California’s massive swing to renting: Only 1 out of 3 California families can afford to buy in today’s market.
Rental Armageddon continues for California and other expensive metro areas around the country. There now seems to be a consensus that home prices can’t fall and that somehow, the Fed or government will step in no matter what happens. This seems to be odd logic since the Fed didn’t step in during 2007 through 2009 before the market got smashed. Of course in the minds of Californians six years ago might as well be ancient history and the 1,000,000+ Californians that lost their home to foreclosure recently are just like the suckers that lost out during the Gold Rush. The argument for home prices being high usually revolves around the following: the Fed is stuck in low rates forever, inventory is low, foreign money is infinite, your monthly payment is about the same as rent (as long as you make a giant six-figure down payment), local household incomes mean squat. That last point is the most important at least in the long-term. Rents are also a function of how healthy the economy is. Affordability in California is hovering near record lows so it is no surprise that many more households have converted to renters.
Talk is cheap, rents speak louder
You would think that most in California are just itching to buy. Sure, this might be the case for people reading a housing blog with household incomes that put them in the upper 20 percent. But this is a small portion of the population by definition. On a larger societal scale it is very clear that there is a very prominent trend to renting.
The California homeownership rate has been slammed now reaching generational lows. This isn’t some tiny shift or moderate movement. This is an aggressive move lower:
The California homeownership rate is now where it was in the 1980s. Yet we have gained more people and more households. Yes, in the form of rental households or adult kids moving back home with parents.
Sales volume remains very weak and inventory is also paltry. So if you are determined to buy in this market, you are going to dive into a market with a bunch of flippers, foreign money, and house lusting Taco Tuesday enthusiasts itching to get into Yelp range of their next Whole Foods market.
Just look at some homeownership rates for various counties:
Los Angeles County, the most populated county in the state with 10,000,000 people is now a majority renting county. Part of this stems from housing affordability:
Only 1 out of 3 California households can afford to buy a home today. In the Bay Area it is down to 23 percent (the CAR is actually generous in how they view affordability). The Bay Area is anything but affordable.
Here is a way to look at it. In 2000, the median price for a Los Angeles home was $192,000. Median income was at $47,000 (a multiple of 4). Today the L.A. County median home price is $484,000 and the median household income is $54,529 (a multiple of 8.8).
So do the math on a 10 percent down payment:
2000:Â Â Â 40 percent of gross annual income
2015:Â Â Â Â 88 percent of gross annual income
And look at it from a more basic level. Income over this period went up around $7,500 (16%) while the typical home price went up by $292,000 (152%). Some will argue about the funny math behind low interest rates but you are ultimately paying hundreds of thousands dollars more and all we are doing is creating larger leverage. This is why so many more people are renting compared to buying. In many areas, the big buyers are coming in the form of investors and foreign money. That is, income that is disconnected from the local area.
I do agree that the Fed almost has no choice in keeping rates low. There is debate how much power the Fed has over the bond market and we shall see. Inflation is already creeping into debt financed items (i.e., housing and college tuition come to mind). The consequences of this hot money is basically crowding out regular home buyers and converting many more households into renters because they simply cannot afford current prices. The rental household momentum doesn’t seem to be letting up as we look into the upcoming California summer.
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141 Responses to “California’s massive swing to renting: Only 1 out of 3 California families can afford to buy in today’s market.”
JP Morgan and Barclay’s role in the housing crisis:
http://www.marketwatch.com/story/how-jp-morgan-and-barclays-mistakes-inflated-the-housing-bubble-2015-06-04
Rate hike might be coming this month after the above expectations job report today. That said, even if it is September of early 2016, the bubble is popping. If the FED gets caught at zero percent as everything goes to shit then the dollar will get crushed. There is no way around the coming correction.
The 3 pillars of Housing Bubble 2.0 are going bad. Non performing REITs, Underwater Knife Catchers and Specuvestors are all about to be hit with SERIOUS cash flow problems. Compounding the rush for the exits will be the Boomers who realize they won’t live to see the next crest in the market. A pickup in lower cost SFH inventory will seriously damage rents and cap rates just as it did from 2008-2011.
Dare I say we may see some semblance of normalcy in CA Real Estate by 2018??? As normal as we can expect for CA of course…
I believed in the ‘there will be no V shaped recovery – it will be a long L’ back in 09/10 and MAN WAS THAT A MISTAKE – those years were the best RE buying opportunity in my lifetime, any maybe yours (to date). In prime los angeles you could get 7-10% cap rates everywhere (condos dived in price big time, now there are 500k again for nice ones).
sigh.
You doom and gloomers – sorry, this popping bubble you have been hoping for and been wrong about for years now, will not happen. Accelerated employment will lead to wage growth that will normalize the affordability situation. Good luck shorting this market. You will learn to not stand in the way of policy makers.
***to date
Nice caveat you got there.
2009/2010 was like what, a few short years ago? Do you plan on dying soon? If so, then why bother giving a shit?
@Jerrelle
So you expect wages to inflate by 100% within a year just to approach to exponential real estate price increases that started over 2 years ago?
The self selecting group that Jerelle is a member of are the real doom and gloomers. Being well positioned within the present dysfunctional status quo, they will claim anything in an attempt to shift any attention away from red flags which signal creative destruction. Perhaps this is part of managing the money — professionally.
The real optimism lay in the skepticism of what the closet doom and gloomers are peddling.
Sorry Jerelle, the corporations can now make profit without any hiring or production thanks to cheap fed money, and if wage inflation does occur they have the safety release valve in cheap foreign labor.
The end is near, 1/4% hike in 2 days, was looking to buy but will sit on the side lines for now!
If your decision to buy can be swayed by a 1/4 move in yield, you should rethink whether you are ready to buy a home at this point.
Self selecting group.
Whatever you’re smoking pass it over. On paper a major correction may be overdue but the flippers have buyers in the larger California cities (L.A., Bay Area and San Diego). The Chinese are printing thousands of millionaires a year and from my vantage point in Carmel they are all over here shopping.
Affordable housing is confined to the Central Valley and points north of Sacramento. That is baked in, unfortunately.
