Jinx left this comment earlier today:
So which schools will be better off? Those that receive their money from property taxes or those that receive from the state?
I assumed that those whom receive money from property taxes may be less affected, but I just read that Carlsbad is going to bump its class size for grades 1-3 from 20-24 kids per class up to 32 kids per class. Do you think all districts will be forced to do this?
Jinx is addressing money for schools in particular, but it’s worth examining the whole enchilada.
We are going to have to learn to live with less government.
It is beyond politics now – government is too big for its britches, and needs to shrink. We’ll have to live with more potholes, bigger public-school class sizes, and shorter hours at libraries and parks – or closing down them down altogether. We may even see public lands for sale.
How do those types of changes affect your real estate decisions?
I don’t think home buyers are that concerned about the government, but maybe we should be? The City of Carlsbad has $100 million in the bank, but if they had to endure a few more lawsuits and another golf course bailout, we could see that dough could go up in smoke. The pension problems with the City of San Diego are well-documented, will residents eventually end up footing the bill….and should that be considered when buying?
Or, will you be paying higher taxes no matter where you live?
Are these issues causing more homebuyers to want to hunker down behind a gate in a home where they can escape from it all? I don’t hear people saying it out loud, but the lack of security about the future has to be one of the reasons causing the flight to quality properties.
How does your outlook on the future, impact your real estate decisions today?
I sure agree with you about the hunkering down we’re seeing. But, it’s never “beyond politics” regardless how much our Gov’t. “needs to shrink.”
It’s always about politics. Does anyone think Oil companies, the Pentagon or our mega-banks will agree to shrink their absurd over-the-top Gov’t. gimmees – because it’s “fair”?
Unfortunately, the solution to tough times that worked for us for 200+ years, “shared sacrifice”, is off the table.
Honestly, I do not understand ‘class size’ issues. When I was a kid we had 30-40 kids in a class and we were expected to shut up, sit still, pay attention and actually learn… times certainly have changed 🙁
My outlook on the future has certainly kept me from purchasing. Having dug myself a huge financial hole in the 90’s I’ve vowed never to be underwater again, thus my caution about real estate in general.
I see inflation coming thick and fast and that is why I am looking for an investment property. Banking on future appreciation but not anytime soon. Still see house prices going lower but since my goal is long term then I’m fine with it.
That’s the problem with public sector benefits and pensions – they crowd out all other spending. I bet Carlsbad is taking in more than ever.
There’s too much of this kind of static view of the world.
Taxes will return with an improving economy. Watch this be the next big headline later this year, surpluses. The general discussion about taxes, particularly property taxes & redevelopment, has been a positive.
My inside lines in a certain north county coastal city are saying that subdivisions are flooding their departments and that with this will come more property taxes, more sales tax revenue, and, more for the schools and state.
Owners and potential home buyers will go on strike when it becomes too much of an inequitable tax burden for homeowners to fund schools and common services.
Recall the nation was formed as a result of a tax revolt. It’s hardwired into the culture.
So here is a trend: There will be a premium on safety, both personal and institutional, in both the way those with wealth (and choices) invest in property and where they live. Those that can will leave high tax jurisdictions and replace shrinking public services with private ones. Travel through Europe or South America and note that the wealthy often have their own security enclaves and private utilities and the seething masses have whatever passes as public services.
The current public pension debate is really just the beginning of a general tax revolt. Inflation is just another method of taxation. IMHO All public entitlements are in play, because there is a finite number of tax targets to fund them, and once taxes get to critical mass and become confiscatory social redistribution, people revert to their own self interests, and do annoying things like vote their agenda to be left alone, migrate out to less expensive locations, or revolt so that they are no longer easy hosts to parasitic tax policies. The mortgage mess and the general trends noted on this blog all underscore the DE-leveraging under way, both in housing, as well as the tax policy that is premised on clipping the home owner to pay for “services”. I would bet that soon many of us will be like Jims favorite Ice cream truck vendor who only takes cash. High and perceived inequitable tax burdens result in everyone justifying a way to stay out of the system rather than cooperating with it.
