income and a commute that is equally outrageous both in terms of time AND expense. Talk about being between a rock and a hard place!
In my view, decades worth of ineptitude, if not outright fraud, on the part of local governments are to blame for the diminishing quality of life in SoCal. Residents in LA/OC spend less time with their families because they spend more time commuting, there is no end in sight for the increasingly congested highways (freeways that were built for 1940s population levels), there is poor recognition on the part of homeowners and renters for the health risks of living on top of these clogged freeways (particulate pollution is a major contributor to heart disease, asthma and cancer risks), and we face ongoing challenges in this State improving on air quality (worsened by the fact that increasing numbers of SoCal residents have been forced to move to outlying areas not just for the sake of a McMansion but for *any* affordable housing whatsoever).
There is one common denominator to the dwindling quality of life in SoCal and that is the unwillingness to implement a regional affordable housing strategy. The Lusk Center for Real Estate has rated Los Angeles THE least affordable city in the country because of a combination of housing shortage, lower median wages relative to cost of living here and comparatively few affordability requirements (significantly less in comparison to San Francisco, New York and elsewhere).
If we are going to improve quality of life, reduce congestion, allow people to spend less time commuting and more time with their families, slow suburban sprawl, improve air quality, and reduce health risks State and local governments MUST begin to coordinate a strategy that allows median wage earners to afford median housing costs in LA, OC and elsewhere. California is already in the midst of a “silent exodus” of mid-skill wage earners who can no longer afford to live here. When the people who make your coffee at Starbucks, the people who staff your local Walmart or Home Depot, and the people who clean your hospital, office or school can’t afford to live HERE it also places growing pressure on entitlements, both state and federal. We can slow the “bleed over” into dependency upon entitlements, the increasing health impacts of urban sprawl, the time we throw away just driving to/from work, and work to preserve what little is left of the rural California landscape by addressing this ONE HUGE PROBLEM: affordable housing.
It’s time for a all-hands-on-deck effort to remediate the affordable housing shortage. Citizen groups, too, must begin to mobilize to protest the City governments that are enabling what little land resources we have for new-home construction to go toward UNaffordable housing. To anyone who is remains skeptical, here’s my challenge: Make a mental note of the new housing developments you see in and around Los Angeles and Orange County — and what the cost is for that new housing relative to local market values. Next, watch and wait: How many of those developments obtain 3/4 occupancy within 5 years? If the answer is “not many”, ask yourself WHY your local government has sweetened the pot for developers who are building housing that is not in line with what the market can bear.
As long as developers are able to offload the risk of building properties that don’t sell, they will continue to build properties that are largely out of reach to the families who live and work around them. Where is the investigation? Where is the reform? Why have State/local incentives gone to developers who construct premium-priced single family homes and condos in the midst of low- to mid-income Cities? And finally, where are our leaders in the California legislature when it comes to keeping our local governments honest about how “affordable” new housing construction is within any given California community?
There out to be some kind of vacant property tax so these owners of empty projects will sell or rent these properties at a loss, and then the properties will be more affordable than they might have been otherwise!
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