The state of California has a tax structure that is inherently in favor of stock and asset bubbles. The biggest sources of income tax for the state include personal income tax, corporate tax, and sales tax. These sources are completely dependent on the health of the overall economy and can turn on a dime. Compare this to a state like Texas that relies much more heavily on property taxes that tend to remain more stable even in recessionary times. But when times are good, the state of course manages a way to spend the money that is coming in. The current housing market is pushing out the middle class but money is flowing into central coffers so all is good. The Board of Equalization shows the big jump in real estate values across the state. Total state and county assessed property values are up to $4.918 trillion, up 6 percent from last year. By the time it all implodes, “I’ll be gone and you’ll be gone.â€Â How stable are the tax sources for California?
Many people are familiar with N.W.A. especially if they have been in the L.A. area for two decades or more. I would imagine the Taco Tuesday hipster crowd would be familiar with this at least. It is interesting that there is this resurgence on reviving the old and trying to make it into the new. Trying to bring back the past in a new light. Since the movie Straight Outta Compton is getting a ton of press and certainly is going to highlight the city, let us take a look at Compton for some real estate deals.  The herd mentality is always strong with some people. They say you need a few prerequisites for high prices: weather, location to city hubs, and of course the forever gentrifying trend. Yet when you bring up a place like Compton, a place that meets these prerequisites, suddenly it is a no go. They’ll then throw in schools (well there are many hipster hoods that have crappy schools and prices are still going up). In the end, it is lemming like behavior that has forgotten the recent past (we are talking 2005 to 2009). Let us see what we can find in Compton since I’m sure the movie is going to generate some buzz.
Last year there was research showing that L.A. County was the least affordable place to rent and this imbalance was leading to rental Armageddon. The research of course highlighted what most of us with reasonable minds already knew and that was based on local household incomes, prices were out of control. Prices were being driven up by outside factors like investors, flippers, foreign money, and those willing to leverage every penny into a 30 year mortgage. A more recent UCLA study continues with this trend showing that L.A. County is now the least affordable place to buy a home as well. Wait, isn’t San Francisco or New York more expensive? Absolutely but households earn more so their ratios aren’t as in insane as in our all hat and no cattle beach paradise. Someone I know that lives a few miles from the beach spent one hour driving to the beach this past weekend and another 30 minutes fighting to find parking. We do have great options here but 10,000,000+ people fighting for the same spots can add some constraints. So now that we know L.A. County is the most unaffordable, what else did the study find?
I wanted to continue in the vein of high housing costs in Northern California because the mania is so out of control. People are funny creatures. Everyone wants a piece of their own cave and some are willing to pay every penny of disposable income to live in a certain zip code. That is until, the mania fades out. I saw a lot of this during the first tech boom in the late 1990s. We are in deep and frothy territory here and valuations are out of control for many tech firms. Bay Area housing is largely driven by the stock market and VC money flowing into start-ups for those hard to find unicorns. Like the old school gold rush, those running side hustles seem to be doing well catering to this new tech mania. Many readers sent over an article about an enterprising person that has a warehouse full of shipping containers. What is he shipping? Your hopes and dreams for affordable housing in San Francisco.
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