CV OWNER. You can expect to see big inflation in Rents over the next 10 years. I say load up the truck.
@Kirby, well said.
2 options for the future, massive spending cuts or massive debt monetization, inflation, and Zimbabwe style “economic stimulus” and “cheap exports” policies. The decision has already been made.
Corn: +121%/year
Gold: +29%/year
Oil: +24%/year
http://markets.on.nytimes.com/research/markets/commodities/commodities.asp
Jack, oh I’ve been looking for a long time now. Just haven’t found the right house. I’m looking in Carlsbad/Encinitas because I can’t afford a second home in Carmel Valley.
Only looking at good school districts.
In regards to rent, I absolutely agree with you that rent is already climbing as is but I don’t expect house prices to go up anytime soon though.
@bubblenerd – Silver too the moon. That has been on fire. I’m in with Gold and Silver but my Silver is about 5x the amount of Gold.
@CV
As long as you don’t hold Dollars, Euros, or any other freshly printed paper, you wont get robbed by helicopter Ben’s.
@bubblenerd
I agree. Currently, my money is in an ING savings account earning 1% interest right now but hopefully soon I can find my investment property and plan to pile the leftover savings into Gold and Silver but mainly Silver since it gains more than Gold but is also more volatile.
CV Owner:
I live in Encinitas. I like it but my investment properties are where the cash flow is – and that is not in the good school district areas.
My best performers 20% cash on cash +++ in National City, Chula Vista, IB, Vista, Oceanside.
Sure, you don’t get the high calliber renter in 92024 or 92130 but I don’t care. I’m in this to make cash flow not as a trophy property. Good luck.
@CV,
Try AmEx savings, 1.15%.
http://personalsavings.americanexpress.com/
I think Gold/Silver coins and even ETF’s are treated as collectables for tax purposes (28% tax). I don’t know what you mean by investment property, but if you mean commercial real estate, just buy REIT stocks with good dividends.
I see three main areas of government:
Services: like businesses, government must continue to figure out how to deliver the same or more services employing fewer people. Increased use of technology will be a major factor. Unions will resist progress to preserve membership.
Infrastructure: we have been been benefiting from infrastructure investments made in the 1930s through 1960s. That infrastructure (roads, bridges, dams, etc) is now reaching or already passed its useful life. Because of higher energy, labor, and materials costs, direct replacement will be very expensive, so we may have to figure out how to make due with less.
Education: we are using essentially the same education model as the 1860s: one teacher in a room full of kids. Debating how many kids is the right number to be in the room to me is a very short-sighted view. More innovative techniques used at the university level and most especially in business training must infuse into primary and secondary schools.
Things could be worse!
Population of South Africa +- 50 million
Number claiming benefits +- 12 million
Number of taxpayers +- 2 million
@Jack, Bubblenerd/CV owner etc etc
Go for it! Property IS A HARD ASSET and as such will survive as an income delivering investment,QE2 is almost maxed out is QE3 now due? What will that do for inflation? The problem with gold and silver is that although they are a store of wealth they do not deliver an income. Property however can be rented and the rental spent while remaining a store of wealth.
“gold and silver is that although they are a store of wealth they do not deliver an income.”
Maybe. Say you bought a property in 2010 for $100k, and got $10k in rent. You made 10% on you investment. You additionally need your property to be worth $120k in 2011 just to get the return gold had last year. How many properties appreciated 20% last year, and returned 10% in rent?
@andrewa
That was my intention with buying gold/silver was for wealth preservation. I bought in January a before the big run up in gold/silver. It is a very nice bonus being up so much.
I am concerned about class size because I used to teach. In the early elementary years you aren’t just training kids to learn, you’re watching how they learn and making sure they’re well equipped for future learning. Younger children need more hands-on help. When you increase the class size from 20 to 32 then that means the teacher has less time to get to know each student. He/she might not catch a student that has learning disabilities, or is gifted, or has other issues that should be addressed. Higher class sizes has less of an impact as the child ages.
