Jan182016
Does Coastal California’s great climate create real estate value?
Many wealthy and powerful people make Coastal California their home because of the weather, and they build companies and stimulate the economy.
The local climate in Coastal California contributes to real estate value, but not because everyone wants to live here. By far the largest reason Coastal California house prices are so high is because there are many high-paying jobs and many wealthy businesspeople who operate businesses here. The climate is arguably as good in Tijuana, but Tijuana is not known for high real estate values. The most expensive real estate in the US is at the Hamptons in New York, but the climate there isn’t very good at all.
Perhaps it can be argued that successful business owners who create high paying jobs choose to live and operate their businesses in Coastal California because of its climate. It certainly isn’t due to the business-friendly nature of State laws. It is certainly less expensive for business owners to locate in places like Nevada where taxes are low and the State is very business friendly, but many business people chose to keep their businesses here, and climate is one of the reasons. Perhaps the quality of the workforce may also have something to do with it.
This climate also helps the wildlife to live in gardens and other urban areas, although a raccoon is not an endangered species, the raccoon is classified by the California Department of Fish and Game as a furbearer and is protected by law against being relocated after trapping or killed by inhumane means. You must have a hunting license to kill a raccoon for its fur. Bats, squirrels and raccoons are estimated to be in 2 out of 10 attics. Due to these stats, Indianapolis wildlife removal companies are reporting a shortage of technicians to trap and relocate wildlife that has made its way into homes and commercial buildings. Bat removal was reported to be the biggest need among all of the requests for services.
When my family makes weekend plans, we don’t worry about the weather. The climate in Coastal California is nearly perfect, and I enjoy it every day. The narrow coastal band of properties in California have a unique and very high quality climate.
Cold
I grew up in Central Wisconsin. Like much of the country, there are four distinct seasons there, but in Wisconsin, the winters are particularly brutal. I remember one full week in February of 1985, the high temperature never got above zero degrees. Each day, the high would be -8 to -2, and the lows would drop down well below -20. One morning, it was -38 when I went outside to start my car. That is cold.
It is difficult to describe just how cold thirty-eight degrees below zero really is. Everyone knows how warm 80 degrees feels, and most know how much colder 40 degrees feels. That same change in feeling accompanies the drop from 40 degrees to zero degrees, and it happens again when dropping from zero to minus 40. Zero degrees is a very chilling cold. Any exposed skin is immediately “bitten” by Jack Frost. Forty degrees below zero is beyond cold. Exposed skin feels like it is on fire at those temperatures as the cold “freezer burns” your skin. Prolonged exposure results in a bone-chilling cold where the surface layers go numb and the chill penetrates deeply into your body.
There is no escaping cold weather. There is no time of day when you can go outside and be comfortable. You have to bundle up with layers of clothing, heavy coats and boots, and you rush from one artificially heated environment to another. Whenever you are exposed to the cold, you hate it — and you can’t help being exposed.
It is never cold in Coastal California.
Hot
I lived in Las Vegas for a while, and I have spent much time in hot, arid climates. Someone described Las Vegas to me as “living in a hair dryer.” The deserts in inland California are much the same. Make sure that you avoid getting pests at home, learn about what attracts Pharaoh ants before it’s too late. There is good weather in these areas for 8 months of the year, but the summers are very hot and nearly unbearable. Extreme heat is very draining, and exposure can result in heat stroke and dehydration. I prefer heat to cold because when it is really hot, at least you can go outside in the mornings or evenings and the temperature is bearable.
It is never hot in Coastal California.
Humid
I lived in Florida for 7 years, and I lived in humid areas of Arkansas and Texas for much longer. Humidity sucks. The moment you step outside, you begin to sweat. It is uncomfortable, particularly when it is also very hot. One thing that always bothered me about living in a humid climate is that you can never open the doors and windows of your house and let the air circulate; your house is hermetically sealed — like a coffin. (We aired out our place last weekend. Most of the day there was a dry 74-degree breeze blowing through.)
It is never humid in Coastal California.
