Apr022015
Will Millennials be forced to rent for life?
Millennials must pay off their debts and save for a down payment in a difficult job environment or they will never become homeowners.
Historically, people who rent their primary residences break down into two categories: (1) those who value freedom, and (2) those who don’t have the financial discipline to save for a down payment. Those who value their freedom to pursue job opportunities or other reasons should not anchor themselves to a piece of real estate. At some point their life circumstances may change, and they may wish to become homeowners, but until that change happens naturally, they will remain renters.
During the housing bubble, lenders and politicians on the left believed they found a panacea with 100% financing because it removed one of the primary obstacles to home ownership. Unfortunately, the experiment with widespread 100% financing ended badly because with no personal investment in the property, the new “owners” lacked the financial skills and the discipline necessary to sustain homeownership, particularly when times got tough.
Apparently, saving is not a barrier to home ownership; saving is a requisite skill necessary to sustain home ownership.
During the housing bubble, few renters were saving for down payments because they had no need, and after the housing bubble burst, the Great Recession caused many to deplete their savings to sustain the lifestyles they were accustomed to. Further, since the federal reserve lowered interest rates to zero, beyond the emotional need to reserves to reduce stress, people had little or no incentive to save; thus American’s are broke.
The end result of the lack of saving over the last 10 to 15 years is that few potential homebuyers possess enough savings to cover either the 3% down payment on a GSE loan or a 3.5% down payment on an FHA loan. And since renters are putting a large percentage of their income toward rent, even if they wanted to endure 0.2% savings interest rates, they don’t have the disposable income necessary to save for a down payment.
No down payment, no sale.
This problem is most acute among Millennials who are also struggling with enormous student loan debts. Large debts and small savings is not a recipe for big home sales numbers, and the near-record low first-time homebuyer participation rates back this up.
Rising Rents Are Finally Forcing Millennials to Buy Houses
Prashant Gopal and John Gittelsohn, March 25, 2015
(Bloomberg) — Americans in their 20s and early 30s are getting a nudge toward homeownership a decade after sales peaked during the housing bubble. It’s not their nagging parents. It’s rents. They’ve risen so much that buying is making more sense.
“I pay $1,410 in rent for my one-bedroom apartment in downtown Denver,” said Eric Arther, 28, who has saved about $30,000 for a down payment. “If I pay that much, I’d like to build some equity.”
That works great for 28-year olds who’ve saved $30,000, but what about the vast majority who don’t have sufficient savings?
Purchases by younger buyers are likely to grow gradually as millennials work through hurdles such as student debt, lack of down-payment funds and later family formation than previous generations, according to Jed Kolko, chief economist for real estate website Trulia, a unit of Zillow Group Inc.
“We are at the beginning of a multiyear period where more young people become homeowners,” Kolko said in a telephone interview. “But I think it will happen more slowly than most people expect.”
First-time buyers made up 29 percent of existing-home sales in February…. The share of new buyers fell last year to its lowest level since 1987, according to the group.
I believe this will also happen slower than most expect because nearly everyone who analyses real estate is blinded by their own optimism bias. Millennials have real problems with excessive student loan debt and a lack of savings. Short of a massive bailout from the US government, those debts won’t disappear overnight, and even if they did, savings doesn’t appear my magic either.
“We’re just now hitting the point that the oldest of millennials are in their early 30s, which would be about time for them to make those moves,” Willett said. “The question is, do they have money for a down payment?”
Obviously, they don’t.
More Millennials Turn to Mom and Dad to Help With Homebuying
About 17 percent of parents with millennial-aged children say they expect to help, or have already helped, their kids buy a home.
By Andrew Soergel, March 24, 2015
A growing number of homebuyers are expected to turn to the big bank of mom and dad to help finance housing purchases, according to a report released Tuesday by loanDepot consumer lender.
About 17 percent of parents with millennial-aged children – which loanDepot defines as individuals between 18 and 38 years old – expect to help their kids at some point in the future finance a home purchase. And a reported 13 percent of parents have done so in the last five years.
But only 19 percent of millennials aren’t expecting to receive any financial help from their parents, according to the report.
While on 19% may not expect financial support, upwards of 80% won’t get financial support when the time comes. Few parents have the money, and many of those who do would rather see their children be self-sufficient. Studies show that parents who support their children also weaken them because the children remain dependent upon that support.