Please… I’ve already witnessed 10% reductions in closing prices YoY in LA suburbs and the IE. Inventory is up substantially in these areas. The truth is Cramel, Santa Monica, Newport Beach, etc. are not where most people live. The same Chinese you speak of were sitting on the same cash the last decade. Amazingly this run-up only began with QE and the FED allowing institutional investors to screw the general public. If the cash flow was so great why aren’t these REITs pulling a Donald Sterling and owning most of the properties outright and reaping profit? Instead they’ve securitized the rental streams. The data is there for anyone to see as is what’s coming. If you think the FED can magically keep asset prices elevated while choking the life out of consumer spending through the same inflationary policies I can only recommend you Google 1970’s stagflation. I’m sure people in Beverly Hills we’re doing well during that nightmare period as well. But the trickle down didn’t stop that bust and it sure won’t stop this one.
I am so depressed and angry to agree with you.
I see the same thing from my vantage point in Long Beach, CA as well.
Why aren’t there regulations against flippers and foreign investors buying residences?
Something is dead wrong when citizens of the U.S. wanting to purchase a home in their own country have to hope that the flippers flub up AND the economy in China slows down in order to have a chance at the American Dream TM.
And what will be the ‘normalcy in 2018’?….
the bubble pops to 2014 prices?
I’ve said many times. 2011/12 prices will return. That was a reasonable base for a moderate to low inventory + low interest rate environment. The ONLY thing different in the last 3 to 4 years was the FED going QE retard. There are only 2 ways out of this credit bubble insanity, a correction or a dollar destruction. I can understand the argument that the FED is suicidal, but I can’t buy it. If they don’t make a move to reign in Housing Bubble 2.0 the continued crushing of consumer purchasing power and high RE costs will implode the economy. Confidence in the FED is hanging by a thread. Listen to the what Greenspan and Bernanke have been saying lately. They’re in full “don’t blame us” mode. They know what’s coming.
Really… Are we in such FED induced Stockholm Syndrome that a return to the still expensive prices of 2011 is seen as fantasy? Has the so called “permanently high plateau” for prices claimed in 2007 been totally forgotten??? Amazing…
Too funny. Prices are being fueled by over-speculation and fantastical economic policies that 6 years ago would seem unthinkable. Now, people are more than happy to take the blue pill and embrace a new paradigm where money truly grows on trees.
Nzero, my question to you is what will cause the return of 2011/2012 prices.
I’ll try to give my answers. A massive interest rate hike, the probability of that is zero at this point. The second would be another massive job loss recession equal to or worse than the Great Recession. The chances of that happening in the near future are also zero.
Housing is still dirt cheap in most parts of the country. The few expensive areas (LA, Bay area, metro Northeast) are all luxury items. Nobody is forced to live in these areas. I sure hope you are right about your prediction because I would certainly be a buyer again for prime beach close property at 2011 prices. We shall see.
@Lord Blankein
My answer would to your question is it will be the inverse of the FED action that created the mania. In other words an absence of QE. QE fed a speculative bubble that fed this market it also helped keep borrowing costs OBSCENELY low! No one is expecting a return of 8% mortgages. But even a 5% mortgage is a 40% plus increase in borrowing costs off the lows. Mind you in 2012 prices we’re based off of 3.5% mortgages so I’m actually accounting for a higher monthly nut in a WORSE jobs environment!
And for the umpteenth time I don’t want to hear about beach front property in a macro discussion of CA housing. Ontario: Population 167,500. Manhattan Beach: Population 35,726. Pomona: Population 151,348. Laguna Beach: Population23,250. I’m sure you are smart enough to see where I’m going there. As I said previously I’ve seen a few 10% reductions on closing prices in the SGV and IE already. Interest rates haven’t moved yet and every day we’re in record territory with this faux recovery/bull run. You don’t need to see job losses for a correction, As I and others have explained many times this correction is being triggered by the COMPLETE exit of specuvestors as Flips are unattainable and Cap rates are crushed. I’ve got multiple Broker friends in who echo these exact same thoughts. They don’t sell properties in Santa Monica of course.
Again here in the SGV and in many of the high end areas of the IE 20% down still keeps you hundereds of dollars a month ABOVE rental parity! How is that sustainable??? Especially when the CAR’s own Leslie Appleton Young predicts 6% mortgages by the end of 2016??? Prices will need to fall 20% just to keep the monthly nut the same! You really think a 2% plus increase in mortgage rates is impossible. If so you must think that the FED has an omnipotent hold on the bond market. Good luck with that…
Underwater Knife Catchers???
I was accused on these boards of trying to catch a falling knife when I bought a house in 2009, and again when I bought another in 2011, but I’m certainly not underwater now.
SERIOUS cash flow problems???
Rents have been pretty steady throughout the crisis of the last decade. Home prices may have fallen 50%, before coming back, but rents did not fall during this period.
Your experiences may be different, as all real estate is LOCAL. This is my experience with crapshacks in the ugly beach town of Oxnard, AKA Gangland-by-the-Sea.
Doesn’t make any sense as to why you keep coming back somewhere that so mislead you in the past.
Extrapolating from the frm hownership chart, I would presume 2018-2020… Maybe
I do not speak real estate or finance, but your post definitely has style. More importantly, I like what you’re saying (if I understand what you’re saying).
Is the following translation correct?
“Anyone who wants to buy a condo in the L.A./Long Beach area should wait until 2018.”
Downtown long beach condos are still affordable
The FED does have another choice — Seppuku! That would be honorable.
This market is simply unsustainable and will tank HARD.
The only thing tanking is your credibility as the housing market pauses, followed by the next leg higher.
Based on the past 10 years, your crystal ball is spot on transparent. Based on the past 100, your sucking on a pipe dream. Unfortunately as much as I want to call your opinion a shiny turd, the FED monatarists and their oligarch supporters will keep you dream alive for the foreseeable future. Wish Nihilist was right, but I have been playing the bear for a decade and watched the free market turn into a socialized/planned market for the blue chip corporations and investor class.
@RentaLurker
Say it with me brother: That which cannot continue will not.
Either the FED pops Housing Bubble 2.0 or the Bond Market blows up and does it for them. Even if the big correction is a ways off (which I doubt) you will still have dips to buy as the specuvestors and foreigners pull back from an over heated market. CA has had at least 3 major corrections since Nixon took the dollar full retard. Why in the world do you think its’ going to be any different this time???