Wet
We get very little rain in Southern California, so we rarely have to change our plans due to the weather. When I lived in other areas, I always had to make back-up plans in case the weather changed. I spent far too many weekends watching rented movies as the cold and the rain ruined my plans for fun. Also, the lack of rain means fewer molds, pollens, mosquitoes, and other problems and pests of excessive rainfall, although if you have this issues services as Olathe pest control which specialize in keep everything clean of pests in houses or gardens can definitely help with this.
I have always thought Eugene, Oregon, looked like a nice place. I caught part of a football game played there on TV last year, and it was cold and overcast, and there was a light mist. The announcers of the game said it had rained for 18 consecutive days there. WTF! So much for Eugene, Oregon.
It rarely rains in Coastal California.
Storms
I have lived in areas where tornadoes, hurricanes, intense thunderstorms and dramatic changes in temperature were common. I can remember one afternoon in Texas when a cold front came through and reduced the outdoor temperature by about 40 degrees in a few hours. I have evacuated to avoid hurricanes, hid in the basement to escape tornadoes, and experienced thunderstorms so intense that water seemed to fall in sheets from the sky.
We don’t get big storms in Coastal California.
California Perfect
Coastal California has a narrow band of temperature variation with highs ranging from the 60s in the winter to the 70s in the summer. The closer you are to the ocean, the narrower this band of temperatures becomes. We have low humidity and little rainfall, and the closest we come to a storm is the Santa Ana winds that occasionally blow hot air out of the deserts.
The daily weather experience is fantastic. The mornings here are beautiful as we generally get a cozy blanket of clouds that keeps the morning cool. It isn’t a depressing overcast (except for May Gray and June Gloom) because we all know the clouds will burn off by late morning, and we will be bathed in sunlight the rest of the day. If you live close enough to the water, there is a sea breeze that takes the edge off a sunny summer day. The evenings are generally cool and crisp often requiring warmer clothing. I don’t own a heavy winter coat or boots anymore.
The best thing about living in a perfect climate is getting out to enjoy it. We have year-round outdoor activities with little worries about seasonality or bad weather days. I can’t remember the last time we had to change the family’s plans due to the weather.
You do get very sensitive to small changes in temperature when you live in a perfect climate; eighty degrees is hellish hot, and sixty degrees is an Arctic blast. It is the Goldilocks climate.
I used to own a convertible, and I rarely put the top up. There were times I will run the heater in the morning or the AC in the afternoon to take the edge off, but I still greeted the morning air in January or the afternoon air in August with the top down and the wind in my hair. I couldn’t have done that living anywhere else.
Add Value?
Does this great climate add value to Coastal California real estate? Indirectly, it certainly does. Many wealthy and powerful people make our area their home because of the weather, and they build companies and stimulate the economy by their presence. This raises everyone’s standard of living through higher wages, higher rents, and higher home prices, making the homes beautiful with great interior designs.
Are home prices higher because “everyone wants to live here?” No, but believing that is true makes people feel good and perhaps feel a bit superior. Many people really would like to enjoy our climate, but without a good job, the cost of living is so high that being here wouldn’t be very fun or desirable.
The climate is one of the main reasons I live here, and I am not alone. I knowingly sacrifice my standard of living to be here (there are plenty of McMansions I could afford elsewhere). Perhaps the effect of people like me adds some value to real estate, but the phenomenon would be very difficult to measure.
Added value or not, I plan to stay here and enjoy this climate as long as I can.
We have perfect weather in Coastal California.
[listing mls=”LG16080757″]
Climate(/Geography), some family, and a few cultural items are all I miss about California. On a total cost/benefit analysis, it was life changing, much for the better, for me to leave in 1993.
For “everyday/work” life, the place is a pit, as far as I am concerned: crowded, many places are dirty, crumbling infrastructure in places, mediocre public schools, “western” values are beginning to fade into history…
Members of my family have lived in CA since the early 1900’s and continue to live there. I have a lot of history with the place, including two college degrees.
It used to be a place where it was difficult to fail. Now it’s difficult to find a niche within which to succeed, in my opinion.
Good luck to the Californians in the future.
