California Real Estate Outlook 2014
By Bob Schwartz, San Diego, California real estate broker
Although the last two years have seen a nice bounce back recovery in almost all of the California’s real estate markets, the last quarter of 2013 saw a pronounce slow-down in real estate sales. Many believe the sales slowdown to be a direct result of rising interest rates and the resulting increase in home mortgage rates.
For those interested in my Outlook for the San Diego real estate market in 2014, I suggest reading my article published on January 5, 2014, entitled 2014 San Diego Real Estate Market Forecast. Today’s article has more to do with underlying problems in California’s economy and what I see as a possible sure remedy that could turn California back into the ‘Golden State’.
Unless California’s economy has a dynamic turnaround, continued meaningful real estate demand and home appreciation will languish behind states that are on sound economic footing.
After the largest state tax increase in history, many believe that California’s economy and financial Outlook is much brighter now. They are overlooking the long term debts and obligations that the state has accrued. California’s total debt according to independent estimates is approximately $848 billion! California’s state income tax rate, the highest in the nation tops out at 13.3%! California’s state sales tax rate is 7 1/2%, but when local city and county taxes are included; it’s 10% in some areas. As of 2010, 144,000 households, 1% of the California taxpayers, accounted for 50% of the total state income tax revenues.
Although Gov. Jerry Brown enacted minor window-dressing pension reforms, nothing has been done to address the real cause of California’s huge debt. Needless to say, reckless overspending by the California legislature is at the heart of our woes, but the majority of the States problems can be traced to Cadillac salaries, regal pension and retirement health benefits paid to state employees. Currently, there are 12,199. retired state workers receiving pensions of more than $100,000 a year! Even though unemployment in California has been falling, the state still has one of the highest unemployment rates in the nation. Of California’s 58 counties 27 have unemployment rates at or above 10%; four of them have unemployment rates higher than 15%. The jobless rate in April was 24% in Imperial County!
How can California housing continue to appreciate in light of the States underlying fiscal problems? Ever-increasing taxes, water rates, utility rates and some of the highest gasoline prices in the nation are all draining Californians disposable income and their ability not only to qualify for the average home mortgage, but also their ability to accumulate sufficient down payment for the average California home.
Don’t lose heart! Nature has provided a solution to California’s financial woes that is immediately available. If government and environmental groups just come to the realization that continuation of the current status quo will only result in stagnation and deterioration, we will have a huge come-back.
Some estimates are that California is sitting on more oil deposits than all of Saudi Arabia. Until recently extraction of those oil deposits could not be achieved economically, but with the improvement in tracking the entire oil-producing picture has changed.
Currently the boom that is going on in the Dakotas and Pennsylvania is all directly attributable to cracking. To the consternation of the green glass even the Obama administration recently reluctantly admitted that fracking was a safe process.
Back in September 2013, even the California legislature approved a bill on regulation of cracking. One must keep in mind that this bill does not allow racking, but just that the framework for its regulation. Even though a small step some believe that even the far left California legislature realizes that the income derived from oil production in the state that not only reduce our massive deficit but turn it into a surplus relatively quickly.
Let’s keep our fingers crossed that Gov. Jerry Brown goes through with allowing fracking in this state and does not entrust its approval or regulation the zealots on the California air resources Board and/or the California Coastal Commission.
