Sunday, November 6, 2005

Saying Goodbye California Sun, Hello Midwest


With the prohibitive housing price, people are leaving. Will this make California a better place or worse?

One thing is for sure that with fewer tax-payers, the state has to raise tax to keep itself from bankrupcy.

 

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By MOTOKO RICH and DAVID LEONHARDT

Published: November 7, 2005


LEE'S SUMMIT, Mo., Nov. 3 - A year ago, Melanie Fischer, a lifelong Californian, was not entirely sure where Missouri was. So when her husband proposed that they consider moving there, she raced to locate the state on a map printed on her children's placemats.


Today, Mrs. Fischer and her family live in this suburb of Kansas City, in a five-bedroom house nearly twice the size of their former home near San Bernardino, with a huge yard and a lake view from the hot tub on their deck. Still, Mrs. Fischer, 28, and her husband, Nathan, 30, had enough money left after their move to pay off the debt on their two cars and buy a 21-foot motorboat.





Mike Sinclair for The New York Times

Nathan and Melanie Fischer moved their family to a bigger home in Missouri from San Bernardino, Calif.



Many of their new neighbors cannot fathom why the Fischers left sunny California for, of all places, Missouri. "You have to give up things," Mrs. Fischer said, "to get things."


A growing number of people are leaving California after a decade of soaring home prices, according to separate data from the Census Bureau, the Internal Revenue Service and the state's finance department.


Last year, a half million people left California for other parts of the United States, while fewer than 400,000 Americans moved there. The net outflow has risen fivefold, to more than 100,000, since 2001, an analysis by Economy.com, a research company, shows, although immigration from other countries and births have kept the state's population growing.


The number of people leaving Boston, New York and Washington is also rising, and skyrocketing house prices appear to be a major reason, said Mark Zandi, chief economist at Economy.com. From New York, the net migration to Philadelphia more than doubled between 2001 and 2004, with 11,500 more people leaving New York for Philadelphia last year than vice versa. The number of New Yorkers who have moved to Albany, Charlotte, N.C., and Allentown, Pa., among other places, has also increased sharply.


But the change seems most pronounced in California, which has long been a beacon that draws people from all over the country, with its sun-drenched coasts and dynamic economy.


Today, however, the same factors that have made California so alluring have also made it unaffordable for many young families, retirees and recent immigrants to the United States. Some are heading to fast-growing cities like Las Vegas, as they have been for decades. But even less-glamorous destinations, like the Rust Belt and Texas, are on the receiving end of the migration.


The last few years appear to be one of the few times on record that California has lost domestic population when its job market was as healthy as the rest of the country's, economists and demographers said.


"People are saying, 'Even though I have to take a 10 percent wage cut to go to Vegas or Phoenix, it's actually a wage increase,' " said Ross C. DeVol, the director of regional economics at the Milken Institute, a research group in Santa Monica, Calif. "They look at what housing costs here, and they're making decisions to go elsewhere."


Far more Californians are staying - for the weather, the landscape, the culture and other reasons - than are moving, but it is also clear that California is losing some of its attraction.


In a survey of 2,500 Californians last year by the Public Policy Institute of California, a research group, about a third of residents under 35 said the cost of housing was making them consider moving to a less expensive area. Two-thirds of those people said they were thinking of leaving the state.


The current migration out of California is not as large as the one in the mid-1990's, which was driven more by job losses in aerospace and other industries than by real-estate prices.


Today, the most popular destinations for people moving from Los Angeles and San Francisco are less expensive parts of California, like Riverside and Sacramento. Las Vegas and Phoenix also remain near the top of the list, but Dallas, Houston, Atlanta, Nashville, Virginia Beach and Oklahoma City are becoming popular, according to Economy.com.


In the Kansas City area, which straddles Missouri and Kansas, a small band of Californians are discovering the plentiful supply of spacious homes for prices that would not buy a shack back where they came from.


"They just walk in and go 'Wow, we can have space,' " said Sandy Tasker, a real estate agent with Coldwell Banker in Overland Park, Kan.


According to I.R.S. data, the net population transfer to Missouri from California more than tripled, to about 2,200, from 2001 to 2004.


Guadalupe Osegueda, a 34-year-old ironworker who grew up in Los Angeles, recently chose Kansas City over the desert cities that have traditionally drawn Californians.


"I didn't want to go to Las Vegas or Arizona," said Mr. Osegueda, who lives with his fiancée and their two daughters. "Everyone is going there and the prices have gone up drastically."


The couple sold a three-bedroom house near Los Angeles for $450,000. They bought a four-bedroom house, with two kitchens and a swimming pool, for $185,000 in Gladstone, Mo., near Kansas City.


With a monthly mortgage payment of only $496, Mr. Osegueda said he hoped he could retire by the time he was 48. In California, he said, "people need to work all their lives to pay off their home."

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