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What we can learn from the Great California Exodus (Sept. 2012)


By turtledove   Follow   Sun, 23 Dec 2012, 7:52am PST   11,167 views   148 comments
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I hope this hasn't already been posted. Didn't see this on the site. Thought it was interesting.

http://www.manhattan-institute.org/html/cr_71.htm

Executive Summary

For decades after World War II, California was a destination for Americans in search of a better life. In many people’s minds, it was the state with more jobs, more space, more sunlight, and more opportunity. They voted with their feet, and California grew spectacularly (its population increased by 137 percent between 1960 and 2010). However, this golden age of migration into the state is over. For the past two decades, California has been sending more people to other American states than it receives from them. Since 1990, the state has lost nearly 3.4 million residents through this migration.

This study describes the great ongoing California exodus, using data from the Census, the Internal Revenue Service, the state’s Department of Finance, the Bureau of Labor Statistics, the Federal Housing Finance Agency, and other sources. We map in detail where in California the migrants come from, and where they go when they leave the state. We then analyze the data to determine the likely causes of California’s decline and the lessons that its decline holds for other states.

The data show a pattern of movement over the past decade from California mainly to states in the western and southern U.S.: Texas, Nevada, and Arizona, in that order, are the top magnet states. Oregon, Washington, Colorado, Idaho, and Utah follow. Rounding out the top ten are two southern states: Georgia and South Carolina.

A finer-grained regional analysis reveals that the main current of migration out of California in the past decade has flowed eastward across the Colorado River, reversing the storied passages of the Dust Bowl era. Southern California had about 55 percent of the state’s population in 2000 but accounted for about 65 percent of the net out-migration in the decade that followed. More than 70 percent of the state’s net migration to Texas came from California’s south.

What has caused California’s transformation from a “pull in” to a “push out” state? The data have revealed several crucial drivers. One is chronic economic adversity (in most years, California unemployment is above the national average). Another is density: the Los Angeles and Orange County region now has a population density of 6,999.3 per square mile—well ahead of New York or Chicago. Dense coastal areas are a source of internal migration, as people seek more space in California’s interior, as well as migration to other states. A third factor is state and local governments’ constant fiscal instability, which sends at least two discouraging messages to businesses and individuals. One is that they cannot count on state and local governments to provide essential services—much less, tax breaks or other incentives. Second, chronically out-of-balance budgets can be seen as tax hikes waiting to happen.

The data also reveal the motives that drive individuals and businesses to leave California. One of these, of course, is work. States with low unemployment rates, such as Texas, are drawing people from California, whose rate is above the national average. Taxation also appears to be a factor, especially as it contributes to the business climate and, in turn, jobs. Most of the destination states favored by Californians have lower taxes. States that have gained the most at California’s expense are rated as having better business climates. The data suggest that many cost drivers—taxes, regulations, the high price of housing and commercial real estate, costly electricity, union power, and high labor costs—are prompting businesses to locate outside California, thus helping to drive the exodus.

Population change, along with the migration patterns that shape it, are important indicators of fiscal and political health. Migration choices reveal an important truth: some states understand how to get richer, while others seem to have lost the touch. California is a state in the latter group, but it can be put back on track. All it takes is the political will.

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bmwman91   Sun, 23 Dec 2012, 1:17pm PST   Share   Quote   Permalink   Like (4)   Dislike     Comment 1

Cost of living, it has to be #1. OK sure, you can EASILY pull $100k a year in the Silicon Valley. Couples pulling $250k are very common. At present, it will not get you anything more than a condo unless you have $200k+ in cash to support a $1M jumbo loan. $200k cash can get you a nice 2 story 3/2 or 4/2 in most of the rest of the nation. Yes yes, the weather sucks, but other than that, you buy the house and you can easily take a 50% pay cut because your living cost is property tax, insurance and some maintenance. Chances are that your living standards will be at least the same, despite half of the total income (the progressive income tax setup helps a lot). A certain member here keeps talking about how it is impossible to give up a super high salary, but if you can just go and pay cash for a house elsewhere, you require a lot LESS gross income to maintain the same lifestyle. You just have to sack-up and accept the less pleasant weather or lack of interesting geography. Some people can't handle politically centrist or right-leaning areas either, which basically confines them to the super expensive liberal enclaves along the coasts. I have found people in much of the rest of the country to be much more politically "balanced" than people in CA give them credit for, and in many ways they are much more "balanced" than the progressive-or-die types around here.