“Support from parents is playing a significant role in the housing recovery, and this new research indicates the trend will increase,” Dave Norris, president and chief operations officer at loanDepot, said in a statement accompanying the report. “Through the survey, 75 percent of millennial-age homebuyers who received financial support from their parents said that assistance made it possible for them to buy a home.”
The number of Millennials with parents with the cash and the desire to help is not large. While the desire may be there with some, the money probably isn’t.
Rent vs. buy vs. live with mom and dad
Christine Romans, March 23, 2015
our generation is twice as likely to be living at home with mom and dad than shopping for real estate. In fact you’ve been out of the home-buying game since the Crash of 2008.
Only 13.2% of people aged 18 to 34 are homeowners, a record low number. An astonishing 31% of people aged 18 to 34 are still living with their parents. And men are more likely than women to still be living at home.
Millennials must really wonder how previous generations did it. The world Millennials live in has student debts they will spend a lifetime repaying, house prices so high they can never afford them, and a job market so weak they will never get ahead. It must look hopeless.
For graduates with student loans, living at home or with relatives is a smart strategy and the single most effective budget tool you have. It’s actually a no-brainer: Why give 50% or more of your pay to a landlord when you can live at home rent-free and use that money to cut your debt, build your emergency fund and save up for a home.
And party, of course. I took a year off between my sophomore and junior year of college, and I didn’t save a penny….
It might have been considered “slacker” and embarrassing for Generation X, but for millennials, it is acceptable and even wise.
For Millennials, their options were much more limited.
Assuming your finances are in good shape — you are gainfully employed, have six months of savings in the bank and money for a down payment — then the smartest money move you can make is buying a home now. Interest rates are rock bottom, but will start rising either late this year or next.
This is common advice today: buy a home because rates will go up and make owning even less affordable. This advice completely misses the fact that rising mortgage rates may force house prices lower, something Millennials know is possible because they witnessed the housing bust.
Millennials need to get their personal debts down to manageable levels, and they need to save a down payment to buy a house. If they don’t accomplish those tasks, they will not become homeowners: it’s that simple. They will become renters for life.
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To know the joy of raising a child with autism, please read:
“Forced to rent for life” implies that home prices always go up, and there will NEVER be another 08 type housing bust. Ever.
Nope. It just means you will be too bearish at the bottom of each cycle. For example, this take this gal:
http://sbbeachbubble.blogspot.com/
Renting since 1988 – she didnt buy at the bottom of the cycle in 92 “because prices were just too high”. Likewise, she didnt buy at the 2009 bottom because again “prices were just too high”.
Had she bought when she first had a chance she would be 7 years away from being mortgage free. Instead she is in her 27th year of renting with no end in sight. Sad…
Way to deflect!
To be fair, you were too bearish at the bottom and missed some stellar opportunities to invest.
BOGEY says:
September 8, 2011 at 2:33 pm
Being the current price model is based on the continuation of negative real rates and 30yr money availability will remain uber-tight accordingly + the existing Calif economic model is aligned against growth, expect OC prices to fall at least another 30% as time passes.
On a positive note: market participants have begun to accept this reality.
LOL thats a blast from the past – Bogey will get his -30%, but it may only be in another decade after prices double, and a new bottom formed at prices several hundred K higher than today.
Speaking of which, doesnt Lee in Irvine still rent & post here?
Yep, he was the first to post on yesterday’s blog.
I think Lee in Irvine rents because he invested in his business rather than housing, so he is likely getting a better return.
You can always get something that will offer a better return than housing. There are people who do this who are HAPPY with that decision renting for life, and I salute them.
That said, none of those people are here. The people truly happy with that decision are out living their lives without a care in the world what prices are doing. This cannot be said about much of the commentariat here, who has spent a decade pining away, and angrily calling for crash after crash after crash.
I don’t see as many permabears as I used to here. Many probably still read, but few comment as before. From somewhere between 2009 and 2011 depending on the area, it became cheaper to own than to rent, and many took advantage.
I think many of the bull versus bear arguments of the housing bubble have evaporated. Those were good times, but unless we get gripped by another mania, people just aren’t as emotional about the issue as they were.
Narl – Who were you posting as back in the day? I was active on Lansner’s blog but didn’t hook up with IR until he started this blog. -Liar Loan
MR/LL – I was a lurker then, not an active contributor. I did post once or twice in late 08 asking sincere questions about a place I was going to buy.
