Frank wrote:

"Jim, do you see Prop 13 and capital gains taxes as contributing factors in the reluctance to move? Here in Santa Clara County, if you ignore the hot and cold stretches, the overall number of sales has declined dramatically over ten years as empty nest boomers have decided to hang on to their low property tax basis and put off capital gains taxes. Should the government do something (capital gains exemption if held for 15 years) to free up more housing which should, in theory, reduce the cost of housing for everyone? Are we not painting ourselves into a corner of reduced sales irrespective of current market conditions?"

Yes, one of the the primary reasons for long-time owners NOT moving is Prop 13, even if they can afford to pay a higher tax.  It's only when they are forced to move, by either health or money concerns, that alternatives are considered.  

The squeeze is getting tighter and tighter - the state's budget is in the hole for more than $17 billion, gas is nearing $5 per gallon, and inflation is climbing.

What are YOU going to do?  At what point would consider leaving town?

For most it would probably take a Mad Max-type environment to force you to leave California, or would it?  If the state government is forced to raise taxes, and possibly tinker with Prop 13, would you hit the road?  And what role would real estate prices play in your decision?