patrick.net

Nomad,

I like your line of thinking. I'm trying to figure out what makes coastal California so expensive. I don't live in CA, but anyone with experience living in CA and elsewhere, please fill me in on the cost differences.

housing
gas prices and fuel (based on cost per month)
utilities
insurance (home, health, auto)
food
entertainment (incl. cable, movies, plane trips)
education

Based on my observations, I don't think California is outrageously expensive other than in housing and in children's education. At the risk of being called a racist pig, I'd say a major contribution to both are illegal immigrants and marginal legal immigrants. They tend to have large families and don't (usually can't) prepare their kids for school. In areas with high immigrant populations, these kids' unpreparedness brings down the entire school.

In response, the middle class (even the working class who care about their kids' education) try to squeeze into good (too expensive for poor immigrants) school districts or send their kids to private school, which instantaneously sends their cost of living sky high. Due to this squeeze on "acceptable middle class living", places like California will probably always be higher relative to low immigrant areas.

Do I sound like I'm a white flight apologist or what? I'm not saying poor immigrants are bad people, but they do affect the quality of life for their neighbors.

I think the Bay Area compares to the other top-5 US large metro areas in cost of living. Even real-estate isn't out of line when compared to the other large metros.

2000 Census:

1. New York-Northern New Jersey-Long Island: 21,199,865
2. Los Angeles-Riverside-Orange County: 16,373,645
3. Chicago-Gary-Kenosha: 9,157,540
4. Washington-Baltimore: 7,608,070
5. San Francisco-Oakland-San Jose: 7,039,362

I used to think Chicago wasn't in a RE bubble, but the HSBC report shows otherwise. In that report, all the above have bubbles, and the BA isn't the worst.

The entire table:

RankMetropolitan Area NameStates2000 Pop.
1New York-Northern New Jersey-Long IslandNew York, New Jersey, Connecticut, Pennsylvania21,199,865

14Phoenix-MesaArizona3,251,876
15Minneapolis-St. PaulMinnesota, Wisconsin2,968,806

I don't think CA is all that more expensive than anywhere else in terms of food, utilities, and travel. For one, certain things like alcahol and many fruits and vegetables are cheaper here than in many other regions because A: other regions charge taxes on alcahol and might have to ship fruits and vegies in. TN has NO income tax... so they make up for it by having high consumer goods taxes. Wine is about 20% more there, so as a result, I bring cases of wine on the plane with me for mom!
The lack of need for heating is another saver. I am warm natured, so the heat stays off all winter, plus I live in Alameda which is 20 degrees warmer than SF. Back home we heated with a wood stove, and the wood was leftover scraps of lumber from a timber frame outfit my dad's friend owned. So our costs were minumal. But for everyone else, thanks to TVA, the heat of choice were electric heat pumps, which cost anywhere from 150-200 a month in the winter.
One more interesting observation about EU is that MANY jobs that pay decent in the US, like my job as a graphic designer, pay CRAP in EU. I basically would be a little higher than the gas station attendant on the food chain. Thus there doesn't seem to be as much flexibility to move up there, so perhaps people don't even have the ease to make geographic changes to start with.

nomad,

One more interesting observation about EU is that MANY jobs that pay decent in the US, like my job as a graphic designer, pay CRAP in EU. I basically would be a little higher than the gas station attendant on the food chain. Thus there doesn’t seem to be as much flexibility to move up there, so perhaps people don’t even have the ease to make geographic changes to start with.

That's a direct result of the governments (and organized labor which is a government partner in the EU) attempting to allocate capital instead of allowing the market to do it. A lot of tech jobs there are underpaid but also in extremely high demand. Same is true in other professions like finance. If you're any good at either, then you won't work for prevailing wages and instead head off to the UK or US.

In fact, I believe that European professionals are more likely to move to the US or UK than elsewhere in the Eurozone, although this may have changed post Iraq invasion, as there has been a sea change in the attitudes of the entire younger generation towards the US/UK (those too young to remember much or anything about the USSR and the Iron Curtain).

@nomadtoons2 and RTBA,

I have travelled around the US a fair amount. Not extensively like some, but enough to know the differences/similarities among the states. One thing I noticed about the south vs cali is not visually tangible. The first time I encountered it, I was surprised, then I experienced it multiple times and I started to wonder.