All I got in response was cocksure promises from clueless imbeciles about how I would soon be underwater, and they would scoop it up for pennies at the “real bottom” LOL. It was at that point that I left and have been living a much happier life as someone who bought forgot about blogs and real estate in general and moved on. That was 7 years (and multiple hundreds of thousands in equity) ago.
That said, I do like to check back once or twice a year and see the usual permabear crowd angrily licking at the ol salt lick. 8 years from now, when I have this place paid off, I expect they will still be here.
Honestly, I shouldnt be so mean, but I never knew that permabears existed before there were blogs where they could come and vent their never ending frustrations at – well everything. Thus part of me feels like a scientist looking down on an alien species & their failure to thrive. I find this whole thing fascinating.
Keep doing the good work MR/LL you were always one of the good guys. Til next year!
Nari,
In areas like Irvine 60-70% of people are renters
The simple fact is most of these people will never be able to buy there… They need to accept their renter life or move out
I don’t understand why most people accept their shitty CA lives… When they could leave a live a better life elsehwere
When I was young and poor, just starting out after college, I resolved that I would rather rent a tiny beach town apartment over owning in the Inland Empire. This was back when I wasn’t sure if I’d every be able to afford to own in Orange County. Then when I was 25 and still had nothing tying me down, I decided to move out of state to a city in the South where my best friend was living at the time.
One of my big motivators was the affordable housing. You could buy new construction starter homes for a little over $100k. The problem was that most jobs in the area paid $9/hour and there just wasn’t many of them available. Since I attended college in California there was no network for me to tap into and I couldn’t get my foot in the door at any of the major employers. Most of them couldn’t figure out why somebody from California would want to move out there. I got a lot of quizzical looks and crazy stares. Eventually, my savings ran out and I moved back home.
Since then, I’ve had a lot of friends native to California try their hand living out of state in many different regions of the country. They always come back. The jobs are plentiful and relatively high paying, and the recreational opportunities are unmatched. That’s why people stay.
Liar Loan? Nice… we had some good times
Link please
http://www.ocregister.com/lansner/orange-445732-ocregister-http.html#comment-312959
LOL!
MR swing and a miss #2
MR swing and a miss #1
Your search – BOGEY says: September 8, 2011 at 2:33 pm Being the current price model is based on the the continuation of negative real rates and 30yr money availability will remain uber-tight accordingly + the existing Calif econ … – did not match any documents.
Looks like the Register decided to nuke the old comments when they switched to Facebook verification. Nonetheless, the link provided was to your exact comment, as requested.
As expected…strike 3, you’re out.
jus say’n 😉
Go back a month or so & it seems like the record here has been purged too.
Mellow – I was going to say the nuking was good because you could then impugn him by making his predictions seem even worse than they really were.
However, as a long time lurker rembembering some of the stuff El O wrote, I truly believe no matter what you made up, there is a 100% chance he said it at some point 🙂
John,
Absolutely, I recognize those words, and yes, they were said at some point in time years past, although, seems to me some were said more recently than others.
Was that quote/date noted presented exactly as above?
The reason I ask….the individual who posted the quote has a disclaimer that preceeds each and every one of his posts.
Lets dive into his ‘nom de plume’
Mellow
[mel-oh]
.a state, atmosphere, or mood of ease and gentle relaxation.
Ruse
/ruːz/
1.
an action intended to mislead, deceive, or trick; stratagem
———–
That’s why I asked for the link.
I don’t know why the blog isn’t displaying old comments. They are still in the system. I will investigate.
Engage in damage control all you want, but the truth hurts brother. If you cannot buy at the end of a cycle (when prices are 180K) there is a very good chance you cannot buy at the end of the next when they bottom at 500K.
For these people, they will indeed rent for life.
I wonder what your landlord gives you when you rent from him for 30 years? A gold watch like some lower management drone sent off to a retirement of misery? Better yet, maybe ask for a cyanide capsule so you too can be mostly “payment free” just like the people who bought years ago.
That is without a doubt the saddest thing I have ever seen. Imagine pining away for something for nearly 3 decades, only to never achieve it. The and the anger and bitterness of being priced out just reeks out in her posts.
If that werent bad enough, she must be over 50 years old now. She should be at that point in her career where its time to coast, maybe wind down a bit, but how can she do that with her ever increasing rent? What is she going to do in 20 years on a fixed income and she cannot afford it anymore? There but the grace of god…
At some point she should have done the math and said, “Well, prices seem too high, but it’s cheaper than renting, so I will eat my pride and overpay.”
