Californian’s leave the state. Big city real estate collapses.
REAL ESTATE NEWS
California coronavirus panic and unemployment caused by lockdown hysteria add to other sources of misery, causing the once golden state to lose its luster. Californians are leaving for greener pastures.
Why is it getting more expensive to move out of California? Because it’s worth it. The ultra-liberal California legislature just voted to raise taxes on the rich again. What they don’t tell us is that the taxes are often based on political theater. Studies show that most wealthy won’t pay more than about 17% of their income in taxes — total. Any increases in taxes on the wealthy must include corresponding tax cuts or loopholes, otherwise the wealthy pick up and move to another jurisdiction with lower taxes, and the area loses its tax base. California is currently losing its tax base at an alarming rate.
Tech companies that were once big spenders are downsizing, especially when it comes to commercial real estate. Pinterest announced at the end of August that it’s paying a termination fee in excess of $89 million to cancel a lease for 490,000 sq. ft of office space planned for the area near its current San Francisco headquarters
Signs of failure are popping up all over the place. Californians are moving to Arizona and other states in droves. Electric blackouts are the latest slap in the face to California consumers. This needless shortage of electricity comes on the heals of homeless tent encampment sprawl, massive litter and dumping, virus panic, riots, looting, violent crime and massive job loss.
Eventually, California’s big cities will get cleaned up, and back on track, but we don’t know how long that will take. First, we have virus hysteria and its resulting great depression that we must conquer.
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The middle class is getting squeezed from both ends by diminishing lifestyle and rising cost of living. While rioters and looters receive creeping levels of unemployment benefits, they simultaneously live off their parents. The hard-working families, on the other hand, are paying more for food and household items, while being forced to get by with lower wages or no income at all. The stock market displays a veneer of optimism, but with an ominous presage of foreboding volatility. #stagflation #realestate #prices
The Fed and Warren Buffett have recently signaled moves towards inflation. An overly flexible and jittery Fed means higher inflation. The Fed said they will reduce interest rates, print unlimited money and initiate other radical monetary manipulation without limits. Warren Buffet just sold financials such as banks, and purchased significant gold. In toto, these spell clear inflation gestures.
Even more forthright and dependable for price perception, the average meal at McDonalds has jumped up dramatically over the past few months. Various shortages caused by virus panic and resulting stagflation remain a substantial threat to consumer and business economics and way of life. Lingering shortages include household products, cleaning supplies, meat, small change coins — pennies, nickels, dimes and quarters, patio heaters, laptop computers, beer, ice cream, lumber, furniture, appliances, aluminum cans and bicycles.
Extreme drop in GDP Gross Domestic Product causes a sinking economy akin to the Great Depression. The latest consumption numbers just came in at 1%, which is not enough to produce a V-shaped recovery. A sinking world economy creates a greater specter of war than hope of recovery.
Commercial real estate income and property values have collapsed significantly. Residential real estate shows a similar, pattern, with urban residential properties suffering the most dramatic declines. The median Downtown Los Angeles area home price fell by $23,000 in July compared to the previous July. The Loft Blog shall release the august home price report in the following days. Forecasters show that residential prices are likely to face downward pressure in 2021 unless the ongoing virus panic is miraculously eradicated. Miraculous eradication is unlikely for any cold or flu-related virus. History’s biggest rash of botched immunization injuries is more likely.
Stagflation is distinguished by a mix of downward price pressure (recession) and upward price pressures (inflation caused by Fed money printing). The dueling forces cause a combination of unpredictable volatility and exaggerated discrepancies in home prices, with some of the best homes rising while average and worse homes fall in price. The best neighborhoods rise in price while the worst neighborhoods see falling prices. This trend towards disambiguation shall continue to play out most dramatically as blighted urban neighborhood home prices fall significantly in decaying sh!thole cities, while the most desirable suburban home prices remain somewhat stable for a while. In the coming months, most home prices will eventually feel the pinch of a protracted depression caused by unprecedented economic shutdown.
For real estate prices, recession inertia combines with panic-induced great depression metrics to overpower fed money printing. The result is liquidity with a weakened dollar, combined with volatility and mostly moderate price drops over the next 12 to 24 months. Blighted big cities shall continue to bear the brunt of significant real estate collapse, while safer, attractive suburban neighborhoods get away with only minor price drops, on average, due to significant fed intervention promised by the federal government. The government interference also causes medium to long-term stagnation due to diminished efficiency of market forces.
The historically accurate L.A. Loft Blog forecasts stagflation for the coming months, perhaps years. Today’s starkly disconnected stock market has utterly failed to generate any iota of emotional capitulation, which is necessary to support a real recovery. The bloated stock market and artificially inflated economy are super primed, impregnated with over-confidence, ready to deliver a big bouncing brood of financial bombs. Today’s financial opportunities stand in selling early or waiting 5-10 years before selling; placing low-ball offers to catch the increasing number of panicked sellers; investing in gold and blockchain cryptocurrencies; and short selling low-quality stocks while the market is over-inflated.
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