April 29 2021
A long time ago, circa 1999, two young executives pulled up stakes and headed west to California. Mattel had purchased Fisher-Price in 1993, and Marilyn was fully vested but growing a bit weary of her role as head of Global Strategic Planning. I had recently sold my second start-up and was intoxicated by the incredible economic growth oozing out of California's technology companies. Businesses were going from seed stage to public in six months with no product and no revenue.
As we scouted for opportunities, one that looked very attractive was Tellme Networks, founded in San Jose by Mike McCue, a pioneer in speech recognition. Mike wanted Marilyn to run marketing, but she turned it down. It later sold to Microsoft in 2007 for $800 million.
I remember home shopping with our Alain Pinel agent. We were walking into million-dollar homes that looked like small, poorly-renovated guest shacks. We saw nothing that we wanted to live in – especially at four times the price we paid for our home in Orchard Park, NY. Every time we walked out of a house, the agent would stop us at the curb and say, "If we get in the car and leave, this house will sell before we come back."
We ultimately nestled down in San Luis Obispo County, where Marilyn became CEO of Surveyor Corporation, and I joined the venture capital firm that was the lead investor. It was the hottest startup in the webcam space, founded by Howard Gordon, the engineer who created MP3 compression to enable streaming on the internet. At his first company, Xing, Howard wrote the speedy JPEG and MPEG compression schema. Howard and Marilyn were a great team, but when the bubble broke, the dreams of Surveyor were over. But our dreams of living in California were not over. We were here to stay, started WAV Group, yadda, yadda.
Fast forward to today...
Kevin Hawkins, head of our PR division, asked me a question this morning for a client about new home building in Texas. As you may know, homebuilders are out of inventory and are now resorting to auctioning off homes that are not even built, with no guarantee that you will get the house you buy for that price if building materials go up. Kevin asked, "How long will homebuilders be out of inventory?" A long time, I replied. "Why do you think that?" he asked.
I shared my answer and Kevin suggested that I share it in a post—so here you go.
Blame California for rapid home price increases nationally. People are leaving California and its long list of problems, which include:
Add it all up...
California leads the nation in people leaving the state. According to Evan White of the UC Berkeley Policy Lab, 267,000 people left California in Q4 of 2020. They took their home equity and traded it for homes in Texas, Arizona, Nevada, Oregon, Washington and other western states that offer housing at one-fourth of the price.
In conclusion, if you want to understand what is happening with housing in America, I would say that California's mass exodus might be a leading cause. California leads at everything else: why not give them the victory here too?
And as a side note, I would be willing to wager that the dollars Californians save when swapping their $750k home for larger homes in Texas for $250k is heading straight into the stock market. Like the housing market, I would say that the stock market is overvalued too—but I will save that for another post.
To view the original article, visit the WAV Group blog.