The one thing consistent about the bottom of the housing cycle is that it becomes cheaper to own than to rent, and it happened across most of Orange County in 2011, and in some areas from 2009. Perhaps the beach communities never got that low, but the ratio of own/rent was historically very favorable.
Agree. This whole thing makes me want to cry. Here is telling quote from her blog 11 years ago:
The herd believes that real estate “always goes up”, but this is not true. In 1989 and 1990, I briefly rented a room in a rather nice condominium a few streets away from the apartment where I live now. (At that time, I was renting across the street from the penitentiary-style apartment building in the photo.)…Even now, as I write this, all is not well in the neighboring bubble city Manhattan Beach. Senior citizens, some of them lifelong Manhattan Beach residents, are getting rent increases in non-profit housing and they plain can’t afford them.
This was 11 years ago when she wrote this. Soon enough she will be one of those lifelong senior renters getting rent increases she plain cannot afford…
The added irony is that her last post was within months of the last housing bottom. Late 2011 was the best time to buy because inventory was still abundant, and nearly everywhere it was cheaper to own than to rent. If she had acted then, she would be pretty happy today.
next bust will be bigger. ZIRP ensures that.
now is the time for the bulls to bleat and chest beat. this too shall change.
the bottom was merely postponed. the comments on this blog reflect exactly how monetarism lulls the masses further out on the risk curve. it’s working beautifully. lulled into complacency. I even feel it.
It better be. 6 years ago, LA Case Shiller hit 159.37. Today, its over 226. Thats forty two fucking percent – to say nothing of the 100K+ in rent I have spent since then!
http://us.spindices.com/indices/real-estate/sp-case-shiller-ca-los-angeles-home-price-index
Even worse has been the relentless ridicule I have faced from friends & family with their catcalls of missed the bus. I cant wait to watch that index smash below that 159 level wipe that smile off their smug faces!!!
Without sellers capitulation, it won’t happen, and since in any bust, the banks become the sellers, and since the banks learned they can can-kick indefinitely, I simply don’t see seller capitulation every happening, particularly in areas like Coastal California.
I saw seller capitulation first-hand in Las Vegas, and I bought a number of properties from capitulating banks, but they opted to can-kick in most markets, and I believe they learned the (moral hazard) lesson that they can can-kick to avoid any future crash.
Yep. Matt & Antonio accept that the bottom is gone & move forward. If you dont believe me, listen to your ally IR.
If you do not, this will be your future:
http://sbbeachbubble.blogspot.com/
27 years of angry renting with no end in sight. Dont be that guy boys – dont be that guy…
El O,
I agree. Rent cannot continue to increase on top of stagnating wages. As it’s been said, a rising tide lifts all boats, a low tide lowers them too.
“Rent cannot continue to increase on top of stagnating wages”
Yet is has been.
People are making standard-of-living adjustments to deal with increased housing costs. Renting rooms instead of apartments, multiple families in a house, moving back in with parents, etc.
Also, massive immigration and visas bring in folks that are used to much lower standards of living and they are fine with cramped conditions. Check out the latest census data and you will be amazed at the amount of jobs that have gone to foreign-born workers.
I no longer place a lot of weight in the median income / median home price theory as it is no longer working.
The median income / median home price theory works well in most of the country. In areas were land use restrictions create large supply shortages, the relationship starts to break down because people substitute down in quality as you describe, and the lowest rung on the income ladder gets priced out. Historically, these are the people that move out of California for better opportunities elsewhere.
Millennials have very high wages in the industries that are booming.
In tech Millenials make more money than most of the people who frequent or write this blog.
Commenting on your presumptuous and obnoxious statement is excellent troll bait. Let’s see if anyone bites.
Astute!
It’s the obnoxious reality
Millennials in CA tech are partying like it’s 1999 with high salaries, equity, and stock options
The high margin software economy is disrupting the old economy. Not necessarily creating real value but definitely transferring wealth to CA
Too busy partying to look for a house!
Are you talking about the Bay Area? LA/OC software development jobs are 90k-120k. It’s a decent salary but you won’t be able to party like it’s 1999.
