California Dreaming – More Than a Third of California Households have Virtually no Savings.

By Dr.HousingBubble

A new report highlights that more than one-third of California households have virtually no savings. These households would not have the ability to live at the poverty level for three months if one paycheck in the household was lost due to a job loss.

You also have more than 2 million young adults living at home with their parents since the rent is too high. This isn’t the California that is presented in Hollywood movies.

The reality is, the middle class is slowly disappearing in California. There was a time not long ago when a blue collar worker was able to purchase a home in many California locations.

“(Pasadena Star News) Lars Perner, an assistant professor of clinical marketing at the USC Marshall School of Business, said California’s high housing costs have put many households on shaky financial ground.

“The cost of housing in California is exorbitant,” he said. “That’s a big part of the problem. People pay a disproportionate amount of their income toward housing.”

In places like Los Angeles close to half of renting households send close to half of their paycheck off to rent. And for the majority that own they spend over 40 percent of their net income on housing costs. This provides very little buffer for any emergencies. And of course, people live day to day and the economy has been on a massive bull run since 2009. A small recession is going to cause major ripples. And the way California is structured supports a boom and bust economic cycle. Tax revenues are flush in good times thanks to high taxes across the board but when things contract, the money dries out very quickly.

But it is troubling to know that 37 percent of California households are living on the financial edge. And this is a figure that comes when the economy at least on paper looks good. What happens when you get your inevitable pullback in the stock market and real estate?