Category Archives: California

California Tops National Poverty Rate As Prime Tax Donkey Demographic Plans “Exodus” From State

Despite efforts by state legislators at creating a socialist utopia, California still has the highest poverty rate in the nation at 19%, despite a 1.4% decrease from last year according to the Census Bureau. 

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Poverty and income figures released Wednesday reveal that over 7 million Californians are struggling to get by in the second most expensive state to live in, according to the Council for Community and Economic Research‘s 2017 Annual Cost of Living Index. 

And while California has a “vigorous economy and a number of safety net programs to aid needy residents,” according to the Sacramento Bee, one out of every five residents is suffering economic hardship – which is fueled in large part by sky-high housing costs, according to Caroline Danielson, policy director at the Public Policy Institute of California. 

“We do have a housing crisis in many parts of the state and our poverty rate is highest in Los Angeles County,” she said, adding that cost of living and poverty is often highest in the state’s coastal counties. “When you factor that in we struggle.”

Silicon Valley residents in particular are leaving in droves – more so than any other part of the state. Nearby San Mateo County which is home to Facebook came in Second, while Los Angeles County came in third.

They’re looking for affordability and not finding it in Santa Clara County,” said Danielle Hale, chief economist for realtor.com.

It’s not just housing prices driving the exodus, of course. Punitive taxes – more than twice as much as some other states, are eating away at disposable income. Nearby Arizona’s income tax rate is 4.54% vs. California’s 9.3%, while the new tax bill may accelerate the exodus.

As Michael Snyder of the Economic Collapse Blog pointed out in May…

Reasons for the mass exodus include rising crime, the worst traffic in the western world, a growing homelessness epidemic, wildfires, earthquakes and crazy politicians that do some of the stupidest things imaginable.  But for most families, the decision to leave California comes down to one basic factor…

Money.

Mass Exodus

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As you may or may not be aware, we’ve mentioned the flood of various types of Californians fleeing the state for various reasons; be it wealthy families who want to keep more of their income safe from the tax man, or poor residents leaving the Golden State because they are being crushed by the high cost of living. 

To that end, the Orange County Register notes a significant out migration of people in their child-raising years – as the largest group leaving the state, some 28%, are those aged 35 to 44. 

According to IRS data from 2015-2016, the latest available, roughly half of those leaving the state make less than $50,000 per year, while roughly 25% of those leaving make over $100,000. 

What did the OC register conclude?

Thanks to unaffordable housing, California’s moderate wage earners are going to have to leave the state, while only the wealthy and the impoverished residents will remain. 

But the big enchilada in California — by far the largest source of distortion in living costs — is housing. Over 90 percent of the difference in costs between California’s coastal metropolises and the country derives from housing. Coastal California is affordable for roughly 15 percent of residents, down from 30 percent in 2000 and 30 percent in the interior, from nearly 60 percent in 2000. In the country as a whole, affordability hovers at roughly 60 percent.

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Over time these factors — along with prospects of reduced immigration — will impact severely the state’s future. California is already seeing its population aged 6 to 17 decline. This reflects a continued drop in fertility in comparison to less regulated, and less costly, states such as Utah, Texas and Tennessee. These areas are generally those experiencing the biggest surge in millennial populations. –OC Register

And according to ULI, 74% of California millennials are considering an exodus

Where to? 

As we noted in June, these are the top 10 California counties that people are leaving, and where they’re headed (via the Mercury News): 

1. Santa Clara County

Out of state destinations: Arizona, Nevada, Texas and Idaho

In state destinations: Alameda, Sacramento, San Joaquin, Santa Cruz and Placer counties

2. San Mateo County

Out of state destinations: Arizona, Nevada, Texas and Washington

In state destinations: Alameda, Contra Costa, Santa Clara, Sacramento, and San Francisco counties

3. Los Angeles County

Out of state destinations: Nevada, Arizona, and Idaho

In state destinations: San Bernardino, Riverside, Ventura and Kern counties

4. Napa County

Out of state destinations: Arizona, Idaho, Nevada, Florida and Oregon

In state destinations: Solano, Sonoma, Sacramento, Lake and El Dorado counties

5. Monterey County

Out of state destinations: Arizona, Nevada, and Idaho

In state destinations: San Luis Obispo, Fresno, Santa Cruz, Sacramento and San Diego counties

6. Alameda County

Out of state destinations: Arizona, Nevada, Idaho, and Hawaii.

