Fraters Libertas

Escape From New York (and LA)

Earlier today, I spent some time at my doctor's office, which means that I spent time in the waiting room. The choice of available reading material was sparse and what they did have definitely tilted toward the left side of the political spectrum. Lots of back issues of The Nation and The Progressive with nary a National Review or Weekly Standard in sight.

After extensive searching, I finally settled upon the May 23rd issue of Forbes. In it, I found a piece by Rich Karlgaard (who pens a column called "Digital Rules") called California Leavin' (registration required) that caught my attention. Karlgaard argues that there's never been a better time for residents of Los Angeles and New York to pull up stakes and migrate to the heartland:

* The gap in house prices between greater Los Angeles and interior America is wider than ever. Go to coldwellbanker.comand see for yourself. Click on home price index. Type in $1 million and select Santa Monica, Calif., an upper-middle-class L.A. suburb, as your base-comparison city. Now select equivalent nice suburban areas across the country and see what comparable houses cost. Here's a sample: Scottsdale, Ariz., $348,000; West Chester/Chester County, Pa., $321,000; Overland Park, Kans., $190,000. You can see that L.A. residents are paying a high price for misery.

* Get out now because house prices on the urban coasts have peaked. That's the consensus of experts, based on ratios such as house prices to local incomes and mortgage payments to local rent prices. While I'm usually skeptical of expert consensus, this smells right. Rising interest rates have started to put the brakes on house appreciation. The number of "for sale" signs in California is exploding like spring pollen.

* For most people the quality of life in interior America is better. Okay, that's just one columnist's opinion. But I do travel about the country a great deal, giving speeches. Whenever I ask for a show of hands on how the locals feel about the economy--local and national--Texans, Minnesotans and New Mexicans invariably are bullish, while New Yorkers and Californians are bearish. I suspect the crushing costs of living on the urban coasts has something to do with this. That and the sense, especially in California, that the public infrastructure is falling to pieces.

* The sophistication gap between the coasts and interior America is shrinking. Sinclair Lewis, in 1930, became the first American novelist to win the Nobel Prize for Literature. He came to fame by skewering small towns (in Main Street) and medium-size heartland cities (in Babbitt). Prohibition was the Blue State-Red State divide of the 1920s, and satirists such as H. L. Mencken had a field day portraying the self-righteous sobersides of the prairies (who often drank homemade corn liquor behind the barn at night). That was then, but the image lingers. The truth is, Google, FedEx and free trade (which makes possible the dispatch of ripe avocados to Fargo, N.D. in the dead of winter) have made heartland living a much richer experience than it was a generation ago.

He goes on to say that within the heartland, the best places to put down roots will be cities and towns with universities:

Real estate investments in these university cities have a good chance of growing for four reasons.

* All of the cities mentioned above are situated in states that will outgrow the U.S. general population between 2000 and 2030 (see the census.gov Web site). The U.S. as a whole is expected to grow by 29.2% during the same period.

* University cities tend to be the faster-growing cities within the fastest-growing states.

* Employers hoping to tap younger, cheaper talent in IT, biotech and nanotech--but wanting to avoid the still-cheaper but riskier bets of offshoring to India and China--will find it in American heartland university cities. "Outsource to Wisconsin" will become a recurring theme in the decade ahead.

* Broadband wireless, such as Intel's Wi-Max and Qualcomm's CDMA standard, will soon close what information gap remains between America's big and small cities.

"Outsource to Wisconsin" as a recurring theme in the decade ahead? Reminds me of those "Escape to Wisconsin" bumper stickers put out by the state's tourism bureau. It didn't take much editing to change that message around. How does "Outsource Wisconsin" grab ya?