Yesterday morning NPR ran this report on housing prices:

Economists say home prices are nowhere near hitting bottom. But even in regions that have taken a beating, some neighborhoods remain practically unscathed. And a pattern is emerging as to which neighborhoods those are.

The ones with short commutes are faring better than places with long drives into the city. Some analysts see a pause in what has long been inexorable – urban sprawl.

This is a predictable fact of soaring gas prices. Older city centers have more commute options, and usually shorter commutes period, meaning less gas consumption. This eliminates a key source of pressure on household incomes.

In fact, we can see a similar pattern here in California. The areas hardest hit by foreclosures are those places with the longest commutes – Stockton, Modesto, the SoCal Inland Empire. And when did the housing bubble begin to burst? Late 2006 and early 2007, as gas prices broke through the $3 barrier for good.

This view is bolstered by a new study and widget from the Center for Neighborhood Technology. It shows that once you factor in transportation costs, living in a city center is just as, if not more affordable, for a middle-class family than a suburb – at least in Seattle (a typical West Coast city with sky-high rents and home prices in the city center).

All of this reinforces the point I made last August in Redefining the California Dream, where I argued that the only way lower- and middle-income Californians will have economic security and be able to afford the cost of living is if we abandon the obsolete 20th century model of sprawl and embrace the 21st century model of elegant density.

It would help, of course, if folks like Zev Yaroslavsky would stop spending their time trying to prevent this necessary shift in living patterns. We need to bolster affordable housing policies, provide mass transit alternative, and zone for walkable communities if we are to avoid a situation where we merely exchange the inner city slum for a suburban slum.

The ongoing state budget deficit is but one aspect of the crisis facing public services in California. Local governments in particular are still very dependent on property taxes, and when those revenues decline, it affects libraries, local parks, roads, and puts added pressure on local schools.

Which is why this LA Times article is so worrying to see:

The tumbling housing market has prompted county tax officials around Southern California to begin reducing the assessed value of many houses, resulting in lower tax bills for homeowners but less-than-expected revenue for already cash-strapped governments.

The values of more than 41,000 homes have been reassessed downward so far in Los Angeles County, resulting in an average tax saving of $660. Other counties have barely begun the reassessment process but promise to get the job done before property tax bills are mailed in October….

In Los Angeles County, the assessment rolls include 2.3 million parcels and about 300,000 pieces of business equipment, boats and airplanes. The county receives about a third of property tax revenue, cities get a quarter, school districts take 20% and community redevelopment areas and special districts combined receive 20%.

The process by which reassessment takes place is somewhat complicated, but the overall point is that as property values decline, so too will revenues.

And this is going to be a long decline. The “bottom” may not be reached for another 4 years. And as this recession is likely to be long and deep, it suggests that government finances in California, on the state and local level, are going to be stressed for the next few years.

In such a situation the previous approach of “gut and run” – slash the state budget and hope a quick recovery prevents further damage to services – will accomplish little more than creating more suffering.

There’s a certain irrelevancy to all of the back-slapping out of Sacramento for their presiding over a “fiscally sound budget” when you read stories like this:

Sales of houses and condominiums in the most populous Southern California counties fell 29.9 percent from the previous month and 48.5 percent from a year earlier, DataQuick Information Systems said on Tuesday.

The report covers the counties of Los Angeles, Orange, San Diego, Riverside, San Bernardino and Ventura and showed a total of 12,455 new and existing homes and condos sold in September, the lowest since the company began recording the data in 1988.

Without being alarmist… aw, hell, I’m going to be alarmist.  The real estate market was the only thing propping up the state’s economy.  There’s an attempt to try and trade one bubble for another and re-create the dot-com speculation circa 1998, but that’ll only go so far, too, and that crash will be just as vicious as the first one.  And looming strikes in almost every aspect of the entertainment industry in LA will make life difficult as well.  It’s through little fault of state government, but you can see a pretty clear path to recession now.

UPDATE: On a somewhat related note, you can’t raise a family in California anymore.

The CBP analysis estimates that in order to pay basic bills in California:
A single-parent family needs an annual income of $59,732, equivalent to an hourly wage of $28.72.
A two-parent family with one employed parent needs an annual income of $50,383, equivalent to an hourly wage of $24.22.
A family with two working parents needs an annual income of $72,343, equivalent to each parent working full-time for an hourly wage of $17.39.
A single adult needs an annual income of $28,336, equivalent to an hourly wage of $13.62.

OK, so we had a busy day today chatting about some very important issues! We tackled immigration and whether children born in the US to undocumented immigrants should receive US citizenship. We talked about health care, and how private insurance really sucks. We talked about high-speed rail, and when we can actually expect a network that covers the entire state. Oh yes, and we also chatted about the big news of LA Mayor Antonio Villaraigosa endorsing Hillary Clinton for President. Overall, I’d say that we talked about a whole lot of important issues today! : )

So what do you want to talk about now? What’s on your mind tonight? I’m still thinking about what happened at the Strawberry Festival. Oh yes, and I’m noticing the wild speculation about a possibly EXPENSIVE Republican Primary in AD 73. Oh, and I also still have Orange County property values on my mind. So what’s going on in your corner of California tonight? What do YOU want to talk about?

Go ahead. Make my day. Fire away! : )

I just noticed something on Jon Lansner’s real estate blog on The OC Register’s web site. The market may be cooling, but prices remain high… VERY HIGH. Actually, home prices are still at RECORD HIGHS here in Orange County.

Fresh stats from DataQuick give a confusing signal about the market for resales of single-family residences. Sales activity is off, again. For the 22 business days ended April 18, volume is down 22.9% vs. a year ago in this key market niche. That’s a strong hint that single-family resales for all of April will fail to meet last year’s count for the 19th straight month. However, the most recent median selling price — $720,000 — would be a new record high for a full month. The current record, $705,000, was set in April 2006.

So what’s wrong with this picture? Although the market is settling down, prices aren’t going down. And with prices remaining this high, way too many folks can’t afford to buy a home in places like Orange County.

Come on over, and join me after the flip for more on what still needs to be done to help people afford a home in this area…

Let’s face it: The market is flattening. Real estate in Southern California is certainly not as red-hot as it was just three years ago. The market peaked in 2005, and there just isn’t as much demand for homes ever since. However, supply is still limited as there isn’t much land left in Orange County for new homes. And still, there will always be some demand as jobs are created here in OC, and people continue to move down here for the jobs.

So what can be done about this? Some would just like to build more expensive McMansions out in the hills, in the small patches of open space that we have left. However, this won’t solve our housing problem. We need lower priced homes near urban cores of Orange County where all these
new jobs are being created.

So what can we do? Perhaps we can offer incentives to developers who agree to set aside a good percentage of their homes for affordable housing. Maybe we can also encourage these developers to build higher density housing in these urban cores where all the jobs are. And maybe we can encourage these cities to make these areas attractive by fixing the roads and placing parks within reach of these new homes. Perhaps this can become more than just building affordable housing, but also revitalizing our cities in a responsible way.

So what ideas do you have for affordable housing? What do you think we need to do to allow workers to actually live near their work? And how can we make this new housing into neighborhoods that people can actually live in?

Let’s start thinking of good ideas to solve this problem. : )