Here’s why the price of housing will never go down in Chico – houses will get smaller, but the price per square foot is going to keep climbing

20 Dec

Thanks Dude, for this article from zerohedge.com –  

http://www.zerohedge.com/news/2017-12-19/calpers-goes-all-equity-bubble-boosts-stock-allocation-50

CalPERS has decided to raise the stakes by $50 billion, and critics are saying they are investing in “bubbly stocks”. As defined by Wikipedia, “a bubble occurs when investors put so much demand on a asset that they drive the price beyond any accurate or rational reflection of its actual worth.”

In past CalPERS has failed to bring in anticipated returns because they’ve made bad investments, first based on bribery, and later, on philosophy – buying stock in “green” companies that failed miserably. I believe those “philosophical” investments were also based on bribery or other influence but that hasn’t come out yet.

Here in Chico CalPERS failure will determine the cost of our housing market, since developers/homebuyers are expected to pay for the salaries, health benefits and pensions of Downtown $taffers. Last night council deadlocked over fees – Mark Sorensen correctly stating that there is no data to support lower fees for high density builders, and Karl Ory throwing up that ages old argument that has led us on the BOOM and BUST trail again and again – we need more housing for the “workforce.”

15 years ago, it was, “more starter housing for young families.” They change the words but it’s still the same – more profits for developers, more fees and property taxes for the city.

This city has suffered two big BUSTS in my adult lifetime. I learned about the economy when, in 1989, my family bought an entirely over-inflated house. Within three years prices went through the floor again, and when we tried to sell we couldn’t even get what we paid. Families all over town, like us, were paying over-inflated mortgages and property taxes, which means no “discretionary” income.

In the early 2000’s the market was flat and the developers turned to their friends in elected positions – like Larry Wahl and Dan Herbert – to campaign for “starter housing for young families”. They wanted lower fees – Dan Herbert almost went into tears complaining about the $17,000 in fees he’d just paid to build his new house, he just kept repeating that over and over at the council meeting. 

That campaign led to the biggest building BOOM in Chico history. But wait! Prices didn’t go down! Houses went from the$90,000 range to over $300,000 within eight months. 

And of course by 2010 the BUST rolled in, with foreclosures all over town. Foreclosures never went away, we still have many foreclosures in Chico.  Right now Zillow is listing 68 foreclosed homes. Over the past two years I’ve lost five neighbors to foreclosure, while one foxy old bastard next door actually re-bought his own house at auction, reducing his mortgage debt by about $100,000. 

That should tell you, some of these housing prices are just made of air…

The BOOM we are experiencing now has all the hallmarks of the previous BOOM – housing prices up sharply, sales quick and high over the Summer. I sold a home this Summer because I saw that, and I wanted to unload before the prices hit rock bottom and stayed there for years to come. We essentially sold the place at Open House, within the first two weeks, for asking price. I had feared the realtor had asked too much, and was surprised at the full price offer.  They were ready to jump through hoops for us to get the house, they were almost annoyingly pushy. 

Two realtors I spoke with when I was selling told me uneasily they expect a BUST by Spring 2018. Already I’ve noticed sales are slowing, but  that just might be a Winter thing. We’ll see.

CalPERS is going to take California down. 

 

 

 

 

 

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2 Responses to “Here’s why the price of housing will never go down in Chico – houses will get smaller, but the price per square foot is going to keep climbing”

  1. Jim December 20, 2017 at 7:38 am #

    First, housing prices are determined by market forces, not by the fees in construction
    Second, the people living in these houses still have the same impact on public safety, roads, traffic and schools.
    Therefore the impact fees should not be reduced.

    • Juanita Sumner December 20, 2017 at 8:36 am #

      Yes, the market should determine prices. I know that sounds fiendish, but we should not, as a community, be expected to give charity. If a person can’t afford a home here, they should either look into getting a better job (possibly elsewhere) or move to a cheaper community. We bought our kid and his wife a house in Paradise for roughly half what we would have paid in Chico, in a neighborhood where they don’t have to worry about transients pooping in their driveway or breaking into their car. Everything they could afford in Chico was in a crime zone.

      When, as has happened, people can’t afford housing in Chico, the prices will come down. There’s so much play room – the prices are super inflated over the actual cost – the labor and materials are not going up nearly as fast as the price.

      But of course, that will spell disaster for homeowners who paid too much. That’s why the government should not play around in the private sector. Fees should be based on the actual staff costs, not on some bullshit philosophy.

      Staff costs also need to be addressed – we pay these idiots too much to study stuff for two years and then come back with “guestimates” to support their social agenda.

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