Mostly the Bay Area… Manhattan as well…. Limited in OC/LA
I bet AZDavid is kicking rear
I thought there was some good software development money sloshing around in the South Bay? Are they not getting paid as well as their Bay Area brethren within the same companies?
HUD’s Castro to Realtors: We want alternatives to traditional credit scoring
Castro panders like a true politician
Several real estate trade groups spent Wednesday discussing the challenges that credit standards pose for access for some would-be borrowers and alternatives to traditional credit scoring.
The event, co-hosted by the National Association of Realtors, the Asian Real Estate Association of America and the National Association of Hispanic Real Estate Professionals, included two roundtable discussions and a keynote address from Secretary of Housing and Urban Development Julian Castro.
Castro said he wants to widen the circle of opportunity for responsible families by making homeownership more affordable and accessible.
“FHA’s work alone will not solve all the industry’s challenges, which is why I appreciate this focus today on out-of-the-box thinking,” he said. “I know that new credit scoring models are being developed so that non-traditional factors can be considered when determining creditworthiness.”
Castro said FHA is exploring the use of new credit scoring models.
“We’ll look at every option that brings housing opportunities within reach of more Americans,” he said.
FICO Creates New Credit Metric for Deadbeats
Millions of Americans unable to obtain credit cards, mortgages and auto loans from banks will receive a boost with the launch of a new credit score aimed at consumers regarded as too risky by lenders.
The new metric, set to be announced as soon as this week, is being developed by Fair Isaac Corp., creator of the most widely used consumer-credit scores, and is being tested in a pilot phase with credit-card issuers. Fair Isaac said it hopes to make as many as 53 million people who don’t have credit scores more acceptable to lenders.
Policy assumes reclassifying people somehow makes them more reliable
The new score is largely a response to banks’ desire to boost lending volumes by increasing loan originations to borrowers who otherwise wouldn’t qualify, many of whom tend to be charged more for loans.
Besides increasing their pool of borrowers and loan originations, banks stand to earn more in interest revenue from riskier borrowers. Lenders charge higher interest rates and in some cases extra fees to borrowers who present a higher risk of falling behind on debt payments.
The announcement comes as the housing industry seeks ways to make people more creditworthy to increase loan originations, an important source of profit for banks and real-estate agents. The National Association of Realtors, along with other real-estate groups, will sponsor a symposium on credit access on Wednesday, which is billed as the first of its type to discuss ways to increase access to mortgages using alternative credit-scoring systems.
Quick the banking industry needs more victims of their ponzi scheme or it’s going to collapse.
That’s exactly what’s going on. Everyone is still chasing yield, so investors are looking for more bad loans they can fund with all the money the federal reserve printed to paper over all the bad loans they made last time.
Not necessarily. It will affect two groups: young people who didn’t get a credit card in college and immigrants. Neither group has bad credit–if they did, they wouldn’t be eligible for this scoring system. Now it does mean that banks will be able to charge higher interest, but it’s mostly because they don’t have pre-existing credit histories.
Mortgage Applications rise with seasonal pattern
The seasonally adjusted Purchase Index increased 6 percent from one week earlier. … The unadjusted Purchase Index … was 8 percent higher than the same week one year ago.
…
“There was a broad based increase in mortgage applications last week relative to the week prior. The increase in purchase volume was led by a nearly 6 percent increase in both conventional and government markets, perhaps signaling that households are finally ready to begin the home-buying season,” said Lynn Fisher, MBA’s Vice President of Research and Economics.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.89 percent from 3.90 percent.
Fed’s credibility on the line with looming interest rate hike
With an interest rate hike looming, the Federal Reserve’s credibility is on the line.
Chair Janet Yellen has professed unflinching confidence in the Fed’s ability to steer policy back to normal. That confidence will now be put to the test as the central bank sifts through a pile of economic data to find the right time to act.
The transition carries huge economic consequences, but major political ones too, because Fed skeptics would seize on any misstep to justify tightening the leash on the bank.
The big question at the Fed is when to pull the trigger on the first interest rate increase since 2006.
Ideally, the central bank will allow the unemployment rate to drop as far as it can without keeping rates low for so long that inflation begins to grow more than expected.
It’s a bit of a moving target for the Fed, which has to pump the brakes before hitting its goals.
On Friday, Yellen said “policymakers cannot wait until they have achieved their objectives to begin adjusting policy.”
“Doing so would create toogreat a risk of significantly overshooting both our objectives … potentially undermining economic growth and employment,” she warned.