The FED is not omnipotent. Communism DOESN’T work. Even more so when you have a mixed economy that despite the FED’s best efforts is STILL affected by market forces. I’m actually really disappointed at all the negativity around here. Do not give up on reason. This House-Of-Credit-Cards is shaking. It took a perfect synergy of specuvestor heat, FED QE and total gaming of the stock market to manufacture this faux run. Witness the post QE stock tank and the sudden surge in “Belgian” treasury purchases that followed. No wage gains and $7 “Value” meals while the consumer is spending 50-60% of income on housing is SOOOOOOOO bullish LOL! Turn off the noise and just look at the facts. Prices are trending down and listings are up in the areas people actually live in. If things were so rosy why are so many rushing to list their homes? Why not sit back and enjoy “Appreciation 4 EVA!”???
They are trying to suck us into a credit bubble in it’s last throws to further enrich the banking cartel. Don’t be fooled. There getting desperate: Fed Mouthpiece Jon Hilsenrath Furious “Stingy” US Consumers Refuse To Buy The “Recovery” Propaganda
@ NihilistZerO, the controls short term interest rates, the Fed does not control long term interest rates. The Fed can control 5/1 adjustable rate mortgages. The 15 year and 30 year fixed mortgages are out of the Fed’s hands. The 10 year bond is what 30 year mortgage rates follow. Pension funds, mutual funds, 401K funds are what drives the long duration bond market. The U.S. retirement fund market was $22 trillion in 2014. This completely dwarfs any QE done by the Fed.
The plunge in bond market yields mirrors the increase in Baby Boomer retirement funds, as it should.
About 1/2 of all Baby Boomers were born prior to 1958. Average retirement age is age 62. Based on this criteria, my back of the napkin estimates have long term interest rates staying low until 2017 to 2020. Adjustable rate mortgages will follow whatever the Federal Reserve does but long term interest rates will be a function of Baby Boomers retiring and pulling money out of their retirement funds.
@Blofeld
I’m aware that the FED does not control long term rates directly, but an increase in the discount window affects so much that interests with long term debt that any raise in short term rates ultimately affects the stock market, mortgage rates etc. This is why the FED has waited so long to raise and is still unsure of the timing. This only furthers the irrationally of markets that look to the FED for guidance. Those retirement assets you speak of are actually worth how much in the absence of wage inflation? As it relates to housing if you have a RE Security whose cash flow is negative (I admit to not knowing how you’d express that with Cap Rate) them what is the underlying asset and the security itself really worth. Once either the bond market or the FED itself moves rates even a little the worm will have turned back to a mode of price discovery. I have no Crystal Ball, but neither does anyone else. To be Hyper Bullish in this environment, knowing the unprecedented manipulations in equal to mainlining hopium. I’m sure it feels good, but it’s not great for One’s future.
Some cities are re-enacting their rent control laws. It will be interesting to watch the market’s reaction.
I believe from experience, that prices will go down pretty soon. o lot of these people saying that bubble is not going to burst are people afraid of losing their homes. trust me. i was there
“lot of these people saying that bubble is not going to burst are people afraid of losing their homes”
^^This^^
You should post this shit on Zerohedge, it is good stuff for sure and it will help drive your readership and ad revenue.
I’m not a shill for ZH or anything, just think this stuff is too good to pass up!
Please no ZH cross post. That comment forum is absolute looney town.
The most that I would cross pollinate is to mention the relevant news items here from there.
If you think this place dgenerates quickly, go read some of those ZH hot topics.
@ Hotel California – please bookmark this post. We can look back a few years from now and both laugh at how wrong you and other chicken-littles have been. Do you even live in CA? Sadly, the poor people who bought into your fear mongering will have missed out on a good opportunity to purchase a home.
full disclosure – I live in LA near the beach so I follow my own advice.
Perhaps used to live here, but definitively does not live here now. That what makes him/her an authority….objectivity!
Nope, still living here. If I wasn’t, I wouldn’t be here giving a shit about what happens here.
“Sadly, the poor people who bought into your fear mongering will have missed out on a good opportunity to purchase a home.”
Achh, local house peddler writing. “good opportunity” to lose 30% of your capital, you mean.
You forgot “House prices only go up”-claim, but essentially what you say is the same thing.
– They ain’t making any more land.
– Buy now or be forever priced out.
– So Cal is undergoing a historic gentrification.
Famous last words before the last bust.
I’d like to know exactly what “fear mongering” of which he asserts. I’ve not advised anyone to get out before it’s too late. It’s rather telling that the status quo brigade is so desperate to paint with this broad brush anyone who dare speak a word contrary to their interests.
Wrong about what? Either you provide details to backup your assertions or you’re simply generalizing. Chicken little about what? I’ve never claimed any skies were falling. Yes, I do live in CA, also near the beach — exactly how does that have any bearing on the truth of matters?
The difference between you and I is that I’m not giving out advice. I’m pointing out what doesn’t make sense and raising questions. I know that makes many of you uncomfortable, which is why you’re here in the first place, on a blog which is raising questions. Most of my neighbors here “near the beach” are just like you, currently spreading feathers like a drunken peacock. I’ve been living here long enough to have seen this show play out multiple times.
Congratulations on shifting the debate to being more about you and I rather than the issues at hand.
I’ve noticed a trend of new freshly minted realtors amongst my group of Facebook friends and their associates. I can’t help but think this is a reflection of the bubble times returning and the wake of opportunists that quickly follow. All over town in San Diego I see HELOC billboards and on TV commercials for mortgages. On CNN Money I read that San Diego is only 5% off the peak pricing of the last bubble and that prices are only set to go higher in the near future.
I feel like the world has gone mad all over again. I’ve waited the last few years stacking cash and will continue to do so until this craziness dies off, hopefully in the next few years. Luckily my small but cozy beach apartment is up for lease renewal, and the landlords stated the rent increase on the already far below market price will only be $25 this year. It sucks to wait to purchase a home but in the meantime I’ll enjoy life at the beach.
I agree, but damn, it’s been hard. I, too, live in a small apartment by the beach, as you can’t get anything decent for under 800K anywhere around me. I’ve been saving money for a long time too, but I don’t feel like dropping every dime of my savings into an enormous down payment.
So, I don’t know anything about real estate, so maybe this is a stupid question, but: Why doesn’t the government put a limit on real estate purchases by non-citizens/overseas investors? Wouldn’t that prevent a lot of these all-cash buyers from driving up housing prices? Say, if you’re a non-citizen, you may only purchase one home that you intend to physically live in.