While driving around the Dallas/Ft. Worth area, I noticed my rental running low on fuel, so I exited the freeway and consequently got lost after finding a gas station. I asked as politely as possible (have to say this because my mom is a japanese native) "Excuse me, how do I get back to I35 West?" The woman I asked was probably working class and african american. She looked like a dear caught in headlights when I approached her. I saw more of the whites of her eyeballs than anyone else in my life. Now, I do NOT look like "the man" nor will I ever. I am not white, not tall and at the time, I was not wearing a business suit or tie, just jeans and a t-shirt. But she was scared of me. I never had anyone look at me as if they were frightened so badly and I felt really bad. I don't think that Dallas is so small and un-metropolitan that there are no asians. I finally did get some directions, but this woman clearly felt like I was going to hurt her in some way. I experienced similar things while travelling through Mississippi and other southern states. I encountered a number of african americans that were afraid of me; as if the Jim Crow days were still in effect and I could lynch them if they looked at me the wrong way. Maybe to some less educated, poorer folks, an asian IT consultant represents white power. Looking at me in jeans and a t-shirt, how could anyone know that's what I am? Perhaps its the way I carry myself, perhaps I just look like a mean SOB(I really don't think so). I went to a predominantly african american high school in the east bay, where no one was afraid of an asian guy. So this was very new and strange to me. And it was also very sad.

Say what you will about the south being friendlier than Cali, it is ~ I will not argue that point. The south also has a lot of small town cultural activities that are very cool to a non-native. But the south is FAR away from Cali when it comes to racial integration and lack of oppression. I am not saying this out of lefty smugness; it is just my experience. Because of this experience, I perfer Cali ~especially the BA.

The US is still an enormous magnet for talent and innovation. We can argue about which US region is responsible for what (I am a long-term Silicon Valley bull). But, the fact is that the US has a flexible, mostly merit-driven, risk-rewarding economic culture. Not that this system is perfect by any measure -- it has lots of problems and generates its share of pain and losers -- but I'll take it to any of the socially planned societies any day; and apparently so will a lot of other highly skilled people from around the world.

Scott,
The irony to me is that everything you said is very familiar to me as I have been living with this myself for 7 years in the Bay Area. I cannot tell you how many time people just assume I'm a slack-jawed idiot. I don't think I have what one would call a heavy accent, but apprently, it's enough for people to say some very bizzare things to me.
You would not believe some of the things people have said to me, even hostile comments during the last election since many just assumed I was a Bush lovin, Gay Hatin' redneck.I have never felt that at any job I've had in the BA, people have taken me very seriously even though I have developed some rather innovative marketing campaigns singlehandedly.If I changed my accent, I have no doubt things would be very diffrent. Even yesterday, I was mowing the yard and here comes this woman with her husband. She was curious about the plum tree in the front yard. She approached me and as soon as I started talking, I could see her expression change- the " oh god.. deliverance!"
Racism and stereotypifying exsists on every square inch of the planet... even in the good ole' bay Area.

skibum,

Exactly. This is part of the Virtuous Circle Economy that the BA, Boston and NYC have managed to create. All have vibrant talent engines, world-renowned research-oriented universities, risk and institutional capital infrastructures, and a supportive culture.

This is almost impossible to duplicate through government action. It has to grow naturally. Sophia Antipolis is a great example of a failed attempt to replicate Silicon Valley.

nomadtoons2,

Funny (and sad observations)! I've run into that more times than you can shake a stick at. What makes it even more ignorant is that I'm most often mistaken for a New Yorker? This is a mystery to me. Chicagoans (particularly south siders) have a speech pattern and a meter that is totally different from New Yorkers! I've even been mistaken for a Bostonian (and these are educated people)? Either way being "detected" is not good! This means you have all of the hurdles everyone else trying to sell me something has, plus a few more! I've actually ran into situations where I later found out it was a "deal killer". All just part of the open mindedness of the west coast I suppose!

Randy, Nomad, SFWoman,

Thanks for your feedback. They ring true with my observations. It sounds like education of child (either directly or by buying into exorbitantly priced good school districts) is the major cost impediment to BA’s middle class.