In state destinations: Contra Costa, San Joaquin, Sacramento, Placer, and El Dorado counties

7. Marin County

Out of state destinations: Nevada, Arizona, Oregon and Idaho.

In state destinations: Sonoma, Contra Costa, Solano and San Francisco counties

8. Orange County

Out of state destinations: Arizona, Nevada and Idaho

In state destinations: Riverside, Los Angeles, San Bernardino, San Diego and San Luis Obispo

9. Santa Barbara County

Out of state destinations: Arizona, Nevada and Idaho.

In state destinations: San Luis Obispo, Ventura, Los Angeles, Riverside and Kern counties

10. San Diego County

Out of state destinations: Arizona and Nevada

In state destinations: Riverside, San Bernardino, Imperial, Orange County and Los Angeles

Source: ZeroHedge

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Crisis Level: California’s Housing Affordability Plummets To 10-Year Low

California’s housing affordability crisis is progressively getting worse. It has now plummeted to its lowest level in 10-years, and less than one in five households can afford to purchase a median-priced single-family home in the Bay Area, according to new data released by the California Association of Realtors (CAR).

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CAR released its second-quarter Housing Affordability Index report (HAI), based on the percentage of all households that can afford to purchase a median-priced, single-family home in the state. CAR also reports affordability indices for regions and counties within the state. The index is regarded as the most fundamental benchmark of housing well-being for home buyers.

The percentage of home buyers who could afford to buy a median-priced, existing single-family home in the state declined from 31 percent in the first quarter to 26 in the second quarter; in the previous year, the index was at 29 percent, according to CAR’s HAI.

The second quarter marked the 21st consecutive quarter that CAR’s HAI printed below 40 percent; the index topped at 56 percent in the first quarter of 2012.

The report showed that prospective home buyers would need to have minimum annual income of $126,500 to prequalify for the purchase of a $596,730 statewide median-priced, existing single-family home in the second quarter. Assuming a 20 percent down payment and an effective composite interest rate of 4.70 percent, the monthly payments of a 30-year fixed-rate loan would be around $3,160.

The California counties that recorded 10-year lows in housing affordability were Alameda, Merced, Orange, Riverside, Sacramento, San Bernardino, San Diego, San Mateo, Santa Clara, Santa Cruz, and Sonoma.

Here are the areas where housing affordability is at crisis levels: Santa Cruz (12 percent), San Francisco, San Mateo, and Mono (all at 14 percent), and Alameda and Santa Clara (both at 16 percent).

According to CAR’s index, the most affordable counties in California during the second quarter were Lassen (64 percent), Kern (53 percent), Madera (52 percent), Tehama (51 percent) and Kings (50 percent).

Housing Affordability Peaked At 1Q 2012 

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Housing Affordability — Traditional Index 

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Affordability Peak vs. Current 

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In a separate, but relevant report from CAR, data shows California’s real estate market could have already peaked.

California Home Sales Declined for the 1 st Time in 4 Months

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Sales Lost Momentum as Mortgage Rates Continued to Climb

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California is one of the largest housing markets in the nation, as it has been a forward leading indicator for the rest of the country. Amid a housing shortage, which has blossomed into a housing affordability crisis, sales this summer have started to tumble, even as more inventory comes online. The supply of homes for sale increased annually in June for the first time in three years, according to the National Association of Realtors, which has depressed sales for the third straight month.

And now it seems, California’s real estate market could be in the beginning stages of a correction to fair value, after nearly a decade of speculation forced much of the median-priced single-family homes out of reach of the middle class – contributing to the housing affordability index at a 10-year low.

Source: ZeroHedge

 

California Gained Just 800 Jobs In June; Unemployment Remains At Record Low

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Employers in California’s trade, transportation and utilities sector cut jobs in June. Above, the Port of Long Beach.

California’s economic engine paused in June, as employers added a meager 800 new jobs. The unemployment rate held steady at a record low of 4.2%, according to data released Friday by the state’s Employment Development Department.

