RE: [Fwd: California's Position on the Energy Crisis]

From: Jim Whitehead (
Date: Tue Apr 17 2001 - 11:07:17 PDT

> We point out that wildly overpriced real
> estate built on earthquake fault lines may indicate widespread
> poor judgement.

In the city of Santa Cruz, where the 1989 Loma Prieta earthquake did
significant damage to downtown, took out bridges in the San Francisco Bay,
and destroyed significant numbers of houses (mostly on fill soils), the
average home dropped in value a whopping .... 15%. This lasted a relatively
short time (a few years), and values have only gone up since.

My grandparents bought a house near Wilkes-Barre, PA in 1957 for $3,000, and
sold it last year for $125k, for a 43 year capital gain of $122k. Many homes
in Santa Cruz increased this much in the past 2-3 years. Is this
speculative? Partially so, partially it's just market conditions. In Santa
Cruz county, the drivers appear to be a slow-growth attitude (it takes a
*long* time to get a building permit in Santa Cruz County) and significant
parks and greenbelt area. So, relatively fixed housing supply. When demand
spikes (as it did recently, with the .com phenomenon), prices go up rapidly
due to inelastic supply. But, since there isn't much building going on, and
since the area is fairly desirable to live in, demand never goes down too
much. Thus, market economics keep housing prices from dropping too much,
even after such a strong recent run-up. (Then there is also the speculation
by real estate agents when housing prices dip, which also acts as a buffer
on the market, keeping prices from dropping too much).

So, where would you rather have an investment property -- near the San
Andreas in SF Bay, or somewhere in flyover country?

- Jim

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