Re: Wages, Inflation and Social Security

imouttahere_at_mac.com
Date: 01/10/05 

Date: 10 Jan 2005 14:22:35 -0800

royls@telus.net wrote:
> On 9 Jan 2005 08:57:23 -0800, imouttahere@mac.com wrote:
>
> >Courageous wrote:
> >> >"Despite some of the best financing conditions in decades,
housing
> >> >affordability at the national level has fallen to the point that
> >only a
> >> >little more than half (50.4 percent) of all homes sold in this
> >country
> >> >during the third quarter of 2004 were affordable to families
earning
> >> >the median U.S. household income," ...
> >>
> >> So? It might be true that a good portion of buyers are trading up
> >> on equity.
> >
> >That's just about the only way one can afford a house in California,
> >these days...
> >
> >Not that there is anything /wrong/ per se, with high home
valuations.
> >Supply & demand and all that.
>
> There is most definitely something _wrong_ with high home valuations
> per se.

The way I look at it most of the planet would like to live in
California, so there's going to be a overwhelmingly strong demand for
land here. The quality of life, minus the overcrowding of course, in
most of California is world-class, on par to the south of France, with
a good 5-10% of the state perhaps *the* most beautiful and livable
places to be on the planet. And we have a tech sector, LA and SF,
military jobs, so people come here for the jobs too. Money + scarcity =
high market prices.

> An impoverished society is one where things like food,
> clothing and _shelter_ are expensive relative to labor, while a
> prosperous society is one where those things are cheap relative to
> labor.

In my way of thinking we will always bid up the price of desirable land
such that it will dominate all other costs. We could have all cars
running on tapwater, but the end economic result would be higher home
valuations as people shift the savings into the home purchasing
decisions.

> Since the passage of Prop 13, CA has rapidly gone from being
> among the most prosperous to among the most impoverished of US
states,
> exactly in step with the rapidly increasing labor cost of a place to
> live.
>
> That is the trap. Homeowners think the increasing values of their
> holdings mean they are getting richer, but in fact they are a sign
> that society, including them, is getting poorer.

Dunno. It's certainly a sign of increased consumption (possession of
peaceful, uncrowded residential property) in the face of insane market
demand.

But to get people to see a higher quality of life is 'poorer' is
difficult.

The main problem as I see it is our cities are very centrifugal, with
wealthy areas and warzones. This is unsustainable.

> >But my interest in this discussion is highlighting how competition
for
> >housing is driving prices ever higher, and ever more out of reach to
> >first-time home buyers (without backing from relatives). It's a sad
> >dynamic.
>
> It's not competition for housing to live in so much as competition
for
> housing as an investment, to get in on the extravagant subsidies to
> landownership. That's always what really drives these bubbles.

Yes. There is a LOT of foreign investment in california real estate,
and it is indeed part of the problem.

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