It seems Governor Moonbeam’s budget is off by a smidge. It’s amazing how reality always interrupts delusional fantasies. California has been in an economic crisis for years, but they continue to fake it. Dr. Housing Bubble addresses the implications of faking the numbers. My budgets never seem to be off by this much. I wonder why.
California is in a heap of trouble. Stay away. Colma loves these stories. More room to surf. Maybe Gov Moonbeam will create a surfing fee to close the budget deficit.
A brave new economy – California budget implications for real estate
Submitted by drhousingbubbleon 05/14/2012 23:52 -0400
Over the weekend it was announced that California’s large $9 billion budget deficit was no longer $9 billion but $16 billion. Whoops. Last week J.P. Morgan Chase, a darling of the Federal Reserve, reported a $2 billion trading loss on “synthetic derivatives” yet still had the audacity to state no further regulation was needed. Whoops. What we have here is a system of phony numbers and massive speculation. This plays into the giant pool of shadow inventory sitting in bank balance sheets while trillions of dollars went to bailout these banks. Even accounting standards were frozen for these speculators. Instead of working to increase transparency and help the overall American taxpayer they instead are using the same leverage to gamble on global stock markets. The system is interconnected and that is why the California budget figures this weekend came as no surprise. What is surprising is the cheerleaders narrowly focused on real estate and pretending the economy around them is completely sound. Do they have ear plugs and blinders on as to what is really transpiring?
Employment
California’s unemployment rate is officially back to 11 percent but the underemployment rate is above 20 percent. If we look at “not seasonally adjusted” numbers the unemployment rate is 11.5 percent:
Over 2,000,000+ Californians are out of work. The participation rate continues to decline similar to trends across the country yet very few even address this. This is absolutely crucial especially when it comes to housing. Are all the retiring baby boomers going to be the next segment that will boost the housing market? The unemployment and underemployment figures are very important because as long as the employment situation is weak, there is little reason to expect higher home prices.
Unemployment Insurance
A report this weekend discusses how over 200,000+ people on unemployment insurance will lose their coverage this weekend:
Of those losing unemployment insurance coverage 40 percent will be here in California. I’m sure this is a big plus for the housing market. There is only so much fudging of numbers that can be done until people start realizing what a giant mess we are in. Besides this, we now have the government trying to obscure even more numbers to keep their crony financial friends protected.
Cutting off Census
I saw this posted last week and found it astonishing. Many in the non-mainstream financial press use the Census data to crunch numbers and bring a new perspective to what is happening in the market. I certainly use this data as I’m sure many of you do as well. Take a look at this:
“(Census) The Appropriations Bill eliminates the Economic Census, which measures the health of our economy. It terminates the American Community Survey, which produces the social and demographic information that monitors the impact of economic trends on communities throughout the country. It halts crucial development of ways to save money on the next decennial census.”
This is mind boggling but plays into the statistics deception that is being pushed on the public. Similar to those trying to forewarn about the housing bubble bursting, the system is trying to hide data to keep the illusion moving forward. This is madness. Do people realize that good statistical measuring tools came about right after the Great Depression? You know why? So analysts, educators, and all citizens can dig in and keep the system honest. The fact that we spend billions of dollars building streets in other nations and can’t spend a few million to actually audit our own books is nothing more than a purposeful hiding of the obvious. Those that continue to act under the “business as usual” mindset are largely not open to seeing what is going on.
This is why I find it fascinating what is going down in Greece. People have been living in austerity for well over two years and now, for lack of a better word, are revolting. They realize the financial system has them by the scruff of their neck. They have nothing left to lose with a 25 percent unemployment rate. Here in the US, it seems like the folks in charge would rather keep the data obscure and feel that as long as you get your steady dose of iPhones, Dancing with the Stars, and double-lattes that things will just keep marching forward. By the way, we’ve been in recovery since the summer of 2009 so all this data must be imaginary right?
