Will Deficit And Bubble Meet, San Diego?
Another aspect of the San Diego bubble is found in this SOSD site. It seems the city has pension problems and can't issue bonds. "San Diego receives a flood of property tax revenue in December and April. To get through the other months, it issues 'tax anticipation notes,' paid off when the taxes come in."
But what if home prices fall and revenues decrease? Could such a squeeze then cause people to leave, further driving down prices? "Scott Ehrlich, a professor says bankruptcy may be San Diego's only hope of reversing 'imprudent' pension decisions that 'present a crushing burden' to taxpayers."
"The city's growing obligation to its pensioners and the requirements of closing the deficit are certain to strain the city's bottom line for years, forcing service cuts." Crushing burden, service cuts? That's something citizens don't like to hear.
The thing that really hit real estate hard in the oil bust was that people moved away, looking for work. San Diego may be in such a situation, where population shrinkage reinforces the fall in prices.
17 Comments:
It's not just San Diego. Cities and states everywhere are going to be in trouble during the next recession. Many of them only managed to recover from the dotcom bust by issuing bonds and otherwise borrowing from the future. The thing they haven't done is cut the workforce or try to bargain hard with the unions about health care costs. The day of reckoning is coming though. Bankruptcy allows contracts to be renegotiated.
And how about the federal government? What will they do when the next recession hits? Thank's to Dubya's reckless tax cuts for the wealthy, we now have the largest federal deficit ever. They won't be able to prime the pump to borrow us out of the next recession. It's gonna get ugly. A big thanks to all the fools who voted for Bush in 2000 and 2004.
no problems for the feds. State governments cannot run budget deficit and can go bankrupt. Feds, by definition, cannot go bankrupt. Deficit is large in nominal terms, but as percentage of GDP, it much lower than during Reagan years. Total Fed debt also moderate due to the surpluses during the Clinton years. Feds can prime the pump plenty during the next recession.
(disclaimer: I'm no great fan of Bush)
The city of San Diego has threatened job cuts the past few years, but has done nothing. Now, they are cutting costs by not repairing roads and leaving schools in shambles in addition to reducing the police force. People are still moving here by the thousands. Although other reports have mentioned there has been a mass exodus the past 2 years. You would never know it based on the traffic. It just seems like this housing "crisis" is never going to end.
People are moving here by the thousands but they are also leaving by the thousands. Population in/out migration is even here or a net negative as of late. Big companies that hire high paid professionals cannot attract personnel here and their offers are being turned down, real estate costs being the prime issue cited by prospective candidates.
The cars you see on the freeway are parents spoiling their brats with new cars when they turn 16 using all that "cash out" refi money.
Bottom line, the freeways have been bad here for the last 5 years. I would put no stock in the amount of cars I see on the freeway as a gauge of positive population growth. See Piggington's blog about "net out migration" and the Union-Tribune article that supports this.
I appreciate the SD readers adding to the discussion. It sounds like the city govt. is in a pickle. If prices fall, it will mess up their budgets.
(Feds, by definition, cannot go bankrupt. Deficit is large in nominal terms, but as percentage of GDP, it much lower than during Reagan years)
Do you know how much of current GDP is RE related?
I think GDP will shrink a lot if RE bubble bursts...
Rate to rent u-haul truck from SD to Little Rock: $2598. Rate to rent u-haul truck from Little Rock to SD: $731.
(Rate to rent u-haul truck from SD to Little Rock: $2598. Rate to rent u-haul truck from Little Rock to SD: $731)
I have always been interested in the U-Haul statistic. It did predict the Las Vegas slowdown. Thanks and please keep us updated.
how do you get the u-haul rates like that?
To get uhaul rates: go to http://www.uhaul.com/ choose rates and reservations and then one-way.
And you know what ? It's the same thing in Canada. The problem with globalization is that bubbles like the one in USA, can infect like a virus the rest of the world in just a few months. Prices are crazy even here and we do not have the nice climatic conditions as in San Diego. When this bubble starts deflating it will be much more serious than the NASDAQ bubble. You can't even imagine how leveraged even here, real estate investors are. The stupid banks, these irresponsible bums, haven't learned anything.
anon in Canada,
(You can't even imagine how leveraged even here, real estate investors are)
Thanks for the report from the north. Please keep us updated.
The hospital where I work in San Diego is having major retention problems. Doctors and nurses leave, moving to other parts of the country where the cost of living is reasonable, and to institutions not suffering from as dire financial problems. Recruiting top-notch docs from other parts of the US is nearly impossible, because of the cost of housing.
Quality of life here has deteriorated so much, my husband and I are pretty sure we'll move out of California in the next year or so.
I agree with the last post...I've been in SD for 15 years and have seen things slide downhill rapidly. People are rude, housing is astronomical and quality of life overall is down. The weather is just not enough to keep people here when the schools are bad and people are living paycheck to paycheck. Salaries won't catch up to today's standard of living for at least 10 years. I'm not just griping to make this city seem unattractive...it really is unattractive.
I, too, hate to be negative about San Diego, as it was my most recent home for 9 years. We chose to move from the area 8 months ago--in fact I just got back today after a brief visit there. I listened as my friends tried to figure out what private school would be best for their son (to the tune of thousands per year) as public schools are so poorly run. Then I talked to someone in the medical field who said some doctors are choosing to run a cash-only office--no surprise, since overhead costs due to all the insurance regulations/requirements are insanely high. And, of course, every gas station reminded me of how much higher our gas prices have always been compared to the rest of the country, day after day, with no reasonable explanation. Forget talk of traffic or illegal immigration--I'll blow a fuse. It's a good thing I ran across a fairly well known realtor's web site while I was there: mackeysalesteam.com, and read the information under Market Update. Now I feel better.
To the SD posters, thanks for the first hand accounts.
Post a Comment
<< Home