I
know we're probably tired of the cliched lamenting over "the good old
days", but this NYT piece by a CA author describes the boom-and-bust
cycle of "CA dreaming" since the Gold Rush. One generation feels like
the prevailing dream is dead, but then a new dream comes to take its
place.
But what about now, as our state is more constrained than
ever (economically, environmentally, maybe culturally)? The inclusive
middle class, environmentally-sustainable (if it ever was) CA dream
seems to be in jeopardy now, replaced by the "tech dream" that only a
small subset of wealthy folks can enjoy, and constant environmental
crises (that the rich can mostly insulate themselves from). Of course
the top earners in medicine, entertainment, finance, etc. can still
partake in the dream; contrary to media hype,
tech
is only like 10-15% of CA's workforce and GDP. But we don't need CA to
be a bunch of high-end condos, yoga studios, "$20 burger" foodie joints,
plus the old suburban infrastructure (golf courses, Costcos, 5BR
McMansions) grandfathered in - when the tech yuppies want to leave SF to
get more space. There's more to CA than that, otherwise what's the
point of paying the high prices to experience it?
Top schools ostensibly lead to top salaries,
which lets your kids afford
to live in the top school districts later and continue your legacy. But
why is there such inequality in public schools that creates real estate
bubbles in the neighborhoods near the best schools? What kind of "free
society" do we have when some schools have metal detectors and 1990s
computers, and some schools are like
this?
I
don't mean to be like "woe is me, my life is so hard." I'm not happy
with some aspects of my situation, but I'm trying to keep perspective.
What's scary is a big % of Americans have it much tougher, in CA and
elsewhere. So what is the solution? Clearly it doesn't have to be this
way, and there are many "mid-cap" cities that have a great rep for
affordability, quality of life, and good jobs/schools (SLC,
Raleigh-Durham, Denver, etc.). They make it work without being
socialist. But it's just a shame that CA, the most populous and most
economically important state, is becoming an exclusive country club with
an entrance fee of $300K household income. "This land is your/my land,"
remember? Can't we do a better job sharing and making things easier for
those with fewer resources (especially as our resources are further
strained by environmental problems and gov't failures)?
---
I foresee housing and land as a large problem in the future, more so
than now. People want to live near where they work. And culture and
food and art follows the places where people live and have money. So
desirable living areas will always be clumpy. California just happens
to be very desirable for a variety of reasons so I can't see a way to
get these problems resolved. And ultimately there will be a
distribution of incomes available to people in these areas. People have
a very hard time voting in poor people into their neighborhoods by
mandate and capitalism won't provide for them when demand exceeds
supply. Not sure I have any solutions but to say that your (and my)
situation is in some objective sense terrific. To be able to, but not
easily, afford to live in a world city, raise a family, take vacations,
you are a global elite. But as you noted, locally you are a B- so it is
hard to feel as good as you should. I think if you consider only asian
households you are more like a C+ haha.
----
Yeah that is true, but I think a common complaint is that
the high prices are forcing out the "traditional" artists and
culturalists from SF, so all you have left are the wealthy consumers and
capitalists.
An over the top documentary about it from Pelosi's daughter: Alexandra Pelosi on RT w Bill Maher -- Destructio…:
http://youtu.be/ksTRKwCDCLM
Haha in Asian households, B- = whipping and C+ = sent to foster care!
---
----
This apparently has been going on in certain neighborhoods in London and
other world cities for a while. A product of Chinese money disallowed
from buying stocks and the poor bond returns. Can't blame them for
finding the opportunity but it is hurting the locals.
---
Agreed, it's legal, but it's making the median home price in Vancouver
rise to $1.5MM (c'mon, Vanc. is nice but not that nice). According to
that video, it's happening all over the Pac. Rim (NZ, AUS, SEA, SoCal),
and I guess the desirable parts of Europe too (I guess Russians, Saudis,
Emiratis, etc. are doing the same, but there are fewer such buyers).