The June numbers represent a pullback from May, when the Golden State added 7,200 jobs. And the gains in May were much smaller than April, when employers boosted payrolls by nearly 26,000.

The slowdown could signal that California is simply reaching full employment. Employers are struggling to find workers. Or it could be a sign of sagging confidence among executives. A growing trade war with China, for example, has unnerved companies in California’s logistics industry and beyond.

Economists, however, cautioned against reading too much into one or two months of data.

Lynn Reaser, chief economist of the Fermanian Business and Economic Institute at Point Loma Nazarene University, said June’s disappointing figures “warrant attention” and could be a sign of uncertainty around trade. But they are not cause for “undue alarm at this point.”

“June’s weak performance could be temporary,” she said in an email.

Others said it was too early to see effects from the tariffs the Trump administration has placed on Chinese goods. An initial levy on $34 billion of Chinese goods, along with countermeasures by China, took effect in July following months of tariff threats and saber-rattling between the world’s two largest economies. More tariffs have been threatened.

Michael Bernick, an attorney with Duane Morris and a former director of the Employment Development Department, said the slowdown was expected after a sustained stretch of job growth, noting that the current economic expansion is now the second longest in the post-World War II period.

“California has a broad and diverse economy, and we’re now in our 99th month of employment expansion,” he said in an email.

Last month, employers in four of California’s 11 industry sectors added jobs.

The education and health services sector gained the most, growing by 8,000 jobs. The information sector, which includes tech companies and Hollywood studios, grew by 4,600 jobs.

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Employers in the government sector and the professional and business services sector also added jobs.

The other seven sectors saw job losses. Leisure and hospitality cut 4,000 jobs. The construction sector shrank by 2,900. Trade, transportation and utilities lost 2,600 jobs. Employers in manufacturing, finance, mining and logging and “other services” also trimmed payrolls.

Wages, meanwhile, rose 2.6% in California from the previous year, to $30.42 an hour, according to the federal Bureau of Labor Statistics, barely keeping up with the national increase in consumer prices. (The agency does not publish consumer inflation data for individual states.)

The number of jobs in Los Angeles County rose by 8,800. Employers in San Bernardino and Riverside counties added 3,400 jobs, while San Diego County employers cut 5,400. The number of jobs in Ventura County fell by 300. Orange County lost 100 jobs.

Across Los Angeles and Orange counties, wages rose 4.8%, to $29.39 an hour, though inflation took out a chunk of those gains.

So-called core inflation — consumer prices minus volatile food and energy costs — rose 3.5% in Los Angeles and Orange counties.

Sung Won Sohn, chief economist with Los Angeles consulting firm SS Economics, blamed June’s poor jobs figures partly on sky-high housing costs that make it difficult for employers to recruit and retain workers.

He noted that the number of people in the labor force — either those employed or looking for work — has been falling in recent months.

Dave Smith, an economist at the Pepperdine University Graziadio Business School, said that absent an increase in immigration, “we are just not at a capacity to add a lot more jobs.”

Bernick and others said that the economy appears mostly healthy despite the poor June numbers. But Bernick said federal trade policy could hamper further job growth.

“A widening trade war is the main threat to California’s continued employment expansion,” he said.

Source: by Andrew Khouri | Los Angeles Times

If California Is Split Into 3, What New State Will Have The Hottest Housing?

https://www.mercurynews.com/wp-content/uploads/2018/07/0715-BUS-SPLIT-CA-01.jpg?w=842In this June 18, 2018, photo, venture capitalist Tim Draper points to a computer screen at his offices in San Mateo, showing an initiative to split California into three states qualified for the ballot. Opponents of an initiative are asking the state Supreme Court to pull the measure from the ballot. (AP Photo/Haven Daley)

Voters will decide in November on a proposition that calls for California to be split into three new and separate states.

This column isn’t the place to debate the merits of the idea. Nor will I ponder its odds at the ballot box. And I’ll leave to other pundits the vast legal, political and operational impacts of such a historic change — and that’s only if the breakup ever got all the necessary approvals after a winning vote.

