California -- America's first failed state?

Mizzou, that is incredibly inaccurate. The places like Bakersfield and Stockton are where it is the worst. That's where land was cheap and the bubble went crazy. Look up a town called Manteca, it is out near Fresno and they were once selling homes for $600K, homes that now are lucky to fetch $200K. And unemployment in those places is around 15 percent.

Palo Alto and Malibu are incredibly exclusive -- so exclusive that the conditions there are not even worth considering as to the overall health of the state. But overall, the Bay Area is down from the highs by about 25-30 percent -- a middle-class home was going for around $700K and is now in the $450-500K range. Prices rebounding lately as the economy comes back, but again there is no economy in the eastern half of the state.

The other fun part of it is that the eastern half votes heavily Republican -- this is where the secession movement gets chatter -- and the western half votes heavily Democratic, and yet the eastern half gets far more government funding per person.

 

My aunt lives in Elk Grove, which is just outside of Sacramento. She bought her house for $350K, at one point it was worth almost $600K and now her street has 10 foreclosures on it. She's be lucky to get $200K for it.

Prices in Stockton have always been fairly high because a lot of people live there and commute to San Francisco. It's a 90-minute commute, but people still do it.

It would surprise me if anything in the Fresno to Bakersfield stretch ever got that high.

 

Be surprised, then.

http://realestate.msn.com/slideshow.aspx?cp-documentid=27437326

That's a list of the 10 places in the country where real estate prices saw the greatest drop. Four of the 10 places in the entire U.S. were in the eastern half of California -- Merced, Stockton, Modesto (near Fresno) and, yes, Bakersfield among them. There were two more areas in California that are loosely Bay Area-adjacent but not really in the main part of it (Salinas and Vallejo). To make this list meant home prices dropped 60-70 percent from the highs.

I saw another item that at its height, the median home price in Bakersfield was 8.1 times the median household income. Now it's down to 2.6 times. So Elk Grove or LA or whatever you're citing might be a bit higher (though not much) in actual dollars, but it isn't close in percentage drop or percentage of income.

 

Merced is an interesting case. About 10 years ago, it was listed as "One of the best places to live" in the country. Basically, it boomed, in part because of the new university, right up until the crash.

All of the other California cities listed, except Bakersfield, are places where people who work in the Bay Area like to live. Salinas is one of those places that was always really expensive to live and has taken a really bad hit.

 

"Like to live"? Hardly. They may do it out of necessity, but at much lower rates than you believe. Not many people "like" four-hour round-trip commutes.

Regardless, what I was answering was your belief that the big metro areas were more impacted and the places like Bakersfield and Fresno not so much. That's plainly false as shown by the NYT story YF posted.

 

Well, it's "Like to live" because they don't "Like" to pay $2500 for a shithole apartment in San Francisco. That was what I meant...

Anyway...

 

The Times wrote about Merced back in November:

 

Who's applying to grad school with me?

 

Two or three years before the housing implosion I attended a conference in San Francisco. I was astounded at the median home price in that metro area approaching $1 million (I think it was like $875K, but still ...). A couple of weeks later, I was chatting with someone whose sister lived in one of those east areas of California. Per her, her sister would refinance once every year or so and cash out some of the equity increase. I remember getting chills at the thought that there might be a lot of folks doing that, both in California and nationwide.

 

Same situation with Manhattan real estate.

 

I got a job offer from a Bay Area paper back in 2000. It would have been damn close to my dream job.

They offered me a huge raise from what I was making in another city where it wasn't exactly cheap to live, but I would have had to either get a bunch of roommates and live like I was still in college, or live in an absolute shithole if I wanted to be within a 45-minute commute of the job. There was a writer there who was 40 at the time and he was telling me how he had two roommates.

I couldn't justify it.

 

A friend of my mom's lives in an "east" California city, and they refinanced every year and bought a new pickup, ATVs and Jet Skis. They didn't think they should ever have a bigass pickup that was more than a year old.

I suspect they aren't doing well these days.