Why doesn’t the government put a limit on real estate purchases by non-citizens/overseas investors? Wouldn’t that prevent a lot of these all-cash buyers from driving up housing prices?
For whose benefit? American buyers want prices to decrease. American sellers want prices to increase.
Why should the U.S. government help American buyers at the expense of American sellers?
As a prospective buyer, sure, I’d like to see government policy favor buyers. But sellers are Americans too. And it’s their government too.
Why would the gvmt do that (legislate against home appreciation)? To serve which constituency? The under-capitalized? The renter class?
I have a beach townhome 17 lots from the beach at Mandalay beach oxnard shores,mits 3/3 1508 sq feet built in 2000, 3 unit quiet complex, at the top of market 650$k I just listed it yesterday, $569k … There is hope,
Perhaps this maybe a way to find new renters. Those Landlords are salivating at all these forclosed/shortsale homes.
“Why doesn’t the government put a limit on real estate purchases by non-citizens/overseas investors? Wouldn’t that prevent a lot of these all-cash buyers from driving up housing prices? Say, if you’re a non-citizen, you may only purchase one home that you intend to physically live in.”
Huh, have you not been paying attention. Foreigners who come to the US and buy expensive RE are rewarded by being placed in front of the citizenship line. Read this next sentence very carefully and remember it: your politicians don’t give a crap about you, their job is keeping their masters happy.
Don’t post on Zeroedge..
I heard the Chinese argument in different times, different country. When housing wants to correct it will and the Chinese will lose money too. The fed, banks, PE, Hedge, FASB etc. etc. have inflated the market without doubt…
Without inflation the whole experiment by all of above will not end well….tens of trillions of dollars and cheap debt thrown out by central bankers across the world is the first of it’s kind scale wise…let it play out, election year coming up. Distractions they are…life is about enjoying today and stop worrying about housing
Wild card I still see dismissed by many here…Drought continues, water matters..try living without it
what lies before us and what lies behind us are only tiny matters to what lies within us
Get back to nature and forget about housing, California real estate goes up and down but the middle class is being destroyed and that will have many long term effects on real estate here.
Debt pushers are much worse than drug pushers
Ca
cd: “When housing wants to correct it will and the Chinese will lose money too.”
The Chinese don’t care about “losing money.” They’re not buying houses to flip or invest. They’re buying houses to preserve wealth. They’re looking for safe places to park excess cash (i.e., prevent their own government from confiscating their money).
So the Chinese (and other rich foreigners) buy a $2 million dollar house. Maybe it’ll rise to $2.5 million, or TANK HARD to $1.5 million. Either way, NO PROBLEM. Losing $500,000 value on a house is better than their own government taking the whole $2 million.
As I’ve posted before, in the 1970s my father made much money helping wealthy Indians and Thais invest in New York real estate. I know their thinking.
They weren’t looking for a big profit. They were worried that Thailand or India might go Communist and confiscate ALL their wealth. (This was the era of Mao and Ho-Chi-Minh and Pol Pot.) They were seeking safe places to park their excess cash. Downturns in U.S. real estate value did not concern them. They worried about losing it ALL if they kept their money in India or Thailand.
and to get their children and grandchildren into the Irvine and Walnut school systems.
It’s all a guess unless we’re able to get into their minds to know exactly what motivates them, but I would place bet that it’s mostly speculation. They love to gamble and there’s no hiding in the end. If it’s not the Chinese government confiscating their wealth, it could be the U.S. government, perhaps many of them aren’t aware of our history around how taxation has been used here. You can’t move real estate.
While it is true the Chinese have been stashing away their cash in US property (CA), let’s see what happens if a major recession takes place in China. All these millionaire Chinese business owners will have credit dry up and need to liquidate their US holdings to keep their businesses alive.
Give this man a Cigar.
All fiat money is a promise that it will be there when you wake up tomorrow morning.
Everyone grafting, laundering, saving or moving money from foreign currencies is only interested in still having something they can convert tomorrow, whenever tomorrow happens.
FACTS to ponder.
A $100 bill from the US is still a valid currency no matter what year it was printed.
1909,1932,1955 or 2014 they are all money good, everywhere.
You can’t say that for many other currencies. That is why they want to buy here.
Because there are several BILLION people who can’t say that about the money in their country.
They know we won’t change this government nor overthrow the FED. We are too lazy and stupid. CLINTON v. BUSH (insert election year here)
Yes get back to nature. Humboldt county, the Emerald Triangle, has good farming ground and you can be a farmer of the herb. I am a farm advisor to the small farmers doing the Lord’s work. I go to my “cabin” in the Santa Cruz mountains, near Felton, with Forest Lady often(that is expensive real estate). Google moneyed people appreciate the fine pieces of real estate in the Emerald Triangle.
Ah, a bit of economic observation amidst the weed propaganda: Google money (and the general metastasis of cash in the Bay Area) is indeed diffusing outward and starting to influence rural property values in the rest of CA.
Wouldn’t surprise me at all in the next few years to find the Emerald Triangle weed patch turning into vacation properties for the new high tech elite and pricing out subsistence farmers “doing the lord’s work”.
For a while the wife and I were looking at ranch land up near Lake Almanor – but the zillionaires have been showing an unfortunate interest there too.
I wish that the back to nature dropouts and rich dilettantes would look to the beautiful rural Oregon temperate rainforest for real estate bargains. That way I might get out of owning my house there that I’d dearly love to sell and do a 1031 exchange for Socal real estate. Oregon has high income tax, but very low property and(no) sales tax.
Can’t deny tech money is and will keep flowing into housing north of Santa Rosa…too much hot money..
I was in Tacoma this week on business and ran into guy from Ukiah at a place with good carnitas y patron margaritas and he wasn’t aware of huge influx yet around his neighborhood, many long term residents and he was just happy to have his own spring and well.
Until the trend changes, housing is up and so is horse racing
risk is mispriced…bonds are acting up…time will tell
Where will the monies come from to buy houses? Check out google maps and notice how thin the crust is on the continental bread slice….