We are here to talk one thing: What might these three new state housing markets look like based on historical trends. Geographically speaking, the plan creates new state borders along county lines.

There’s the retooled “California,” essentially the coastal counties from Los Angeles to Monterey. There’s the oddly named “Southern California” combining Orange, San Diego, Riverside and San Bernardino counties up through the interior to Lake Tahoe. And there’s “Northern California,” everything else or basically the Bay Area plus everything up to Oregon.

Knowing the new county lineup, I filled my trusty spreadsheet with historical housing data provided by Attom Data Solutions. Looking at stats from 2000 through 2018’s first quarter, here are 10 things you should know about the housing markets within each of the new proposed states.

1. Price tags: When you shuffle the counties into three states, what does a sales-weighted median for 2018’s first-quarter selling prices for all properties look like? It’s no surprise that it would cost the most to buy in Northern California at $580,200. Next was the new coastal California at $571,900. Southern California was most affordable — remember all the cheaper inland properties are in this new state — at $426,000.

2. Best bet: Where was the best performance this century, as measured by growth in median selling prices for all properties, 2000 through this year? Well, seaside property rocks. The Pacific-hugging new California’s 181 percent gain was tops vs. Southern California at 148 percent and Northern California’s 120 percent.

3. Most pain: Split or not, don’t forget the pain of housing’s bubble bursting! What new state’s housing market would have fared the worst in the 2006-2011 downturn? Northern California’s 46 percent price drop was the largest loss and a shade ahead of Southern California’s fall of 45.6 percent and new California’s 41.4 percent tumble.

4. Top recovery: Where was the post-recession rebound the best, measured by the 2011-2018 selling price upswing? Northern California produced 108 percent in gains in seven years vs. Southern California at 84 percent and new California’s 83 percent.

5. Predictability: Split the state into three, expect the same crazy real estate. Just peek at the nearly uniform best and worst 12-month periods since 2000! New California’s best was up 30 percent vs. its worst of down 35 percent; Southern California ran from up 29 percent to down 37 percent; and Northern California ranged from up 29 percent to down 42 percent.

6. Big sellers: Ponder the size of these markets, in terms of purchase transactions closed in the past 18 years. Most sales activity in 2000-2018 was Southern California’s 3.2 million sales followed by Northern California’s 2.9 million and new California’s 2 million.

7. Sales dips: Home buying is down since the turn of the century as homeowners choose to move less and ownership is less affordable. New California’s sales pace is down 19 percent since 2000; Northern California is off 10 percent; Southern California is down 4.5 percent.

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8. Home sweet home: Now let’s think about single-family homes under the proposed three-way split. Southern California would have 2.77 million single-family homes worth a combined $1.44 trillion. New California gets 1.84 million single-family homes worth $1.41 trillion. Northern California is home to 2.87 million homes worth $2.18 trillion.

9. Price extremes: Where’s the budget-busting housing in the proposed new states  … and where are the bargains? Southern California’s priciest single-family homes are in Orange County at an average value of $871,635 vs. the cheapest county, Kings, at $202,699. New California’s priciest is Santa Barbara County at $804,942 vs. San Benito County’s $541,434 low. Of course, Northern California has an insane gap: the highest prices are in San Mateo County at $1.61 million vs. the cheapest county, Modoc, at $89,158.

10. Tax bite: Ownership equals property taxes. How would that cost for single-family homes slice up among the three proposed states? Southern California’s 2017 tax collections for single-family homes ran $12.13 billion or $4,372 per average taxpayer. Northern California property taxes totaled $15.53 billion or $5,419 per average taxpayer. And the biggest individual tax bills were in the new California where $10.38 billion in collections translates to an average $5,636 per property.

Source: by Johnathan Lansner | Mercury News

California Become 3rd Largest State with More People leaving than Migrating to the State

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California has beaten Illinois for net out-migration from the state. California has become one state that there are more people trying to get out than moving into it. So while California wants to protect illegal aliens and fight with the Federal government over sanctuary cities contrary to the Constitutional Supremacy Clause, according to a November report from the U.S Census Bureau, the Golden State has had 142,932 residents exit the state. This domestic out-migration has been the second largest outflow in the USA behind only New York and New Jersey. The net out-migration from California jumped up 11% compared to 2015.