Where did you escape to?
All fair points, coastal CA weather is some of the best in the U.S. But the cost, especially future opportunity cost via insane real estate prices and highest-in-the-U.S. income, sales, and gas taxes, must be considered.
Take your example of Oregon. Winter can be a bear — rain, clouds, occasionally sub-40 degree cold/snow. But for eight to nine months of the year, the weather is very nice. Spring and summer are fantastic; summer is as good, if not better, than California. And this is true for much of the Pacific coast, from southern OR to northern WA.
Most importantly, in OR or WA, you likely could cut your cost of living in half — and possibly more. In many areas, a down payment in coastal CA could buy you a damn house in OR and WA if you avoid a McMansion. Even in Portland, that CA down payment could equal a 50% cash payment on a nice condo, townhome, or home overlooking water.
That’s just the real estate portion. Many other things simply cost less. No sales tax in Oregon, which is enormous for middle class families. No income tax in Washington, huge if you are a mid-level professional trying to put away money for the kids’ college.
If you are not paying outrageous CA coastal housing costs + insane taxes, in lower-cost states you have a real shot at true home ownership (not loanownership), plus fully funded retirement accounts, plus the ability to fund a 529 plan if you have kids. This is an impossible dream for many slaving away in California. Also, if one parent wants to stay home, it can be done without bankrupting the family.
And if you don’t have kids, part-time work or early retirement is a real possibility in these lower-cost states. If you don’t like the December/January rain and clouds, you now have the time, resources, and disposable income to take an extended vacation (think a month or two) to Florida, Arizona, Southern CA and possibly even Hawaii or Europe.
Saving several hundred thousand dollars (and possibly much more) on the cost of your home, plus reduced costs, provides enough money for a lifetime of travel, as well as providing a safety net should health or other issues arise. All of this absolutely is achievable when you significantly reduce your cost of living structure and achieve personal housing security via affordable home ownership.
This is true in most of the country when compared to California. It’s the primary reason California has a net out-migration. People simply can’t afford to live here.
Very few areas of the country have the plethora of diversified job opportunities that SoCal has…. You could go to Chicago for more job opportunities.. But good luck with that… Rural Oregon, forget it
Rural oregon is poor and hillbilly just like Nor Cal.Drugs also have changed this regional area.There is a lot of white trash.Few jobs.lots of welfare folks.
I grew up in a very rural area. My family move out to find more opportunities like most families do. The ones that remain are often the least capable and have no place else to go. And yes, that makes for uneducated white people on welfare.
Lock in now! Stock sell-off sinks mortgage rates
You may be losing your shirt in the stock market this week, but you could get a leg up on your home loan. As investors flee stocks, they are heading to bonds, and as a result, mortgage interest rates are falling. Mortgage rates ended 2015 at their highest level in nearly six months, but have since dropped precipitously.
“Bond markets continue defying the odds so far in 2016,” wrote Matthew Graham, chief operating officer of Mortgage News Daily.
When stocks sell off, investors historically head to the bond market because it is considered a safer investment. Higher demand means lower yields. Lenders price according to the yields on mortgage-backed bonds, which generally follow the 10-year Treasury.
Mortgage rates do not follow the Federal Reserve funds rate, but most expected that as the Fed raised rates, mortgage rates would rise as well. This has more to do with an improving economy, which would be behind both.
“Given the Fed rate hike and strong ADP data yesterday — among other reasonably decent economic anecdotes — we would be more justified in expecting bonds to be under pressure at the start of the year,” added Graham, calling the drop in rates, “a pleasant surprise.”
The average rate on the popular 30-year fixed mortgage is now just below 4 percent for the most credit-worthy borrowers. Applications to refinance a loan had dropped dramatically in the last two weeks of 2015 amid higher interest rates, but this move lower could create a new opportunity for thousands of borrowers who have yet to refinance at a lower rate.
Note how they cite the flawed seasonally-adjusted mortgage applications data to whip people into a frenzy.