And while the unemployment rate is one of the most prominent measures of economic health, the Fed has to rely on many other pieces of competing data to form the most complete picture it can.
“It’s much harder to make an assessment,” former Federal Reserve Chair Ben Bernanke said Monday, following remarks at the Johns Hopkins School of Advanced International Studies.
“The unemployment rate used to be the only number you had to look at. Now of course there are many dimensions.”
Since the unemployment rate is manipulated for political purposes, it no longer tracks the actual rate of unemployment.
A Sure Sign Gold Has Not Bottomed
“Faith Many People Have In Gold Is Rising As Instability Increases”
* Inflation fears have caused a surge in Russian demand for gold jewellery
* Currency depreciation and falling wages weighing on average Russians
* Classified ad websites booming as Russians try to raise cash
* Ruble has fallen more than 35% against gold in recent months
* Ruble today … other fiat currencies tomorrow
“The faith many people have in gold is rising as instability increases,” Adamas executive director Maksim Vainberg said in an e-mail. “Unlike home electronics, gold jewelry can be always resold.”
Until the faithful capitulate, gold will not find a durable bottom
Iceland Proposes Ending Fractional-Reserve Lending
Icelandic officials are thinking about redefining money and ending banking as we know it, Agence France-Presse reports.
Iceland’s prime minister commissioned a report from Frosti Sigurjónsson, a parliamentarian, that argues banks shouldn’t have the power to create money. It sounds strange to say it, but creating money is indeed something that banks do all the time. Say you take out a loan to start a business from your bank. You write checks to your workers and your rent and you buy goods wholesale. Eventually, your suppliers and employees deposit that money at their banks, which can in turn make new loans. One of those banks might extend a mortgage to help someone buy a house, and the cycle repeats.
As the checks change hands, the total amount of money out there actually multiplies with each cycle. Even though the homeowner has paid for the house she’s now living in, your employee can still withdraw her cash from her bank account. And although you have money to pay all your expenses at your business, your bank’s depositors can still take out their money as well. Money has been created.
Sigurjónsson’s report argues that this system is unstable. And it is. If the homeowner defaults on her debts — as many of them did during the years before and during the financial crisis — then the entire system is in trouble. The banks have promised to take care of people’s money, and they find they can’t keep their promises.
Sigurjónsson argues instead for a system in which the government would essentially run checking and savings accounts. No bank would be able to make a loan without taking the money out of some other account ahead of time, so instead of multiplying with each cycle of borrowing and saving, the money in this kind of system would just move around from place to place. The central bank would be entirely responsible for creating new money for people to use as the economy expands. In the current system, the central bank shares that responsibility with banks.
If the central bank was concerned about a bubble forming, about people making unsound loans, policymakers could easily tighten the spigot of new money. Everyone else would be forced to carefully examine about their lending and borrowing.
On the other hand, it’s far from clear that the system Sigurjónsson argues for, sometimes called “sovereign money,” would be more stable. Central bankers can make mistakes just as easily as private bankers can. They might be reluctant to deflate bubbles if things seem to be going well outwardly, and they might respond too slowly in a crisis. Of course, these are problems with the existing banking system as well, but they’d be exaggerated under sovereign money.
“You essentially don’t have a banking system. You would have, actually, an almost Soviet-style banking system,” said Ted Truman, a former Federal Reserve economist. “It’s a monobank, in the terms of Russia, the former Soviet Union.”
San Francisco Home Prices Dip
S&P/Case-Shiller Home Price Indices said San Francisco reported the biggest monthly dip of 0.86 percent of all the 20 metropolitan regions surveyed in the study for the January 2015 period.
According to the National Association of Realtors®, San Francisco’s average home price in the last quarter just a year ago was $742,900. A light dip from this high price may be beneficial to make this city affordable.
Hopefully, San Francisco would still continue to receive good news.
California Imposes First Mandatory Water Restrictions to Deal With Drought
When I turn on my tap, water still comes out
PHILLIPS, Calif. — Gov. Jerry Brown on Wednesday ordered mandatory water use reductions for the first time in California’s history, saying the state’s four-year drought had reached near-crisis proportions after a winter of record-low snowfalls.