Budget Gap
The budget gap announced this weekend was stunning but not surprising. Just look at the April revenue data:
Source: State Controller, CA
“SACRAMENTO – State Controller John Chiang today released his monthly report covering California’s cash balance, receipts and disbursements in April, showing monthly revenues came in $2.44 billion below (-20.2 percent) the latest projections contained in the Governor’s proposed 2012-13 Budget.”
April is a big month for tax receipts and revenues came in $2.44 billion below expectations. The California budget is a mess. So we are now assured that we have two items that will hit in the next year:
-Tax increases
-Service cuts
Both of these are unlikely to boost real estate values. I hear arguments of people saying they are buying homes near prime schools and colleges like UCLA or UC Berkeley. These are public colleges with large support from the state! What do you think this does if prices keep on increasing and put students into deeper debt? These institutions were built with public funds and those funds are running dry. So what do they do? They raise fees. We have a lot of hidden benefits in California paid for by taxpayers and many in the state suffer from the “I want it all but don’t want to pay for it” mentality. Well the time is coming when choices will need to be made. Real estate is no sacred cow like some would think. Heck, even 30 percent of those that own their home in the state are underwater on their mortgages. Just looking at all of this in context makes you realize that some of those diving into the housing market today are suffering from cognitive dissonance when it comes to real estate. The low mortgage rates are a siren call to jump in but just look at the above metrics. What are we going to do, live in homes and trade them to one another continuously as our major source of economic growth? We tried that during the housing bubble and look how that turned out. Beyond artificially low interest rates, why in the world would housing values go up in the state given broader economic conditions?
Hope@ZeroKelvin says:
HAHAHAHA!!! 9 billion, 16 billion, whatever billion, hahahaha, this is the state that embraced The New Math back when I was in the 4th grade and it took me until 7th grade to finally understand complex fractions as a result. And that only after my Dad bought me some workbooks and helped me out. Hey!!! Maybe we should just send these jackasses in Sacremento a math texbook circa 1969, that’s the ticket!!!!!
You have generations of Kalifornians stupified in their so-called “best schools in amerika” who can’t even balance their fucking checkbooks much less participate in the balancing of the state’s budget!!!
Oh but Kalifornians know all about gender studies and climate change and basketweaving and eubonics and all the rest of the liberal mush brain feel-good bull crap!!!
In my glee at watching these idiots hoisted on their own petards of hubris and ignorance I have gotten carried away with my !!!!!s.
I also feel totally vindicated!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
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15th May 2012 at 9:44 am
matt says:
When I first came back to California in 1987, I am an actual native but grew up in Maryland, I remember one image that sticks in my mind. I recall cruising through Beverly Hills and seeing some homeless people with their carts sleeping in a huddle in front of a huge gated estate. Some things will never change here, it’s the haves and haves-nots. Beautiful place, completely fucked-up by douche-bags in Sacramento.
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15th May 2012 at 10:19 am
sensetti says:
Will California be our Greece?
California and Greece have massive unfunded liabilities. A recent study by a group at Stanford University pegs California’s unfunded pension liabilities at $500 billion. But that only includes state debt for California. When you factor in California’s 13 percent stake in the U.S. economy, which is saddled with $13 trillion in debt, the state’s total debt liability is over $2 trillion. Some analysts peg Greece’s unfunded liabilities at a similarly astronomic level. And these numbers only tell a piece of the story
http://dailycaller.com/2010/05/26/will-california-be-our-greece/
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15th May 2012 at 10:37 am
AKAnon says:
Too funny-too broke to continue to measure their brokeness. “If I close my eyes, does the problem go away?” The very definition of ostrich behavior. Good luck, Colma.
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15th May 2012 at 10:39 am
Colma Rising says:
No problems.
Come June, I’ll vote for that tax increase on the 250k+ earners and the 1/2% sales tax and the problem will be solved.
I’ll get all the classes I need to graduate. No problem.
Administration will get phat raises and tuition will go up while lowly professors teach online from their tents in some shantyville. No problem.