Applications to refinance a loan had dropped dramatically in the last two weeks of 2015 amid higher interest rates…
China stock swoon could boost US real estate
Chinese investors purchased $8.6 billion in U.S. commercial real estate assets in 2015, according to CBRE, a global real estate services and investment firm. That does not even include real estate development, in which Chinese are also investing in a very big way. China still ranks second behind Canada in this race, but it nearly quadrupled its play in just one year. As China’s economy and stock market spiral, will that help or hurt U.S. real estate?
“Volatility from China is the new normal, and the sooner we get used to it the better. At the same time, a certain amount of volatility isn’t all a bad thing as global instability often leads to more foreign capital flows to the safe havens, notably London and the U.S,” said Spencer Levy, CBRE’s head of research for the Americas.
The U.S. is now well-positioned to reel in foreign investors, thanks to recent changes in tax law. Last month, President Barack Obama signed into law a provision that waives taxes imposed on foreign pension funds under the 1980 Foreign Investment in Real Property Tax Act (FIRPTA). In addition, these funds can now buy up to 10 percent of a U.S. publicly traded REIT (Real Estate Investment Trust), without falling under FIRPTA; the limit had been 5 percent.
“The current volatility in China has underscored for Chinese investors the importance of diversifying their investments into the U.S. and elsewhere,” said Sam Chandan, a professor at the Wharton School of the University of Pennsylvania. “It does, however, raise the possibility of a policy intervention on behalf of the Chinese government that will limit capital outflow and roll back some of the liberalization at least temporarily.”
Thanks to TRID, California home sales exploded in December
Delays led to highest monthly sales increase in five years
After November 2015 turned out to be California’s worst home sales performance for the month since 2007, several observers were quick to point the effect of the implementation of the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosures rule in October as a significant headwind that California couldn’t overcome any time soon.
December proved that wrong.
As expected, the weaker-than-expected sales figures of November 2015 were thanks in large part to TRID.
According to a new report from the California Association of Realtors, existing, single-family home sales jumped 9.6% in the month of December, as many sales that were pushed out of November thanks to TRID-related delays closed in December.
And according to Ziggy Zicarelli, the president of the California Association of Realtors, December’s jump in home sales in December wasn’t just large, it was historically large.
“As we speculated, sales that were delayed in November because of The Consumer Financial Protection Bureau’s new loan disclosure rules closed in December instead, which led to the greatest monthly sales increase in nearly five years,” Zicarelli said. “Sales increased across the board in all price segments in December, but improvement in the sub-$500,000 market was more pronounced as many homes affected by the new loan disclosures were priced under the conforming loan limit.”
Overall, CAR’s report showed that existing, single-family home sales totaled 405,530 in December on a seasonally adjusted annualized rate, up 9.6% from November and up 10.7% from December 2014.
The month-over-month increase in sales was the largest since January 2011, and the year-to-year increase was the largest since July 2015, CAR’s report showed.
Additionally, CAR’s report showed that December’s sales of condos and townhomes were up 25.1% from November and were 10.2% higher than a year ago at the same time.
While there were more sales closed in December, the median price of an existing, single-family detached California home also rose by a historic margin.
According to CAR’s report, the median price increased 2.6% in December to $489,310 from $477,060 in November.
December’s median price was 8% above than the revised $453,270 recorded in December 2014.
The year-to-year price gain was the largest since August 2014, CAR said.
I’d like to be the first to acknowledge LA Watch for her prescience on this issue.
Thanks. I have no idea what you are talking about, but I am positive you make incorrect assumptions and are a bitter cretin. Happy MLK day!!!
You’ve made numerous poorly supported arguments for why the housing market is hurting. December’s highest monthly sales increase in 5 years kind of blows that out of the water. By incorrect assumptions you must mean that you aren’t a female? Admittedly, that was just a guess.
You should of taken my advice on saying nothing at all. Too late.
Should of or should have?
The rise in December was much smaller than the drop in November.
Immigrants or Executives: Who’s to Blame for Wage Stagnation?
