Does California Know What Time it Is?


Has the California proposition changed fundamentally? And does it matter for real estate?

The answer to the first question is yes—the state had a net population decline in 2021, the first drop since it began annual counts more than a century ago. That followed another historic reversal, noted in 2018, when the number of Californians leaving the state exceeded new arrivals from around the world for the first time.

Those trendlines matter in ways that the periodic headlines about California being over – a periodic theme in the national media for decades – never did.

And they matter to real estate, especially in Southern California—a place that willed itself out of chaparral country, midwifed the birth of Hollywood, invented the Jet Age, redefined the American Dream and became a West Coast bookend to Ellis Island.

All of that grew out of a real estate hustle that peddled parched land as paradise. The scheme relied on constant population growth, presuming eternal desire for Southern California’s lifestyle and land.

The recent dip in population suggests that presumption has been punctured.

The decline is real – an empirical data point. It also aligns with perceptions in many precincts that Southern California’s promise is being spoiled by public corruption, homeless encampments, and a push for residential density that flies in the face of the backyard-as-rec-room culture that has defined the place.

There are more specific reasons for concern in a recent report from Chapman University titled “Restoring the California Dream,” penned by Joel Kotkin and Marshall Toplansky.

You can check the report yourself here—but for now consider this brief excerpt and the challenge it sums up:

“Nearly 80 percent of all jobs created in the state over the past decade paid less than the median income, a percentage far below our prime competitors. The inconvenient truth is that in key metrics such as housing costs and income growth, most Californians are doing worse than their counterparts elsewhere.”

A clear takeaway is that California can no longer be sure it is a magnet for newcomers from around the nation and world. Texas beckons, and for every person who just has to live near the ocean there are eight or 10 who just want their own house. California can no longer count on Californians either. Florida looks better to a lot of well-heeled folks who have grown tired of getting hit with tax hikes only to see the public sector fail to perform the basic chores of government—shelter for the homeless in Los Angeles, public safety in San Francisco, getting unemployment checks sent out of Sacramento during a pandemic.

The report from Chapman makes a lot of sense but is gaining little traction with public officials. That’s likely because the public sector has gotten a reprieve from a reckoning thanks to a gusher of tax revenue from initial public offerings and capital gains on shares of tech outfits from Silicon Valley to Silicon Beach.

Read the rest of this piece at The Real Deal.

Jerry Sullivan is a senior editor at The Real Deal. You can follow him @SullivanSaysSC

Photo credit: Pixnio clock; photo of Los Angeles by Doc Searle under CC 2.0 License, illustration by R. Howard.