Is Real Estate Recovery Imminent in California?

California Real EstateCalifornia has a big problem. It is no longer exempt from the economic hardships of the rest of the US. Silicon Valley is not the high tech monopoly it once was. Hollywood has been replaced by many other great locations to make movies, and many real estate investors have more faith in the rebound capabilities of Texas, North Carolina, Massachusetts, Pennsylvania, New York, New Orleans and Oklahoma.

California has maintained its status as top dog for so long, it doesn’t really know how to go about an economic recovery. Case in point, Forbes and Fraser Institute (Canada) have both given California a D- ranking as a business-friendly state in the US. However, the Golden State has made no attempt to remedy its “unfriendly” practices, which includes high corporate, energy and labor taxes, presumed to be partially stimulated by Proposition 13 (1978).

Proposition 13 allows real estate property to be capped in California. It is currently under fire by economist, Christopher Thornberg, who says it is doing more harm than good. One, it encourages retail and industrial development over residential, which aggravates housing affordability. Two, minimal property tax forces lawmakers to increase personal and corporate taxes to make up the difference, which discourages the entrance and expansion of new and existing businesses.

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