Golden State (CA) Buyers in MN

Not So Golden -- Or Plentiful

Once upon a time -- like three years ago -- having an out-of-town Buyer, especially from an expensive market like California, could be like winning the lottery for Minnesota Sellers.

After all, it's just human nature for Buyers to bid more freely in a market where everything seems cheap by comparison.

Not surprisingly, the converse is also true: it can be tough for local Sellers when the Buyer is coming in from a less expensive market.

Often times, such Buyers need to lose out on a few, coveted properties before they reconcile themselves to paying (higher) local market prices.

CA Downturn Contagious

While the housing downturn and recession have certainly knocked the Twin Cities, they've absolutely clobbered formerly white-hot (and ridiculously overpriced) markets like Southern California.

The result is a one-two punch locally: not only are there fewer, incoming transfers from more expensive housing markets, but the ones who are coming are not nearly as flush as they were just a few years ago.

Just one more reason why it's been an especially challenging market for Sellers of upper bracket homes in the Twin Cities . . .

The Hippo in the Coal Mine

California's Financial Mess

You have to wonder if California’s political paralysis foreshadows the future of the nation as a whole.

--Paul Krugman, "State of Paralysis"; The New York Times (5/25/09)

Just in case you've been enjoying a blissfully off-line Memorial Day weekend, the big story percolating on the leading op-ed pages and blogs at the moment is California's financial predicament. As in, it's out of money. Very soon.

Apparently, its three options are: 1) federal bailout; 2) bankruptcy; or 3) a dramatic cut in services coupled with tax increases. Or all three.

As Krugman notes, if it's true that, as California goes, so goes the country . . . we're in trouble.

Unfortunately, while there is only one Freddie Mac and Fannie Mae, and a handful of too-big-to-fail banks, auto makers, and insurers -- there are 49 other states, hundreds of big cities, thousands of counties, etc.

Bad Precedent

There really is no philosophical reason to extend aid to California and not to Colorado, or New Mexico, or . . . you get the idea.

So, what inexorably bubbles back up to the top of the agenda: the need for structural reform.

As cited in this blog and many others, the good news is, there's surprising consensus about the appropriate package of economic and political prescriptions (address the phenomenon of "regulatory capture," wield the nation's foreclosure laws as they were intended, open up the nation's sclerotic, two-party political system, etc.).

The bad news is, it's far from clear that doing any of the above -- on any realistic kind of timetable -- is politically viable.

Krugman again: "What’s really alarming about California, however, is the political system’s inability to rise to the occasion."

Is California "us??"