I’m a math guy. If only 1/3 families can afford houses. Then over time 2 things can occur. A) Prices go down. B) Homeownership plunges to 33.3333333333333%
I don’t even think that math works Jim. Because a significant percentage of older homeowners can’t afford to even rent the places they live in. Once their inventory hits the market either the price must go down, a higher income person takes over mortgage or if an investor buys it to rent out he must find a higher income earner as well. I’m not aware of any extended period where 20% down doesn’t even get you rental parity. Last year was the beginning of the correction when what little volume there was ceased. I have a couple of broker friends who are pragmatically bearish. This economic “recovery” cycle is one of the longest on record. Once things start to correct it will be exposed to be even more fake than Bubble 1.0. I’d rather be off a year or 2 in my projections than make the biggest financial commitment of my life during a time of COMPLETE market irrationality.
“the biggest financial commitment of my life during a time of COMPLETE market irrationality.”
You need more passion to dive in. Remember housing is an emotional purchase. Yuk yuk yuk.
I am cowed by the same fear of instant equity loss on a big down.
Yes, NZ, “when” will the boomer inventory hit the market? They have no savings! Their over-priced stucco crap shack is their only identity with success! The only thing they have is their Torrance crap shack, which they’re renting out to their kids. These golden sarcophagus will stay in the family for another generation, after which their brood will be renting them out or sold into multi-unit developments, further squeezing SRF inventory.
@RentaLurker
The bigger issue is there is currently no point to purchasing when in so many areas it is SIGNIFICANTLY cheaper to rent. I noticed that Zillow no longer provides rental estimates on the same default page that shows estimated mortgage cost. I highly suspect it’s because it looked completely retarded showing houses that cost more to mortgage with 20% down than they do to rent.
This “market” has been set by the FED and no one else. The specuvestor and foreigners didn’t set the prices until the FED fixed the game. That fix was thoroughly unsustainable it’s unraveling has been in process since volume peaked in late 2013. In the areas where people actually live, prices are trending down and inventory is up. If anything a slower decent down only makes for better bargains later as the marginal buyer of today who buys when prices are down 10% is the foreclosure tomorrow when prices are down 30%.
@Derrick
You’re making a blanket assumption. there will be boomers who hold on, but there will also be those who know it’s either cash out hundreds of thousands in equity now, or wait it out and possibly get burned because they need to sell before the next peak. All it takes is a few per neighborhood and there goes your comps. Prices can both rise AND fall on low volume. It’s all about momentum. Price momentum in Non-Prime SoCal ended late 2013/early 2014. The amount of listings in price-to-fantasy territory is noticeable in my areas. VERY few closing at those prices and most I’m seeing are below peak. With market sentiment down and interest rates on the rise, what will keep prices high for those that HAVE to sell??? Contraty to popular belief not EVERY property is bought in a bidding war. And even those that are will likely be purchased at proices reflecting the current market trajectory. I’ve seen houses close 10% of peak already. Shaving another 20% in a rising interest rate environment with the FED trying to manage the ongoing recession without inflation completely destroying consumers doesn’t seem like a radical proposition to me.
This us why real estate compared to other assets will under perform going forward if there is no economic crash, in my humble opinion.
If there is an economic crash, losses may be similar on a percentage basis across asset classes. That said, owing a home that is stagnant in value is a costly affair with upkeep taken into account. A stock that has fallen 50 percent will still throw off a dividend perhaps and it certainly has no annual maintenance .
I tend to think central banks have proven they can thwart collapse, they didn’t even resort to negative rates, THIS TIME. This is why I think going forward, housing is likely to stagnat while other asset classes continue to grow.
Should this occur, the investor class will slowly abandon real estate, certainly at least from the fevered pace of the last 15 years. Net result, we might even see real price declines, however marginal and certainly better inventory choices.
I am trying to think outside the box here since the fed ripped to shred any type of economic theory any of us grew up with.
That should be Martin, not Nartin,
What we are seeing from personal experience with relatives and friends whose older relatives are dying is that the house is sold quickly by the holder of the reverse mortgage. We know a woman in her thirties who was thrown out of her father’s house within a month or so of his death by the holder of the paper. The holder wants quick closure and equity for heirs is totally unimportant to them. I suspect that a lot of these properties are going to insiders who want rental property on the cheap. The cases I know range from the death of a family member in an age range from 70 to 90. I’d like to know how many SoCal boomers already have a reverse mortgage.
Jim, aren’t you assuming that there exists one home per family? What if there were 100 families and only 66 houses? Assuming household incomes are not equal, then 1/3 of families would not be able to afford a home.
I actually assume there are more houses than families. Now what does that do to the math?
http://www.zerohedge.com/news/2015-05-31/fed-has-been-horribly-wrong-deutsche-bank-admits-dares-ask-if-yellen-planning-housin
(1:)
http://www.doctorhousingbubble.com/cpi-fed-oer-missing-housing-values-fed-base-monetary-policy-on-cpi/
http://pages.citebite.com/d1i8e3n1t3rpv
From:
http://finance.yahoo.com/news/keith-jurow-us-housing-recovery-163036153.html
ManipulatedSupply=ArtficlRE &RentBubbles
(Enabled By ZIRP Means
Bond Bubble.)
(2:)
A Blind Eye’s Been Turned Full Bubble
Sellers Side, Accomplished With ZIRP, Which
Process Replaces The Business Cycle
6 Years Into Recovery And Millennials
Are Still Living With Mom/Dad
(6 Years Into Recovery And Bubble
Sellers Are Waiting For A Legitimate
Business Cycle And Know The Recovery
Is Bullshxx.
6 Years Into Recovery And Everyone’s
Folks Retirment Nest Egg Interest Incomes
Is STILL Getting Ripped Off.)
California has housing inflation madness going on all fronts.
Now take a look at the nation itself
Adjust to population home sales for new and old…
Then take home ownership rates plus median asking renting.
Math, Facts, Data can’t lie
3 Charts here and my interview on CNBC …
Fall of homeownership and the Rise of the Rental Recovery
http://loganmohtashami.com/2015/04/28/the-fall-of-homeownership-in-america/
Was in Vegas for a few days; a server excitedly told us his sister is starting to get into flipping houses, and he might get involved as well.
Interpret that information how you will.
shoeshine boy told me to buy stawks
I have said it before and I will say it again, the only way the housing market has a big valuation correct of 30%+ is if there are massive jobs lost. What will make that happen is my question?