Vicente   Sun, 23 Dec 2012, 3:43pm PST   Share   Quote   Permalink   Like (1)   Dislike (1)     Comment 2

Easy come, easy go. Mistaking your turn on the upside for "divine providence" and hard work, is a common piece of arrogance IMO. Next decade it could be New Jersey that's hot.

lostand confused   Sun, 23 Dec 2012, 9:12pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 3

bmwman91 says

Cost of living, it has to be #1. OK sure, you can EASILY pull $100k a year in the Silicon Valley.

Yeah. I was going to move back to CA, a few months ago and that job fell through. At this point, only looking for full time gigs, as ready to settle down and have kids. Lucky for me the fiancee does not care where and is in IT too, so both very flexible.

Now where I live in the mid-west, I rent a two bedroom for 720 dollars a month. After splitting everything with my room mate, it comes to about 440-480 dollars a month-including all utilities. Gas is about a buck a gallon cheaper than CA. Jobs are plentiful -at least in my area of IT-and contracts last much longer. The rates are lower, but significant overtime negates that.

I am again negotiationg another full time time job right now-two actually. In in L.A. and one in Michigan. The one in L.A only pays 5k extra a year. The difference in living expenses is simply astounding. My fiance is very savings oriented and has a few cousins in CA and loves visiting there. I am really grasping for straws on why we want to move back.

Here, it is 15-20 min commute, tons of savings and no debt. Now the winters are brutal, cold, windy and humid too. Just recently we had a day with temps in the low teens, with howling wind and snow(so with wind chill close to zero F) and close to 100% humdity. That is why!!! Plus I really miss the mountains and ocean. Now after spending time in the south for a small project-I really didn't like it much . But that is just me. But Houston is the same-a nice gated community with swimming pool is 710 for a 2 bedroom . My colleague who was from CA, moved there when he lost a job and couldn't find one. He travels the country on IT projects and the best thing he doesn't have to pay state taxes. His wife has a small time job and they are very, very happy. it does get humid and apparantly, unlike CA, it doesn't cool down that much in the evening either.

But that is one of the drawbacks of CA-wether you are renting or bought, you don't get much savings and if something were to happen-and in today's world, something will happen-just paying the rent or mortgage will make you broke. Both me and finacee are on the same boat-well settled, no debts and ready to settle down. She has visisted CA, while visiting her cousins, so is ready to try it for a few years. I want to get back, but the thought of getting into massive debt these days frightens me.

If houses were 300-400 k fine-that was the price in late 1990s when the market/jobs were booming and any one with a pulse could get a job . Rents too are way too high. Apparantely in the bay area, rents are back at boom highs-even exceeding the boom and it looks like housing is in another bubble.

New Renter   Mon, 24 Dec 2012, 1:51am PST   Share   Quote   Permalink   Like (1)   Dislike (1)     Comment 4

bmwman91 says

Cost of living, it has to be #1. OK sure, you can EASILY pull $100k a year in the Silicon Valley. Couples pulling $250k are very common.

Here in the SFBA even car washers and carnies start at $85k. A good trained monkey can easily pull down $120k.

Strategic Renter   Mon, 24 Dec 2012, 2:17am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 5

I work from home and after 2 years in Huntington beach I have had enough it is an awful place to live. I paid 20k in State taxes this year and am no longer prepared to live in a shack that is valued at 600k which I am renting for $2500 a month. I have a incredible house in Vegas with a swimming pool and tennis court that I am buying cash and cannot wait to get out of this dump.