Same as it ever was.
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15th May 2012 at 10:52 am
Hope@ZeroKelvin says:
@Colma, dude, get on that surfboard and start paddling for Texas. Stock up on some tofu, granuloa and srpouts. I’ll meet you at the Houston ShipChannel. If Cubans can paddle from Cuba to Florida, you can make it down the coast, through the Panama Canal and up through the Gulf, then so can YOU!!
****head slap to self**** I forgot about the standard Kalifornia rejoinder when their Uptopia is exposed for the hellhole that it is: “But our weather is great!!!”.
Good on yer for that weather. You are gonna need it when all those underwater mortgage holders are living under a bridge, which will be infinitely more comfortable in the Mediterranean climate of the So Cal versus the steam box of Houston!!!!!!!!!
!!!!!!!!!!!!
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15th May 2012 at 11:22 am
sensetti says:
Hope
Colma should not get in the water he should thumb a ride to Texas.
This is what Fukushima radiation exposure will do for you, Colma after surfing off the California coast.
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15th May 2012 at 11:55 am
Colma Rising says:
You guys read about a paltry 16 billion and would think the sky is falling….
Maybe it is but the fog will burn off this afternoon.
It’s a scare tactic. Taxes are up for a vote, so Moonbeam is doing a chicken-little dance before he has to axe essential services so nards in Texas can collect six-figure pensions.
As long as I’ve been aware of it, it’s been this way.
Remember: I was born in a briar patch!!!
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15th May 2012 at 11:55 am
DaveL says:
Hopefully California goes bankrupt and all the bondholders (taxpayers/pensioners/employees of California) get wiped out.
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15th May 2012 at 12:36 pm
Colma Rising says:
Now I have that DK song stuck in my head in a loop…
“I am Governor Jerry Brown, my aura smiles and never frowns…..”
Over and over.
Thanks, Admin.
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15th May 2012 at 1:36 pm
Bob says:
I say give the census surveys to the Postal Service…
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15th May 2012 at 3:04 pm
Administrator says:
Rick Santelli explains California
http://www.zerohedge.com/news/santelli-explains-why-broke-california-likes-hot-facebook-ipo
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15th May 2012 at 3:36 pm
Colma Rising says:
It’s hell. Do like Senor Santelli…. go away!
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15th May 2012 at 3:42 pm
Colma Rising says:
My wife wants us to move to CA so very badly, despite the fact that we have very stabile careers in a very low cost part of the nation.
Thor grant me strength to turn down her repeated pleadings for a move to California!
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15th May 2012 at 4:09 pm
ThePessimisticChemist says:
Whoa, I did NOT mean to sign in as Colma. For some reason my damned comp does that occasionally. The above post was me. Also:
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15th May 2012 at 4:10 pm
The Real Colma Rising says:
Go to the California Dreaming thread and use one of my reasons, PC…..
I stand by my story.
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15th May 2012 at 4:53 pm
SSS says:
Hope
I share your disdain for California. Those egotistical fuckers who have been running the state since the post-Reagan days, including the clueless Republican governors they’ve elected, pitched the entire nation as to how wonderful the state is. The chickens have been coming home to roost for nearly a decade now, and they’re leaving an awful mess.
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Please, please, Californians, don’t come to Arizona and fuck this state up. We’ve got more than enough shit to deal with.
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Does anyone have a line on whether or not Jerry Brown has seen the light yet? He’s been a major player in California politics since the 1970s. Governor, attorney general, mayor, governor again. Seems to me he might be getting some semblance of wisdom given his major contributions to totally fucking up everything he’s ever touched?
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15th May 2012 at 10:47 pm
Mikey says:
ooooh – nice try at an SQL injection string Anonymous. I grant you a “Fail” in basic hacking. Next time look at the HTML code *first* and realise that it’s going through Javascript – and that means it’s a parameterised query — and SQL Injection won’t work.
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15th May 2012 at 12:51 am