Monday, February 16, 2009

California is $42 Billion in the Hole

California Realtors might want to rethink that "great schools around the corner" bit within their age-old home sales pitch. By now the whole nation knows that the state of California is fucking broke. You know, for being the 9th largest economy in the world, California's education system is already national disgrace. And this 2009 budget deficit is not going to improve things in this regard. There are no quick fixes. Any resolution will be a painful, drawn-out process because we Americans are seemingly incapable of making difficult decisions.

California must cut jobs and must cut services, or raise income, gas and property taxes to unbearable levels that nobody can afford to make a decent living here. Even without the current budget crisis, California real estate values outgrew incomes at ridiculous rates between 2001 and 2007. Realtors, mortgage brokers and their self-congratulating enablers on Wall Street all applauded the intoxicating run up.

But now here we are.

Any sale today is likely linked to a foreclosure or the threat of a foreclosure. Counties in California will struggle to earn the same property tax remittances they did in years past. Schools will suffer even further. Home prices may continue to fall dramatically in 2009 as Alt-A loans reset. The national and global economic downturn and fear of job loss will continue to restrict discretionary spending. The recent US bailout will require the printing of money. Unless interest rates are soon raised, inflation will roar across the nation. There is also every reason to believe that oil prices will begin a steady incline once again because the economies of China and India have returned to the bar. And they're fucking thirsty. And finally let me just conclude by asking this question:

Where will the riots begin?

Oh California. You really thought you could have your $700,000 single family home, a HELOC from hell, granite countertops, a new fountain swimming pool, and a new white mustang for your Oprah-watching Mrs., didn't you!? Didn't you!?


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