Worst fire season in California’s history is underway, severe drought and high taxes. Yet, if you live on the coast, most people could care less. For now. Real estate is back to where it was at 2006 peak and 2007/2009 economic collapse is nothing but a distant memory.
Our friends at DHB have an interesting take on the whole thing. Why California loves taxes, stock bubbles, and housing bubbles: State and county assessed property values up to $4.918 trillion, up 6 percent from last year.
The state of California has a tax structure that is inherently in favor of stock and asset bubbles. The biggest sources of income tax for the state include personal income tax, corporate tax, and sales tax. These sources are completely dependent on the health of the overall economy and can turn on a dime.
I would also argue that California has been one of the primary beneficiaries of the FED’s insane monetary policies since 2008/09 bottom. In other words, California is like a highly speculative stock (Netflix, Facebook, Tesla, etc..) while the rest of the US is more like a slow moving index fund. The problem is, speculative stocks tend to collapse. I have written about it before. San Francisco: The Most Insane City In America?
If you live in California, start putting your house in order. To be more specific, 1. Don’t touch California’s real estate with a ten foot pole (at today’s prices – unless you are a seller) and 2. Make sure you have job security. Some sort of a storm is coming.