I do home loans for a living. I wish more people could afford to buy, as the purchase business is very slow for the amount of lenders out there trying to get the business. So Cal while a great place to live, certainly isn’t the best place to do my job anymore due to crazy high prices and only 1 in 3 being able to swing them.
It won’t last forever. Seeing lots of folks here thinking it will gives me hope the end is near.
I was thinking the same thing. Whether it’s comments on these boards, or just talking to people I meet in person, there’s more people saying “prices will continue to climb, get in while you can” than I can remember since nearly a decade ago.
Just to add to the above, I’m in Portland now, so I’m not expecting the same massive downswing as I did in Los Angeles, but I think we will settle back down to 2011/2012 prices, when things crack.
“Markets can remain irrational longer than you can remain solvent. ”
– John Maynard Keynes
We each choose to live in a free market economy, where supply and demand determine price. Therefore, we are not entitled to live where one desires, and can only do so if one has the financial means. If the price of a house (or even the rental payment) is too high, you simply cannot live in that area.
Also, this article assumes renting is a bad thing and home ownership is a necessity, which is not the case. While ownership may be a goal of many people, it is not a ‘right’ or entitlement. Renting gives you the same primary benefit as owning: an indoor place to live.
Wished the Fed and government would have followed the “free market” principle before they unleashed their policies to bail out the entrenched elite instead of letting them suffer the consequences of their own transgressions.
It’s no longer a free market when you have Fed policies for institutional investors to buy all the foreclosures and turn them into rentals for a minimum of 5 years with an option to renew for another 5 years at which point they have to sell. This was a special program only for large institutional investment banks. This was not for anyone else, so how is that a free market? Sorry, I wish we had a free market but that ended with the over turning Glass Steagall and allowed regular banks to operate as investment banks and gamble with OPM. Knowing taxpayers will ball them out. Capitalize the profits and socialize the losses.
Question is when did the first “5 year” start? 2008? 2009? 2011?.. When?
Aside from this seeing all these older apartment complexes being bought out by UDR, Laramar , etc and then renovating the complexes makes me think they intend to be owning these for a while. I see the rents have just soared. I am curious though by making these rents quite high would Section 8 not work? I am assuming HUD has it’s own market rate calculator on what rent should be priced at? However, some rents are out of the range or unreasonable. Could this be an attempt to keep HUD out of their projects?
-all IMO
One magnitude 7.0 earthquake and multiple aftershocks on the Newport-Inglwood Fault will easily reset the LA/OC housing/rental market. Developers will have “Fire Sale Bargains” since 2/3 CA Homeowners don’t have earthquake insurance. Last major one hit in 1933, and it averages every 76 years. It’s been recently rumbling again, especially since the water table has been so low b/c of the extreme drought throughout the state. And hopefully, the over-the-top “San Andreas” movie will help keep the potential CA transplants from coming….hehe!
ENEN EverNewEcoN. Thank you for sharing those articles!!! They’re very informative. Good to know at least some banks are calling out the fed!
I gotta say this is the only place I can read what real peope are thinking and going through in regards to the Southern California real estate mess. My frustration has reached a tipping point when yesterday I had to send an email to my father to tell him to stop bringing up the damn housing market. My husband and I are not young kids, my husband will be 50 in December , but we are constantly made to feel like we don’t know what we are doing or we must be doing something wrong since we can’t find a home. Yesterday my father said they just found out house prices will “skyrocket” next year. Buy anything with a roof on it has been his moto for the last 6 months since we started seriously looking. I had to finally shut that crap down. People outside of this market are friggin clueless what complete crap people are tring to unload for $700,000!
My husbands writing partner gave him a flyer of a home for sale near his in Sherman Oaks. It did not have a price on it, but he thought it was going for $900,000 and my husband said he would not want it for half that, plus we can’t afford a $900,000 house!
I know these people are trying to help, but they all bought their houses many years ago and unless you are looking and seeing what’s happening, you are just an annoying idiot that needs to keep your mouth shut. This is seriously depressing and frustrating, but I do get solace hearing that we are not alone. There are other people that have money for a very nice down payment, but are choosing to not be suckers and buy some crap shack so they can own a piece of the American dream.
You’re not alone. Colorado is a different market but we’ve been getting the pressure from most extended family members. we have the money for a down payment, but it’s really disgusting to have to fight 30 people for one house. Honestly…I guess we could buy but we would be stretched to the brink, even with two incomes…forget saving for retirement or college or vacation for that matter. It really terrifies me to sign a 30 year agreement and dump tens of thousands of dollars into a deal…when the alternative news I read points to uncertainty and economic insecurity in the long term.
On a personal note, we have friends who are putting 5% down on their house and rub it in our faces that they own and we don’t. Well that’s fine I suppose but try missing a couple of those mortgage payments. Gotta make them on time every month…for 30 years. I would like to get something affordable and if that means moving to a smaller, less popular place, then that’s what we will plan to do. It’s not worth the stress just to try to keep up with everyone else who is buying. Gonna sit this one out…let prices rise I guess. There’s no way I’m desperate enough to buy now anyway so let the chips fall.
Keep standing your ground, and remember that your father, and the 30 other people bidding for one overpriced house, are not the ones who will be making your over-sized mortgage payments on a place that has suddenly dropped precipitously in value, for the next 25 or 30 years. Your dad will be gone to his long home when you and your husband hit retirement age just to find yourselves mired in an underwater mortgage, with no retirement savings. Will all the people urging you to buy help you out then?
A market where prices have shot up 15% or more in a couple of years has the fingerprint of hysteria on it, and you can always bet against hysteria. I am still seeing the fallout of the last wave of housing hysteria here in Chicago- a friend just lost the condo she bought in 2005. She bought “right” with a 20% downpayment, but even so, the place is worth 40% less than the mortgage on it. The fact as that this area alone has a combined mortgage delinquency and default rate of 28%, and while hysterical buyers are frantically chasing overpriced properties in the “green zone”, and even prices in my non-prime neighborhood have ramped up steeply over the past 2 years, we are still working our way through piles of lingering defaults and foreclosures left over from the Great Rampage of the 00s.
It is good that you are considering your age. You and your husband are now middle aged, with less than 2 decades until you hit retirement age. Is it wise to assume a 30 year obligation on a place that you can barely afford with two incomes and after a large downpayment, in an economic climate where decent jobs, even for professionals, are increasingly difficult to come by?
