Some Californians stay. My father, as a young graduate from UCLA, couldn’t afford a house in CA. (Some things apparently never change.) He took his young family to AZ, where he could buy a house, save some money, and return. We liked AZ and stayed. A fair percentage of our residents are former Californians.

You are right, the issue isn’t the owner occupied homes, it’s the flippers. I was at an auction once, where my hand was up a second too late on the final bid. I ended up overpaying for the item. That’s what happened to the investors who bought last year, and are trying to sell now.

Like any pyramid scheme, the guys who get in early do alright. The smart ones came and went. The one’s that came in last though…those guys are going to be shaken out of the system. The more leveraged they were, the more “creative” the financing, the harder they are going to be hit.

I like being able to talk about “speculators” and “investors” in the generic sense- they don’t sound like real people that way. The sad reality is though, that so many of these folks were people who used their retirement, pulled equity out of their house, etc. The personal tragedies will stack up.

I concur completely that the big story is inventory. It really boils down to simple supply and demand- too many sellers competing for not enough buyers. The sellers that lose that battle are going to lose in a big way.

Flippers boost the local economy through transaction costs. The realtors and builders they have supported will be sellers if appreciation levels off due to external causes like interest rates. Given their visible success, one has to assume that there are many more flippers, realtors and builders now than in 1997.

The landlords who bought early and held look great on paper today. Their asset accumulation should outstrip flipper profit, plus they have contributed less instability to the local economy. However they have been under amazing temptation to use leverage- it would be strange if they did not use equity gains in secured housing as deposits for available housing. The landlords who did not stop buying last year could be underwater net, even if the first house they bought in 1997 is now worth ten times what they paid then.

Increasing inventory is fact.

Inventory leaves flippers in longer term situations, which hurts their financing and income models. The weakest will have to leave, and some builders and realtors will have to follow. Inventory should not theoretically hurt landlords unless they are forced to sell.

Will enough flippers, builders, realtors and mortgage agents exit to leave landlords with empty units? Net population decrease is not required, only an inventory-to-resident ratio that drops rents too far below mortgages. In that case leveraged landlords would absorb losses on the market to liquidate quickly or accept foreclosures.

Don’t declare the Californians victors until the game ends.

I find it interesting though, that you never hear how a bunch of New Yorkers, or rich Texans or something, came in and ran up the market. I have wondered if Californians really dominate this market as much as the claims, and if so, what would account for it.

Some “stupid” Californians (Again, not an indictment of the whole group) have unquestionably not done their homework and overpaid for properties. That alone however, hardly accounts for the housing bubble. While I doubt there is actually an organized conspiracy, I think the real estate industry has found it convenient to blame the Californians- and hope people don’t look to closely at the truth.

(Next time I’ll need to post a photo of a “tongue-in-cheek.”)