New Renter   Mon, 24 Dec 2012, 4:06am PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 6

Strategic Renter says

I work from home and after 2 years in Huntington beach I have had enough it is an awful place to live. I paid 20k in State taxes this year and am no longer prepared to live in a shack that is valued at 600k which I am renting for $2500 a month. I have a incredible house in Vegas with a swimming pool and tennis court that I am buying cash and cannot wait to get out of this dump.

That $20k is better spent on blow and hookers - I'm surprised you stuck it out this long.

Kevin   Mon, 24 Dec 2012, 4:07am PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 7

The thing that makes it possible to live in CA isn't the high incomes, it's the low family sizes.

You don't feel any pressure about where you live when you don't have any kids. A couple earning $60-70k a year can live comfortably in a 1 bedroom in SF or LA and will probably be happier than people living in suburbia elsewhere.

Once you have kids, though? $200k+ or GTFO.

If things keep going like this, in another generation or two there won't be any California natives. It'll be all immigrants from other countries and tech workers, film makers, and porn stars from other states.

New Renter   Mon, 24 Dec 2012, 5:21am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 8

Kevin says

The thing that makes it possible to live in CA isn't the high incomes, it's the low family sizes.

You don't feel any pressure about where you live when you don't have any kids. A couple earning $60-70k a year can live comfortably in a 1 bedroom in SF or LA and will probably be happier than people living in suburbia elsewhere.

Once you have kids, though? $200k+ or GTFO.

If things keep going like this, in another generation or two there won't be any California natives. It'll be all immigrants from other countries and tech workers, film makers, and porn stars from other states.

Sounds like a paradise for the sub-30 crowd. Come to CA when you're a 22-24 yr old fresh college graduate, make a bunch of money in tech or porn, find a mate and leave for greener (cheaper) pastures by 30.

Meccos   Mon, 24 Dec 2012, 6:37am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 9

Billybigrig says

What has caused California’s transformation from a “pull in” to a “push out” state? 

I'll start with ...

1) unsecured borders

2)

3)

2) high tax rates

dunnross   Mon, 24 Dec 2012, 6:44am PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 10

E-man says

Things will only get more expensive in the Bay Area after each boom/bust cycle.

Remember trees don't grow to the sky. The higher they go, the more they fall. Another reason this bust isn't over yet - Bay Area hasn't really crashed, yet. What we've seen around here is just the beginning.

rooemoore   Mon, 24 Dec 2012, 7:01am PST   Share   Quote   Permalink   Like (1)   Dislike (1)     Comment 11

dunnross says

E-man says

Things will only get more expensive in the Bay Area after each boom/bust cycle.

Remember trees don't grow to the sky. The higher they go, the more they fall. Another reason this bust isn't over yet - Bay Area hasn't really crashed, yet. What we've seen around here is just the beginning.

People have been saying this for a long time. My family has been in California since 1842 and first lived in San Francisco in 1870. My mother tells me that every generation has complained about San Francisco RE being too expensive.

IOW, don't get your hopes up...

New Renter   Mon, 24 Dec 2012, 7:35am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 12

rooemoore says

dunnross says

E-man says

Things will only get more expensive in the Bay Area after each boom/bust cycle.

Remember trees don't grow to the sky. The higher they go, the more they fall. Another reason this bust isn't over yet - Bay Area hasn't really crashed, yet. What we've seen around here is just the beginning.

People have been saying this for a long time. My family has been in California since 1842 and first lived in San Francisco in 1870. My mother tells me that every generation has complained about San Francisco RE being too expensive.

IOW, don't get your hopes up...

Sorry Dunross, I have to agree. I have been hearing about how overpriced the SFBA is and about the impending plunge since my family moved here in the late 70's. Such a plunge - like the long expected massive earthquakes - has yet to happen to any real extent. Sure it may happen someday but given recent history it looks like it'll take more than one act of God to do it.