Source: Armstrong Economics

Proposal To Split California Into Three States Earns Spot On November Ballot

3 Californias? Billionaire’s Plan to Split California Into 3 Separate States Clears First Hurdle

California’s 168-year run as a single entity, hugging the continent’s edge for hundreds of miles and sprawling east across mountains and desert, could come to an end next year — as a controversial plan to split the Golden State into three new jurisdictions qualified Tuesday for the Nov. 6 ballot.

If a majority of voters who cast ballots agree, a long and contentious process would begin for three separate states to take the place of California, with one primarily centered around Los Angeles and the other two divvying up the counties to the north and south. Completion of the radical plan — far from certain, given its many hurdles at judicial, state and federal levels — would make history.

It would be the first division of an existing U.S. state since the creation of West Virginia in 1863.

“Three states will get us better infrastructure, better education and lower taxes,” Tim Draper, the Silicon Valley billionaire venture capitalist who sponsored the ballot measure, said in an email to The Times last summer when he formally submitted the proposal. “States will be more accountable to us and can cooperate and compete for citizens.”

Source: by John Myers | Los Angeles Times

California Officials Avoid ‘p-word’ When Selling Higher Taxes to Voters

Why are officials so unwilling to tell their voters (tax donkeys) that pension costs are the underlying factor in their requests for tax increases?

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While public and media attention to this week’s primary election focused – understandably so – on contests for governor, U.S. senator and a handful of congressional seats, there were other important issues on Californians’ ballots.

One, which received scant attention at best, was another flurry of local government and school tax and bond proposals.

The California Taxpayers Association counted 98 proposals to raise local taxes directly, or indirectly through issuance of bonds that would require higher property taxes to repay.

The proposed taxes on legal marijuana sales and other retail sales and “parcel taxes” on pieces of real estate were particularly noteworthy for how they were presented to voters.

Most followed the playbook that highly paid strategists peddle to local officials, advising them to promise improvements in popular services, such as police and fire protection and parks, and avoid any mention of the most important factor in deteriorating fiscal circumstances – the soaring cost of public employee pensions.

City, county and school district officials howl constantly, albeit mostly in private, that ever-increasing, mandatory payments to the California Public Employees Retirement System (CalPERS) and the California State Teachers Retirement System (CalSTRS) are driving some entities to the brink of insolvency.

However, those officials are just as consistently unwilling to tell their voters that pension costs are the basic underlying factor in their requests for tax increases.

Why?

Tying tax increases to pensions, rather than popular services, not only would make voters less likely to vote for them but make public employee unions less willing to pony up campaign funds to sell the tax increases to voters. It is, in effect, a conspiracy of silence.

This week’s local tax and bond measures are just a tuneup for what will likely be a much larger batch on the November ballot.

It’s a well-established axiom of California politics that low-turnout elections, such as a non-presidential primary in June, are not as friendly to tax proposals as higher-turnout general elections, such as the one in November. Primaries tend to draw older white voters who often shun taxes, while general elections have younger and more ethnically diverse electorates easily conditioned through social media to believing they might receive a few crumbs from voting in favor of socialist wealth transfer tax schemes.

As local officials make plans to place those proposals on the November ballot, a bill making its way through the Legislature could skew local tax politics even more.

Senate Bill 958 would allow one school district, Davis Unified, to exempt its own employees from paying the $620 per year parcel tax that its voters approved two years ago.

The Senate approved SB 958 on a 24-19 vote last month, sending it to the Assembly. It’s being carried by Sen. Bill Dodd, a Napa Democrat whose district includes Davis.

The bill’s rationale is that housing is so expensive in Davis that teachers and other school employees cannot afford to live there, and that exempting them from the parcel tax would, at least in theory, make housing more affordable.

However, if SB 958 becomes law, it would set a dangerous precedent. It doesn’t take much imagination to see local government and school unions throughout the state demanding similar exemptions from new taxes with the threat, explicit or implicit, that they would refuse to finance tax measure campaigns.

The very people who benefit most from additional taxes by receiving higher salaries and/or better fringe benefits thus would be able to avoid paying those taxes themselves.

Source: The Mercury News