Thake a look at this new book:

http://www.amazon.com/gp/product/1403968594/002-4789095-3272821?v=glance&n=283155

It is about Greenie.

California, my adopted home state, has given me cradle to grave high-quality, low cost education, from public grammar, middle and high schools to CSU and UCLA law.

I would never say "My country, right or wrong." But it's damn close.

DinOR, Nomadtoons-

Me, too. Not so much out here, because my working class Chicago accent (I have the South Side version, because most of the people I grew up with in the NW suburbs originally hailed from the South Side; however, DinOR, I say Chic-aaahh-go, instead of Chic-awe-go.) has faded over the years, but I took a lot of heat for it out east when I was in school there.

In law school my classmates would literally snicker when I talked in class. (Maybe it was becuase what I had to say was stupid, but I prefer to think it was the accent.)

I once turned heads while speaking to the bank teller in NYC. Literally everyone in the bank started gaping at the guy with the strange accent.

The thing was, the Brooklyn and New Jersey accents were just as unique, and there were a few people with those jaw-clenching accents in our class too, but my Chicago accent was the one that seemed unusual to the New Yorkers, so I took a lot of shit. I didn't let it get to me, though. I also dressed differently -- shorter hair, more colorful casual clothes (literally more colorful, I wore the same stuff as everyone else but in shades other than black and grey) and wore more conservative buisness clothes on interviews (I once showed up wearing the exact same tie as the security guard at the front desk, exceprt that mine was silk!) I refused to dress differently, though, if the NY'ers didn't like it I didn't care. Well, I did get different work clothes but they were still on the conservative side.

I found the people out east to be extremely provincial and hostile to outsiders. They were also very, very cold at first, which was awful. I came to terms with it after a few years, and even started to enjoy living there, but it took a long time. My first year in NY was probably the worst year of my life because the people were such assholes. After that I warmed up to them, and they to me, but it took a long, long time. I would live there again but it would still be a culture shock.

Interstingly, I find California to be much, much more laid back than the east coast. Out here no one cares where you come from. There is not much real hostility toward non-natives, all are welcome in CA. Well, some people are not that enthusiastic about the Mexicans, but that is mostly a function of their massive numbers, if there weren't so many of them no one would care.

This is one of the things I really like about CA. The people here can be provincial too, and certainly smug and bigoted toward outsides, but generally I find them to be very accepting and laid back. It is ten times better than out east.

Astrid-

If we have to relocate, that'll be the reason why. I can afford a house, or private school tuition, but not both. In other areas you can afford both, or buy a house and send your kids to good public schools. If we have to leave that will be the reason, I like it here and I don't mind the other stuff.

Here's a link to a Malcolm Gladwell article on how society perceive people who are different.

http://gladwell.com/1996/1996_04_29_a_black.htm

Joe Schmoe,

I never lived in NY but after your describing it I can imagine the grief! I definitely have the "south side" version w/Chic-aaah-go. It's our nature to take and d-r-a-w o-u-t all of our vowels and trail off on our consonants. I remember a guest Sunday School teacher trying to break us of this habit and it was just hilarious! Must have felt like trying to teach little hoodlums how to be angelic.

Jeezus luvs me dis I knoooooow (I heard it on da radiooooo)!

I did not do my schooling in the US so I am not aware of this issue - is it possible to bring down the level of the whole class or school if a couple of students in a middle school or high school class (supposedly unprepared immigrant's kids )cannot understand the material being taught ? This is the wind I am getting when people here discuss about high school education in California.

Phil-

Well, it's usually not just a couple. And one kid can cause a whole lot of disruption if they don't behave properly.

SFWoman,

I get those too once in awhile and when I follow up with a call the mortgage broker either doesn't understand it himself or they "gloss over" huge swaths of the program! I try to stay on top of this "pay option" ARM deal b/c when the crash becomes more apparent I'd love to roost in an "up scale" neighborhood and just make everyone else there miserable.

I think that it is considered unPC to track kids and it is considered detrimental to kids to fail them or hold them back so you do get classes filled with kids who aren’t prepared to work at grade level and have parents who can’t/won’t help.

Sad.