New Renter   Mon, 24 Dec 2012, 7:36am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 13

E-man says

New Renter says

bmwman91 says

Cost of living, it has to be #1. OK sure, you can EASILY pull $100k a year in the Silicon Valley. Couples pulling $250k are very common.

Here in the Bay Area, A good trained monkey can easily pull down $120k.

I have to agree though. It seems like everyone is making in the $110k to $170k range. At least that's what I see when I go through the rental applications. The norm is around $110k to $120k.

Life is pretty tough for folks making $10-$20/hour in the Bay Area.

Not in my case, nor my wife's.

dunnross   Mon, 24 Dec 2012, 7:50am PST   Share   Quote   Permalink   Like (2)   Dislike (1)     Comment 14

New Renter says

I have been hearing about how overpriced the SFBA is and about the impending plunge since my family moved here in the late 70's.

Bay Area wasn't too expensive in the 70's. Prices in the midwest cities like Chicago and Detroit were actually higher than in the Bay Area. I know this is very tough for you to swallow, having been brainwashed by the local hype, for so long.

New Renter   Mon, 24 Dec 2012, 8:09am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 15

dunnross says

New Renter says

I have been hearing about how overpriced the SFBA is and about the impending plunge since my family moved here in the late 70's.

Bay Area wasn't too expensive in the 70's. Prices in the midwest cities like Chicago and Detroit were actually higher than in the Bay Area. I know this is very tough for you to swallow, having been brainwashed by the local hype, for so long.

Sure, no kingdom lasts forever. All I'm saying is that the talk of the impending doom of the SFBA has been around a LONG time and despite crisis after crisis - aerospace bust, dot com bust, housing bust, etc - it hasn't happened yet.

I'd also love to see prices reset to levels where a mortal such as myself can buy a nice house without enduring a lifetime of two income slavery but it hasn't happened yet. I would have thought this last crisis would have been the final straw but no it was just an opportunity for housing bulls to jump in and buy profitable rentals on credit.

dunnross   Mon, 24 Dec 2012, 8:20am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 16

New Renter says

it was just an opportunity for housing bulls to jump in and buy profitable rentals on credit.

There aren't any profits to be made on rentals in most of the Bay Area, as these bulls will soon find out. These bulls are jumping in, once again, for the same reason, of perceived future appreciation. The Bay Area housing boom is now unwinding in reverse, and it will take some more time to complete this cycle.

New Renter   Mon, 24 Dec 2012, 8:55am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 17

dunnross says

New Renter says

it was just an opportunity for housing bulls to jump in and buy profitable rentals on credit.

There aren't any profits to be made on rentals in most of the Bay Area, as these bulls will soon find out. These bulls are jumping in, once again, for the same reason, of perceived future appreciation. The Bay Area housing boom is now unwinding in reverse, and it will take some more time to complete this cycle.

Yes but how much more time? I'd rather not have the settling take so long such that a mausoleum is the only practical option

dunnross   Mon, 24 Dec 2012, 9:06am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 18

New Renter says

Yes but how much more time? I'd rather not have the settling take so long such that a mausoleum is the only practical option

If the houses don't crash in terms of nominal dollars, they most certainly will, in terms of gold currency, which is the only true currency, not subject to any liabilities, or the whims of the FED to try to prop up the housing market. So, keeping all your money in gold, and calculating your house prices in terms of oz of gold, instead of dollars, will give you the peace of mind you need to wait this one out.

turtledove   Mon, 24 Dec 2012, 11:55am PST   Share   Quote   Permalink   Like (3)   Dislike     Comment 19

Many of you have said higher taxes are the problem. So why does California have higher taxes? What is it about what we do that requires a premium over what other states do? Yes, we have more people... but that should also mean a larger tax base. It's not like we're providing better services (if education spending and the like are indicators). We are paying more for things that other states offer at a lower price (taxes). There is something very wrong with that.