This
seems to be another global consequence of China's social-economic
policies. Unlike the US, where ~50% of households own some stock (which
is still way too low considering the ROI), for China it's like under 20% - maybe this is driven by the unproven (some might say corrupt) nature
of their markets, and the cultural tendencies of Chinese to put their
savings in cash or physical assets. So if retirement was more secure in
China (better kids:parent ratio, more functional equities markets, gov't
safety net), maybe there would be less demand for foreign property. And
if Chinese are using illicit funds to buy real estate, then I also
fault Beijing for not enforcing the laws and regs to make that harder to
pull off. And I also fault parties in the US for not checking where the
foreign buyers' funds came from. As you know, to get approved for a
mortgage we practically have to sacrifice our firstborn, but it's
all-cash home purchase, no questions asked.
But I assume that
only the wealthiest 10% of Chinese have the funds to buy overseas real
estate anyway - though 10% of China is still a shitload of buyers. This
is offensive and I'm just joking, but sometimes I miss the '80s when the
US and Western Europe were the only rich nations, and Japan was the
only rising economic power to worry about. :)
----
I think in China the basic idea is that land is something you
can physically own and see with your own eyes. Chinese people (well
people everywhere, but maybe moreso in China) feel that it isn't too
hard to be an amateur expert in property prices - that you can beat the
market basically. Finally, property prices are perceived to be
relatively stable compared to other forms of investment.
Compare
that with stocks, where who knows how to value anything. Stock markets
in China are basically thought of as gambling markets (actually not too
far off....), whereas property investment is the slow and steady, tried
and true investment strategy. Everyone understands (or thinks they
understand) real estate markets. Understanding stock markets is not
something that the average Chinese person has much experience in.
Additionally,
for very wealthy Chinese there is the idea that you want a property (or
perhaps multiple) overseas where you can escape if things get bad in
China. The Chinese don't like pollution any more than we do and most
realize that overseas places are a lot nicer than most cities in China.
Finally,
getting permission to convert money into foreign currency is a lot
easier if you're buying property than if you're buying stocks.
Of
course, the smart strategy would be to invest in low-cost index funds
in a Vanguard coop account, but I guess Vanguard's marketing team hasn't
made too many inroads in China yet :-P
---
These days it seems that very little in the
Chinese economy is slow and steady :P - they had a major RE bubble too
with levels of speculation likely exceeding those of US-CAN. I could
sympathize if the average Chinese person doesn't have a lot of good
options for capital gains to save for their retirement, but I assume
that it's the top 10% who are the ones buying most of the foreign
property (i.e. the average Chinese can't pay $1.5MM cash for a CA
condo).
I don't know if funds/pensions are very popular in
China, but that overcomes the investor ignorance problem. Most
Westerners have no idea about equities too, but at least they leave it
in the hands of pros and pay them a commission (this strategy only
screws them every decade or so with a widespread financial crisis :).
And as you said, you can lower risk by diversifying (equities tend to
outperform REITs and most single properties in the long term).
So
there is a difference between a justifiable need for financial
security, and greed. I am not sure what category most Chinese overseas
RE buyers are, maybe both, but probably skews towards greed. That is
legal but unfortunate in my book. And of course the same can be said of
domestic speculators.
There is some harm in speculators
manipulating the price of securities or silver. But then again, most
people aren't paid directly from capital gains (except pensioners and
rich fund mgrs). But if people are inflating the prices of life
necessities, like oil, water, and housing - then it's a bigger deal.
Like when oil rose to $120+ a barrel, some were saying that this wasn't
the speculators' fault - it was just normal supply and demand. Maybe so,
but it's pretty hard to precisely pin down causality in market price,
which is of course an aggregation of many factors. But huge inflation in
inelastic goods tends to hurt many but only benefit few.
Bottom
line, I wish people would at least buy homes with the intent to use
them, or make them available to those who need them. I understand that
not all of us are "entitled" to an affordable picket-fence place with a 5
mile commute. It would be nice, but there is always going to be
inequality in housing. Though I think we are at pretty bad levels in
most of the economic centers of the world.
BTW - if you
made it to the end of that YT video, you saw that horrendous quote from
the real estate mogul d-bag with the Rolls. Something like, "I think a
Googler working hard is more deserving of a home in Si Valley than
someone who happened to grow up here. Just get more education if you
want it." Yeah, as if the issue is that cut and dried. Hard work and edu
is all you need to be a millionaire in CA, sure. It doesn't need
further comment - but you are all welcome to vent. :)