I hope you and your hub can continue to resist the bleatings of the herd, and continue to rack up savings while waiting for the right property in the right area to become available at a price that makes sense. I remember how frantic I was in the 00s as I watched everything that I could imagine myself living in ratchet up in price, far out of my range. I could not have begun to afford the place I bought two years ago, in 2005, for it was priced nearly 3X what I paid for it after the bust. I was about the same age you are now. It was very frustrating to watch from the sidelines, especially since rents were rising in tandem, but I was afraid of being trapped in a mortgage I could not afford, even though i never imagined the decline in prices that happened in the subsequent bust. I predict that the people hysterically bidding up the prices in your town will be wishing they were you in not very long. You two, on the other hand, will have a good cash stash in hand, and will be able to drive a very hard bargain for exactly the place you want, at a reasonable price.
I’m not the only one who feels that the housing market nationwide, and especially in major metros, is still fundamentally very weak. I was surprised to read of how high mortgage default and delinquency rates still are in some of the most overpriced metros, and on what shaky supports the current “hot” market depends, here, from Keith Jurow, here:
http://www.advisorperspectives.com/newsletters15/Why_the_Housing_Market_Collapse_is_Set_to_Resume.php
I shut my family down about two years ago. Just ask what they want for their home today.. and then follow it up with what they realistically expect to pay for the next place (hint: it’s usually 200k+ under the going rate). Theory will meet reality very quickly.
I’ve almost come to blows with family members over this, BTW. You are not alone in your frustration.
That’s a good question to ask because most people are probably going to buy right back into the same market they sell into, both in terms of place and time. Home prices rising above the rate of inflation mostly benefit those whom stand to profit on taking a percentage-based cut from a sale. My neighbors who act like greedy children over our neighborhood’s rising home “values” don’t consider that it makes switching residences (when buying) in our area to have higher real transactional costs than before. So it’s really a matter of when you get in because most people will carry that basis forward.
The only way to keep the game going is increasing demand relative to supply. That’s why some pundits are stuck on the message that everyone will always want to live where they live, because they know that’s the only scenario in which disregarding all other factors could possibly work.
The author of this blog rightfully continues to mention the 1MM+ or so that lost their homes to foreclosure in CA not too long ago. Perhaps the housing pundits have forgotten about those people but I bet a lot of otherwise would-be buyers have not.
Keep focus. Ignore all the HPI Forever positions, especially from complacent relatives who they think $900,000 is cheap, having bought their homes for next-to-nothing, decades ago.
Some pick-me-up morale boosting hope for the future, when the market begins to crack and values crash (a post from another housing forum).
_____
I wish I could remain magnanimous, humble but after years of being patronized by life winners racking up debt and Realtors who had the people skills of a hand grenade, I’m afraid I will now become a spectacular C**t as I strut around viewings with a large wad of cash or maybe even enough to be mortgage free.
When I do buy my cheap house in a year or so when it really bites I will behave like Lex Luther with a deposit. I am unsure yet as to if I will wear a victory cape but I will be a monster and they will rue the day..
Will I make an Realtor get down on all fours and bark like a dog to make a sale? If I do ill video it and put it on here.
This collapse will be beautiful, no sympathy, nobody forced them to rack up debt or load up BTL. Finally the theft from the young can stop, the sale of debt slavery can end, tv wont be full of ridiculous property shows and we can live in houses and work for a living – while the neighbours, who bought a similar house in 2011-2014, beg me to be allowed to nibble my hedges for sustenance. At which point, I’ll hit them on the head with my cane.
Or if you can allow yourself some imaginary fun, breaking the law against the oldies with their $1m Real Estate Winnings, then you know this market is breaking your sanity. [Note: It’s just imaginary joking]
When the time comes I will thrash a boomer with a bottle of Chardonnay because I enjoy ironic violence.
I will then seize their house, I will create a defensive perimeter by setting fire to their Prius.
I will then weaponize the collection of exclusive porcelain figurines in the 2nd spare room by chucking them at whomever comes to try and take my new house.
Also, this is a very good post by fid. I’m just going to wait until this market tires itself out and there’s very few buyers left who can buy at today’s prices. Then we’ll have to see what owners do in order to sell. (Eg: Cut their asking prices).
_____
fid
May 30, 2015 at 7:51 am
Couldn’t agree more. The disconnect between the generations is quite staggering. Very few folks over the age of 50 or so will concede the obvious: they got (relatively) dirt cheap housing, education, equity and retirement costs in comparison to the youngsters … who they are counting upon to purchase them into paradise.
Just wait until the dollar bubble. I know that sounds hilarious.
But THIS IS the dollar bubble.
What the heck do you think QE means?
Well. We’ve printed the “land”. I am expecting a rise in interest rates. Eventually there will be nice rates on 1-2 year CD’s. Once that starts banks hoarding cash will have lots of incentive to make money on their cash instead of putting it into circulation by loaning it out. That will certainly drive RE prices down. And the stock market will take a hit …
Would LOVE to hear your take on this.
Basic study of Keynesian economics will explain why asset prices are going up while wages stay flat and go down. There is no way to spend your way out of debt, history has proven this. There is a time to buy and a time to sell. This is a time to sell and to get into cash. I bought several condos and I’m selling everything now. Last year was the high. Everyone is jumpy in the financial world right now and the big scary Sept the sky is falling date is quickly approaching. No one can time disaster but I’m not taking any chances so if I’m selling early, so be it. A minute late is too late.
Sometimes reading this blog scares people to the point where they make no decisions to buy or sell. It was a great buying opportunity 2009-2012 and many missed it. If you can’t afford your dream home buying a condo at the right time is a great option. Collect the rent and get the appreciation. I got both, I enjoy the ups and downs of our boom bust state. You can too if you look at a few charts. It’s easy to see when the best time to buy or sell.
I will wait for the next bust and buy again. It’s pretty simple. Even if home prices stay strong a jolt to the stock market is enough to get everyone scared and start running for the hills. Too many factors or catalyst on our horizons. It’s better to be safe than sorry. The projected gains this year in the stock market do not warrant the risk so think about your 401ks also. I would not want all my eggs in this stock market basket.
It does not do you any good if you rent because of bubble prices but you are fully invested in the stock market and the market takes a major hit. A loss is a loss. You really don’t want to lose on both ends…that will keep you up at night and anxious during the day.