The thing that really gets me is the political effect of the migration. We have no balance. With every California conservative moving to more conservative states, we just perpetuate the liberal agenda here in California. Who are those people replaced with? Others who also want to perpetuate the liberal agenda.

Margaret Thatcher once said something to the effect that socialism works until to you run out of other people's money to spend. The California migration pattern isn't promising.

Vicente   Mon, 24 Dec 2012, 1:50pm PST   Share   Quote   Permalink   Like (1)   Dislike (1)     Comment 20

turtledove says

The California migration pattern isn't promising.

This is BS. Why do you assume it's only conservatives who move to other states? Why do you even believe this thinly-sourced gruel?

Migrations are for birds and buffalo. An entire herd picks up and moves and it's gone. Is the population of California increasing or decreasing? It would be a migration if it were decreasing.

Let's say I've got 5 kids and 2 of them move to other states. Maybe the ones that leave go off for military services, and will end up moving back someday. In any case in the interim still 2+3 remain in-state.

It's difficult to characterize the reasoning of thousands of people who after all aren't being directly surveyed about it.

New Renter   Mon, 24 Dec 2012, 2:27pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 21

dunnross says

New Renter says

Yes but how much more time? I'd rather not have the settling take so long such that a mausoleum is the only practical option

If the houses don't crash in terms of nominal dollars, they most certainly will, in terms of gold currency, which is the only true currency, not subject to any liabilities, or the whims of the FED to try to prop up the housing market. So, keeping all your money in gold, and calculating your house prices in terms of oz of gold, instead of dollars, will give you the peace of mind you need to wait this one out.

Gold? Isn't that in a bubble all its own?

Sure looks like a bubble to me

dunnross   Mon, 24 Dec 2012, 3:35pm PST   Share   Quote   Permalink   Like   Dislike (2)     Comment 22

No, gold is not in any bubble yet. In 1980 the price went up 35 times since the bottom of $25/oz. This time, it's only up a mere 6 times. Comparing against the CPI index is not a fare comparison. The govt CPI is not a true measure of inflation. The inflation since 1980 has been much higher than the gov't CPI of 2% is indicating. Besides, every bubble is always higher than the previous, so, according to your own graph, it should be at least $2400, but, this time, it would go much much higher. Look at the DOW/gold ratio on the graph, below. The ratio always goes to 1/1 or below. Now, it's still around 7/1, which means, that when the bubble is over, gold will be very close to the DJI index, most likely, around 5 or 6000.

bmwman91   Mon, 24 Dec 2012, 4:32pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 23

turtledove says

So why does California have higher taxes? What is it about what we do that requires a premium over what other states do?

Good question. The highways in the most affluent region in the United States are complete and utter shit. Even AFTER CalTrans finishes their work, the highways are still shitty half the time. Texas and Colorado both have MUCH higher quality highways, enough so that I actually notice and am impressed every time my employer sends me there.

lostand confused   Mon, 24 Dec 2012, 5:49pm PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 24

turtledove says

Many of you have said higher taxes are the problem

Well not exactly. TX may not have state taxes, but real estate taxes are high-sometimes triple that of here. Maybe that is what puts a lid on their prices. I think unless you reach 65 or some such age, there is no cap on taxes. There are somethings that money and savings can't compare to-like in socal, coming out in the dead of winter in your tees and shorts.

Plus if your average daily high in the winter is the low 30s -the high , not low- and the wind chill makes it even lower and your eyes water when you leave and the only thing you look forward to when you step outside, is to get back inside a heated building-money can have a little less meaning!

dunnross   Mon, 24 Dec 2012, 11:37pm PST   Share   Quote   Permalink   Like (2)   Dislike (1)     Comment 25

lostand confused says

TX may not have state taxes, but real estate taxes are high-sometimes triple that of here.