Are immigrants to blame for America’s economic rut? In his recent cover story for The Atlantic, David Frum points to that belief as a major reason for the dynamics of the Republican primary, particularly Trump’s rise. In his final State of the Union address, President Obama pushed back against those who would answer that question in the affirmative, saying, “Immigrants aren’t the reason wages haven’t gone up enough; those decisions are made in the boardrooms that too often put quarterly earnings over long-term returns.”
Is Obama right?
The extent to which immigration impacts wages is a contentious and layered question. Critics of current immigration policy often cite the work of the economist George Borjas, a professor at Harvard, who finds that in both the long and short run, the impact of immigrants on wages can be deleterious, particularly for low-skilled workers. But Borjas also finds that the opposite can be true, and that the outcome on wages depends largely on the size of demand and the consumer base in a particular area of for a particular product.
But on the bigger picture, Obama is right: The discussion of just how much wage suppression immigrants might be responsible for is a bit beside the point. The president’s argument during the State of the Union address was probably not that wage redistribution and suppression doesn’t exist, but instead that the level of wage dampening that immigration is actually responsible for in the broader scope of the problem pales in comparison to the wage suppression that has occurred since multi-billion dollar companies decided to prioritize rewarding shareholders first and workers last.
O.C. is again a mortgage powerhouse
Back from the depths of the housing crash, Orange County is once again the mortgage mecca of America.
New quarterly federal jobs data show the county is the national employment leader in two key home-loan related categories:
• Local bosses at “real estate credit” businesses – private lenders, not banks or credit unions – employed 9,599 people in June, just topping Dallas County, Texas, for the county with the most workers in this employment niche.
• Orange County had 4,793 workers classified as “mortgage and nonmortgage loan brokers” – people who handle loans funded by third parties. That was nearly double the nation’s No. 2 county in this category, Los Angeles.
Orange County has long been a mortgage-making hub, and not always with great results.
Many modern loan-making techniques were pioneered here – from lending to people with less-than-perfect credit to selling loans off in bundles to investors. Loan-making prowess can be seen at a host of independent mortgage companies as well as in sizable mortgage units of traditional banking institutions.
This history of lending innovation turned ugly a decade ago. High-risk mortgage-making practices, including tactics popular with several large Orange County-based lenders, helped create a housing bubble and subsequent collapse that devastated the real estate industry.
But as the housing market recovered in recent years, the local mortgage business rebounded, too.
Orange County real estate credit bosses grew their staffs by 71 percent in the past three years, far faster than 4 percent growth seen nationwide. Curiously, Dallas County has lost its crown as the top mortgage job market since 2012, as its real estate credit bosses cut staff 20 percent in three years.
The ranks of mortgage brokers in Orange County have grown 60 percent since 2012. Nationwide, broker employment is up 23 percent in the same period.
One way to gauge Orange County’s influence in home lending is to ponder its outsize share of mortgage workers.
The local real estate credit industry had roughly 4 percent of the 215,538 workers in this employment niche nationwide in the second quarter. Orange County had 5.5 percent of the nation’s 80,606 loan-broker workers.
That’s remarkable when you note that Orange County’s overall workforce is equal to roughly 1 percent of total U.S. employment.
The reason Dallas is declining and Orange County is expanding is because of where we are in the cycle. Dallas is the mortgage servicing capital of the country. As defaulted loans have dried up or been sold off, the number of personnel needed to service these loans has declined. Defaulted loans are very labor intensive, requiring low ratios of loan count to servicing headcount. Conversely, well performing loans are not very labor intensive and you can get away with very high ratios of loan count to servicing headcount. This shift has been happening for several years, ever since home prices bottomed out.
Orange county was never much of a servicing mecca, but was always big on the originations side of things. Now that homes are increasing in value and with low rates still lingering, you have a much higher need for loan officers, processors, and funders. This growth will eventually pull back if mortgage rates ever do rise and the demand for refinancing declines. But for now, the fundamentals favor Orange County mortgage lenders over Dallas-based servicers.
Thanks for sharing that insight.
It has taken a decade, but at least for now, it appears the mortgage industry recovered here.
[…] California communities. The narrow strip of land within a mile or two of the ocean is one of the most desirable climates in the world, and many people of great wealth want to live […]