Wed, Oct 22 2008

California's falling home values dragging down rest of country?

The Wall Street Journal carried a great story driving home the point that areas of California have had a much deeper decline in home prices than in much of the rest of the nation. One thing I would point out is that prices have not declined this much in every area of the state. Friends who live in Silicon Valley tell me that Sunnyvale, Mountain View and other nearby cities are still sporting some pricey homes.

A few years ago I met some of the people who were working in Silicon Valley and buying first (or even second) homes in the Los Banos area. They were all immigrants who took a trip back to their homeland every few years, and I recall at that time how I wondered about their ability to afford a home. They were encouraging us to buy a second home in Los Banos, using our current home's equity to help us get another house. We didn't do that. I don't know what happened to all those families, but my fear is that their Los Banos houses are now part of the Central Valley statistics.

A lot of folks in California treated their skyrocketing home equity as something that would never go down in value. They cashed it out and took trips, bought personal watercraft or put a down payment on a new car or even another house. Now even some of their retirement funds have dwindled in value, and this isn't the first time that has happened. We simply can't assume that home values will always be on the upswing in California. This state brings a lot of wealth to the U.S., but it saddens me to think that this time our state may be one of the major contributers to the current financial sinkhole.

posted at: 13:49 | category: /Miscellaneous | link to this entry