If you consider the valuation on the house in TX vs California (about 1 to 5, on the average), TX RE taxes are actually lower.

bob2356   Tue, 25 Dec 2012, 12:14am PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 26

lostand confused says

TX may not have state taxes, but real estate taxes are high-sometimes triple that of here

Yes it's really terrible in Cameron County TX where I have to pay $2700 a year on a property assessed at 137k (3k sq ft house, 1/2 acre lot, great older area) and zero state income tax. Wow, that's a whopping 1.9% tax rate almost DOUBLE the Ca tax rate. I would much prefer to pay 1% on a 750k house in CA plus 9.3% income tax. That would be about 25k or 9 times as much. Such a bargain. Thanks for pointing that out.

lostand confused says

Plus if your average daily high in the winter is the low 30s -the high , not low- and the wind chill makes it even lower and your eyes water when you leave and the only thing you look forward to when you step outside, is to get back inside a heated building-money can have a little less meaning!

It's obviously not something that has occurred to you, but what people in the rest of the country do is buy a coat and hat. Then it's perfectly comfortable to be outside all day. I like winter and being outdoors in the winter even when I lived upstate NY.

Living in the brown state wouldn't do it for me. If it makes you happy then great, but that doesn't make it better, just better for you.

mmmarvel   Tue, 25 Dec 2012, 2:21am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 27

lostand confused says

Well not exactly. TX may not have state taxes, but real estate taxes are high-sometimes triple that of here. Maybe that is what puts a lid on their prices.

The tax rate may be high (and as a homeowner in Texas I agree it is) but my home is valued at $135K here (and is 2400 square feet) so while the tax rate is 1.17% my actual taxes maybe much lower than someone in California who has a lower tax rate BUT is living in a 1200 square foot home valued (taxed) at 350K.

Plus, we have a homestead act which keeps the tax rate on your primary residence lower. And yes, once you hit 65 your rate is also reduced.

As for water and utilities, I pay approximately $50 a month for water, sewer and garbage (which is picked up twice a week). As for your tee shirt and shorts, hmmmm, sounds like Houston, for the past two months we've had high 70's and low 80's for our day time high, with lows normally in the 60's. Just saying.

Vicente   Tue, 25 Dec 2012, 2:54am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 28

bmwman91 says

The highways in the most affluent region in the United States are complete and utter shit.

I don't think you can make a hard & fast rule about highways.

Been to West Virginia? Or South Carolina?

I've crossed from red-to-blue and blue-to-red boundaries where as SOON as you cross the state line it goes from smooth to bump-bump-BLAM-bump-thud-grrrrrrrrrrrrrrrrrr.

As a Georgian, I dreaded driving in Alabama.

drew_eckhardt   Tue, 25 Dec 2012, 2:55am PST   Share   Quote   Permalink   Like (1)   Dislike (1)     Comment 29

bmwman91 says

Cost of living, it has to be #1. OK sure, you can EASILY pull $100k a year in the Silicon Valley. Couples pulling $250k are very common. At present, it will not get you anything more than a condo unless you have $200k+ in cash to support a $1M jumbo loan.

Only if you insist on living near the downtown of a nice walkable city (or perhaps the "right" public school; our kids have undergraduate degrees so that's not relevant).

$400K ($80K down for a conventional mortgage) will get a 1950s 3/2 ranch in Sunnyvale (Fremont High).

If you want to save your cash, $100K ($20K down) gets a 1990s 3/2 double wide mobile home in Sunnyvale with central air and double paned windows. You'll get a 20 year term, no options for a lower down-payment, and 7% interest rate. Slot rent, mortgage, insurance with earthquake and flood coverage, and property tax total about $1500 a month. A few of those properties will be Fremont although most aren't. With 2 bedroom apartments renting for $2-$3K/month having common walls, less space inside, and less yard/deck space that's not too reasonable

Either will make for a comfortable bicycle commute between Menlo Park on the north and San Jose in the south which is about right for software jobs which are centered somewhere either side of Mountain View.

If you do want to live within walking distance of a nice enough downtown, $1M is on the low end for a single family home.

Ceffer   Tue, 25 Dec 2012, 5:04am PST