Some choice quotes:
During baseball season, Bill Arnold sometimes watches his beloved Dodgers from a private luxury box: the backyard of his Rocklin home. Covered patio, 32-inch television, beer tap, grill and swimming pool – all paid for by borrowing $100,000 against his ever-increasing home equity.
“We continue to be amazed about the value of our house,” Arnold says. Three years ago they paid $460,000. A recent appraisal came in at $780,000. Sitting on a gold mine, the Arnolds decided a year ago to build a backyard entertainment complex. Jan, a tech consultant, was nervous about borrowing $100,000 against their equity, but Bill said it was a no-brainer.
It seems everyone in Arnold’s Coppervale Ridge subdivision has a stake in the great American real estate boom. It’s made them wealthier. It’s created jobs. It provided security when big employers downsized.
But that dependence, some say, is a problem in the making.
The economy has been relying on real estate to an extent rarely seen, coasting on an intoxicating wave of rising prices and nonstop construction.
Now the boom is fading. “When you scratch the surface about this recovery we’re in right now, it doesn’t look very pretty,” said Chris Thornberg, who tracks the California economy for the UCLA Anderson Forecast. “We’re in an economy that’s being driven by this real estate bubble. … I’m not saying it’s going to collapse around our ears, but we definitely have this issue.”
Statewide, the real estate sector created 40 percent of all new jobs last year. The year before, real estate created 40,000 jobs while the rest of the economy lost 105,000 jobs.
Nationally, the real estate sector generated 465,000 new jobs from 2001 to 2004, according to consulting firm Economy.com. The rest of the economy lost 821,000 jobs.