I just read that Encinitas is trying to limit increases in grades 1-3 to 22 kids. So maybe they have more money than Carlsbad? Or maybe they just understand education better?
I think most buyers won’t care about this, they’ll just buy in a general area because the district has a good reputation.
Not to get all political, but how many of these students are illegal?
Thaylor-In Del Mar, Carlsbad and Encinitas, almost zero percent. Their parents can’t afford to even rent in NCC, rather, they commute to clean the houses and do the landscaping. Lesser cost/income areas of Oceanside, Vista, San Marcos, and especially Escondido, probably quite a few. I have no statistics, just have lived in these areas.
CV Owner,
The highly stagflationary environment we’re heading into will lower rents, not raise them — people will have to dedicate increasing shares of their income to non-housing essentials.
The boogie monster for me is simply interest rates; once they start rising housing prices will drop rapidly to compensate. That won’t hurt you if you never sell, but you can “never say never”.
@ TJ & Bear:
You are wrong.
San Diego has a shortage of housing. Not much being built, low permits being pulled, population increasing, lack of qualified buyers means more renters.
I think what will happen though is DOUBLING UP.
I don’t know your background or even if you own a single asset. Heck, you may not even live in the United States? Your opinion is laughable.
I agree with #24… if folks are not buying then they are renting… you need a place to live. However, as a renter you may cut down from 3 BRs to 2 BRs … but you would still need a roof over your head. For the same size dwelling rents should increase in the inflationary environment. My apartment management increased my rent again by $50 from this month. This is the second increase in past 12 months.
I think the higher quality areas will end up paying for more services themselves. Solana Beach school district hasn’t lost any of the enrichment classes (music, art, PE, science, computers) but families donate $300/year and have fundraisers all year long. Now the same thing is happening with everything else. The HOAs take care of landscaping on the streets, something city government used to do. They won’t open the park in PHR and it will probably be up to the residents to pay for maintenance (on top of HOA fees) if it’s ever going to open. Part of the flight to quality that Jim was talking about I think.
“My apartment management increased my rent again by $50 from this month. This is the second increase in past 12 months” …
BTW same lame-ass but somewhat legit excuse … “To keep up with the increasing cost of material, upkeeping and services, have forced us to increase your rent by $50 starting from April 2011 ….”
Your opinion is laughable.
IMHO you’re greatly underestimating the depth of the problems this country faces. Oh well.
Jack,
Regarding your comment in #24, I’ve known TJ from the blogs since the early years, when most people weren’t willing or able to acknowledge the housing/credit bubble, much less warn about the coming losses in pension funds and falling tax receipts, etc. During all the years I’ve spent on the blogs, TJ was the only person, other than myself, who was warning about the coming financial crisis in the govt. Again, this was when the bubble was still very hot, and most deluded souls were expecting 10%+ annual returns on their RE “investments” in perpetuity. These were the people complaining that “govt workers” would never see cuts in pay or benefits (just in case you didn’t know this already, unions have been making concessions for years now).
Just for the record, tj understands **very well** what’s been going on with our economy, and has a proven track record that shows he’s been able to predict what’s coming in the future far more accurately than any of the “experts” who were being trotted out during the bubble. You’d be wise to at least give his thoughts consideration.
I am buying modest Single family NC houses for cash. I prefer buying close to churches and elementary schools, since I market to folks that attend or require both, through word of mouth whenever I have a vacancy. It’s an ethical way to get and keep good tenants. The ad valorum tax issue is offensive, but I am taking a longer term position to buy hard assets for all the reasons others have already well articulated.
I am also buying arable farmland in the foot print of Sutters Original Land Grant from the Vice Roy. (I am a native born great-great grandson of an original 49’er. California, with all its issues, will always be special to me!) History can teach: Sun, soil and water, along with a strong back, are as valuable as gold when fiat currency fails.
If the current trends follow the course of similar financial debasements those with fully vested land title and the means to assert the same, either in court or by social contract will come out just fine.