Why did the housing bubble reach the most ridiculous heights in California? Here are several theories and I'd like to hear yours:
1. Californians are too stupid to do some arithmetic before signing gigantic contracts for many hundreds of thousands of dollars. (Sounds plausible to me.)
2. Immigration raises demand for housing and drives down wages, while stressing out public goods like schools and freeways.
3. Momentum — Housing prices had been rising most years since 1975, so it just had to continue.
4. Lack of land — California! is essentially the Mediterranean climate zone, a strip 500 miles long and about 20 miles wide, running from the beach to the first line of mountains in Southern California and the first valley in from the foggy beach north of Santa Cruz. The rest of California is either beautiful but too vertical to be habitable, or is Odessa (TX) West, but with lousier high school football. Lots of people bought houses in Bakersfield figuring they had to go up up up because ... they're in California! No, they're in Bakersfield. If you saw "There Will Be Blood," you'll see the sharp difference between the miserable oil town near Bakersfield and the exquisite coast where the pipeline winds up. The oil town was actually filmed in West Texas, but it looks a lot like the Central Valley anyway.
5. Zoning / Environmentalism — The land everybody wants is controlled by the California Coastal Commission, so much of it, especially the prime turf between Santa Barbara and Hearst Castle, is unoccupied except by cows. 6. What's your theory?