Mr. Brown, in an executive order, directed the State Water Resources Control Board to impose a 25 percent reduction on the state’s 400 local water supply agencies, which serve 90 percent of California residents, over the coming year. The agencies will be responsible for coming up with restrictions to cut back on water use and for monitoring compliance. State officials said the order would impose varying degrees of cutbacks on water use across the board — affecting homeowners, farms and other businesses, as well as the maintenance of cemeteries and golf courses.
While the specifics of how this will be accomplished are being left to the water agencies, it is certain that Californians across the state will have to cut back on watering gardens and lawns — which soak up a vast amount of the water this state uses every day — as well as washing cars and even taking showers.
“People should realize we are in a new era,” Mr. Brown said at a news conference here on Wednesday, standing on a patch of brown and green grass that would normally be thick with snow at this time of year. “The idea of your nice little green lawn getting watered every day, those days are past.”
Just so we’re clear on who is important in California…
Owners of large farms, who obtain their water from sources outside the local water agencies, will not fall under the 25 percent guideline.
And yet… agriculture uses 80% of the water. Even if we completely eliminate residential and commercial use, we would still have a shortage since we are at 5% of normal average reserves. Had we limited agricultural use 5 years ago, and farms had relocated to areas of the planet where there isn’t a drought, then we wouldn’t be facing these restrictions today.
At a minimum, we should require that farms switch to drip systems instead of spray systems. Better yet, since they have all this money to spend on buying politicians, the could use some of it to build desalination plants and pumping stations.
Thank you for the beautiful blog post, Sundays at Disneyland. My sister is autistic (back in the 70s there wasn’t much awareness of Austism, so according to school officials she was just “troubled” and “difficult” and “lazy”) and her childhood was hard. My sister loves trains and I still remember how excited she would get when my Mom would put her conductor hat on her head and take her down to the station in our city and watch the trains go by and get unloaded. Her favorite was the lumber cars because they had such unusual shapes. I didn’t understand much in those days but her joy was infectious.
My parents were ahead of their time and attempted to shield her as best they could from the “helpful” judgments of the world. There were a lot of struggles but she’s found her place in the world and its beautiful. She now assists educators on effective ways to work with special needs kids. She’s an expert largely because she has so much personal experience being on the business end of the wrong way to do it.
Thank you for sharing your sister’s story.
Autism can be a special gift if parents open their eyes to the unbridled joy these children experience. It warms my heart to hear that your parents recognized and cherished this back in the 70s when most were not so enlightened.
In my region (northern Virginia), rents have increased by a good 25 percent since the last bubble burst in 2008 which is a lot BUT the bubble has been reinflated to almost it’s previous point (houses now cost about as much now as then) meaning that house prices are certainly higher, about 50 percent.
So this begs the question: If buying versus renting didn’t make sense then, why does it now?
I’ve accumulated at least as much equity in my savings account as someone who has purchased a home in 2008 (perhaps not at the bottom, but near it). So renting isn’t all that bad but it does stink in the sense that we will have to move again at some point while an owner can stay put.
Long term: rents are about as high as they can get now without people going broke but buying is little better. For about the same price as renting, we can buy a crack shack with about 200K of needed repairs. Realtors try to sell these pigs and seem frustrated that with the market topped out, their commissions are going into the toilet. Sure, they’d love to make a BIGGER commission with a buyer paying more, but if NOTHING sells, they don’t make a dime either.
I’m reminded of 2007 when everyone told me, hold onto your ears here:
“REAL ESTATE HAS DOUBLED IN PRICE SO IF YOU BUY NOW, YOU’LL DOUBLE AGAIN! AND RENT IS HIGH! SO BUY NOW!”
But the real estate prices have more or less topped out, even here so there’s little sense of urgency for late money. Directors and lobbyists don’t want to buy crack shacks. The poor kids moving into the area for DC jobs are living like illegals 4 to a unit. It’s all what I saw in 2007.
The two big differences between then and now are rents are much higher, and interest rates are much lower. Those two factors tip the rent versus own balance back in favor of owning, albeit based on artificial manipulation of mortgage rates.
Polish Knight, can I ask where you are looking? I am in NVA (Alexandria) & looking to buy.
For what its worth, I dont think rent vs buy ever makes sense in year 1. Back in 1999, not knowing what I was doing, I bought @ $2500 mo vs $2100 to rent. Yet, I thank god every day because comparable rent today would be $3400, but my payment is still $2650.
Also, that 16 years went by in the blink of an eye. Wife wants to move but with only 14 years left, part of me wants to just pay the sucker off!
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