Also, I think we need to brink discipline back into the classroom. Kids should be told that they will burn in hell if they misbehave.

Perhaps it could be that californians are favorable to outsiders because most californians are not from california.

SFWoman,

I went to a HS magnet program that essentially resegregates the "good students" from the rest of the student body. I know honors, IB, and AP have essentially been adopted by public schools throughout the country for a similar effect. Does SF proper have such programs?

Also, if we double class size from around 30 to 45, we can increase school capacility by 50% without a proportional increase in costs. I really doubt academic performance will be affected by much.

Peter P,

Public displays of rudeness is prevalent at all levels of society. I might be suffering the crotchety old lady syndrome, but it does seem like kids I see nowadays are more materialistic and assertive than was the case 10 years ago.

I went to a HS magnet program that essentially resegregates the “good students” from the rest of the student body.

We also need a program to resegregate the bad students from the rest. They need specific education on how to stay away from jail and prison.

but it does seem like kids I see nowadays are more materialistic and assertive than was the case 10 years ago

Very true. It used to be that kids are taught to become the perfect workers. Now, they are taught to become the perfect consumers.

Peter P,

There's a big difference between classes with 10 students, 25 students, and 50 students. 50 student environment only works in a lecture only environment where all the students behave themselves. Otherwise, it's way to much to expect teachers to keep track and teach effectively.

Perfect consumer is the opposite of smart consumer.

50 student environment only works in a lecture only environment where all the students behave themselves.

It is doable. But we must allow teachers to exert whatever control they see fit.

The right students will still get personal attention. Students will just have to develop this "people" skill early on.

Peter P,

Maybe it's all the work of the Sirius Cybernetics Corporation :P

Back to housing, did anyone check out the DQ numbers for the bay area? Sales are still down YOY, but up from February. Prices are still going up. Foreclosures are only marginally higher.So this tells me that even though things are starting to get nasty in other parts of the country, there's still people in the BA slapping down 6-700k for these things. What the hell? Why in god's name isn't the BA crashing yet? I know we're all rooting for a big deline, but these numbers don't look promising. Any thoughts?

Well, in many instances parents are no better than their kids. They all think their little angels are perfect when they are hellions. They've basically made it impossible for good teachers to teach the average student body.

Nomad,

I wouldn't be surprised if a lot of stretched buyers are still depending on HELOC and CC to pay their monthly expenses. It'll just take longer to get to the tipping point.

They all think their little angels are perfect when they are hellions.

This is sad. But public education should not subscribe to this thinking. If parents think that their little angles are special, they can surely pay for private, special education.

Astrid,
It would seem that there is every possible stick shoved into the motorbike spoke in the BA as far as RE, so I would expect RE to crash as bad or worse than Florida. FL's crash is well underway and looks to be going the direction that I hope the BA to be heading. Why it is barely nudging is a mystery to me.

Per DQNews, Santa Clara county is now down month-on-month, from 663K in Feb to 660K in Mar. Marin county is down from 837K to 817K.

Teens and children need to be taught to be skeptical and cynical about marketing and consumerism.

Teems and children are perfect consumers because they have infinite wants and they use Other People's Money (OPM). :)

SFWoman,

Thanks for the info. I went to HS in Montgomery county and every school has AP classes, quite a few had IB programs too. My program was test-in and I can say my classmates were dramatically better than students I met in the general ed classes like Health.

Still.. A little voice in my head wonders "what if it doesn't?" As I see it, the play money in the BA has been around for so long that I sometimes wonder if people stop and wonder what 100k means anymore. 300k, 700k, 900k... what does it matter? It's all a LOT of money, and I think so many folks are accustomed to the shock of high prices that perhaps they are willing to pay a hell of a lot more than I thought was humanly possible. Arg. Frusturating!

I went to HS in Montgomery county and every school has AP classes, quite a few had IB programs too.

Perhaps in CA it is considered unPC to have these programs. Every students should be treated the same, even if it means crap.

Peter P
In a classroom with over 30 kids, usually only the misbehaving kids get the attention...which is tough on the top 10% who need special attention also. They have to teach to the middle and become disciplinarians...which is not their primary job. Also, be aware, the top 10% are our leaders for our future.