I imagine that if you factor in all the illegals and those that live under the radar, the number of people able to afford a home in California is far less then 1 in 3. Owning a home in a major city like LA is far out of reach for the majority of people. I have many friends who complain about the current real estate market and specifically how unaffordable it is. I always tell them “Leave”. That’s right, leave California. There are MANY places in the Southwest where you can buy a bigger, newer, nicer home for a fraction of what you pay here for a pre-WWII crap-shack. Arizona, Nevada, New Mexico for example. If your priced out of Cali and can relocate jobs or telecommute, then a change of venue may be your best option for home ownership.
I got a junk email from a realtard today. FWIW, here’s what it says:
“Look at these recent real estate news headlines…
“US new home sales, prices rise strongly in April”
“Home prices in 20 metro cities rise 5% in March”
“Housing stocks set to double – here’s why”
“US housing starts, permits surge in April”
The housing market is in full swing in summer 2015! We’re seeing more millennials buying homes, consumer confidence is up, and interest rates are still hovering around 4% so mortgages are affordable. And get this – in some neighborhoods we’re having all out bidding wars with multiple offers on a single home for sale.
Supply is not keeping up with demand – not even close. This is very comforting to our clients who need to sell their homes at higher prices – especially those recovering from the recession.
That’s why we wanted to write you today. If you’ve been thinking about selling your home or are just curious what your home is worth in this current market…
THATS MARTIN, NOT NARTIN! Lol
Found this article. Is this just the beginning of this bubble as wall streets preps to reallocate?
https://www.yahoo.com/finance/news/huge-force-wall-street-psyched-110700111.html
If you go to countries in Europe, many more people rent than own. Ironically, these places are more left or socialist … few can afford to purchase a home … they are expensive. Many of the people are typecast at a young age in school, and via academics and testing will determine if they are smart enough to go on to college, or will they be fixed into a trade or other career. Their salaries will be fixed within a range once they are locked into a trade or career path, and they will pay a large percentage of their earnings into taxes, for the socialized medicine, retirement plans, and for all the rules and regulations that manage their lives, etc. Coincidence or not?
I find it more than coincidental that places like California are appearing more like Socialized countries like Germany. People are more pigeon-holed into jobs/careers, pay is becoming mandated, many more people rent than own simply because they can’t afford to purchase, taxes take an increasing amount of a families income, and so on!
So 1/3 of the population is probably renting from those chinese/foreign bought homes. So this 1/3 is a gold mine for those people then. Chinese about to own California people.
My mom has lived in her home in San Diego County since 1975. She says she has seen it go up/down three times. Bought it for under 20g and now it’s worth 375. Three years ago houses were selling in the neighborhood for 220 and under (bigger than hers). I lost my behind on a house I bought in 2006 and ended up giving it up in a divorce because it was so under water. I think the market will correct itself for sure. I remembered believing that “my” investment would get me 1million by 2020. Hahaha. Dreamers we were in 2005-2006. I am still renting and will continue to do so until I see 2012-type prices again. Our household income is about 85k and to spend 3000 to live in a 1300 square foot home instead of paying 1400 for a large townhome free of maintenance just doesn’t seem logical at this point. I’m going to save the next couple year and watch from the other side this time around.
Even 1 in 3 sounds out of whack. Jobs in CA just pay absolute crap, well unless you work for the state. The citizens of the People’s Republic of California must be in a drug induced coma to put up with the endless financial abuse from the state. One officer pulled me over and asked why I had a radar detector. Then he wrote me up for 1 mile over the speed limit. Hey, Dick – you answered your own question. Freakin worse than pirates!
California continues to create low wage jobs and companies continue to move their operations out of the state. With a majority of Boomers retiring out of state, the CA’s housing market is in for an absolute free fall sometime in the near future.
Prices sure aren’t dipping in Santa Monica. Here’s a townhouse: https://www.redfin.com/CA/Santa-Monica/1304-Stanford-St-90404/home/6763353
Sold in 2009 for $680,000.
Listed in 2015 for $979,000.
Sold for $1,025,000.
Whoever bought in 2009 realized a $345,000 gain over 6 years (minus transaction costs, fees, taxes, etc.)
Wow, whomever paid over a million for that location is a moron. I live a block away from that place, paying $1,300 a month in rent and would never consider paying more than $800k for that place.
Looking to buy in West SFV – Need Advice””””””
I’m so glad I found this site and this discussion. I’m hoping to get feedback from those here who really have a sense of the pulse of the market.
The really hard thing for me is that I’ve been wanting to buy in West SFV – Calabasas/Woodland Hills/Agoura Hills – since early 2011. I’ve been visiting SoCal (rented a beach bungalow in Malibu Seasonally since 2009) for 6 years and following real estate in West SFV since 2010, but I wasn’t ready to buy at the time. Coming from SW Florida, where the market has had nowhere near the rise that LA has since 2007. I owned two homes in FL, one waterfront with a great view and one 2000SF 3/2/2, sold that one already and the waterfront will close in a few weeks.
That said, between the two of them I will only net just below $500k. I really wanted to pay cash with buying the home in LA, of course that’s not gonna happen now. In 2011, I found some great houses in nice WH and Calabasas areas that needed a little sprucing up, for under 600k. Today, those homes are being flipped for 800-850k.
I have been renting a home for the past 16 months, way above my price range for buying (near Hidden Hills, 3000SF, current market price about 800-850k), paying $3800/mo. rent. For me this is a HUGE payment, and I can’t wait to get rid of it (I’ve had no debt or house payment in 15 years, even though I’m only in my mid-40s, self-employed.)
So here’s the rub: I will FINALLY be able to buy something, starting in July. But like many here, I have been watching the market go up, up, up… with anger, fear, disgust, and wonderment of “is this the next bubble’s end”? Knowing myself I will want to buy as soon as I have to (looking for something in the ‘current’ 650-700k range, will have to get an approx. 200k loan), however I know that summer is the hottest time of year in SoCal for buying/selling (just as Dec/Jan is in SW Florida). So I am thinking to wait, and keep paying that huge rent bill, a few more months, and HOPE the market cools down (crashes, ideally) in Sept/Oct/Nov.
Those who are closely following the market, what do you think? Is it a good strategy to wait? It scares the crap out of me b/c I feel like I’m running after a train that is leaving the station, going faster and faster, and if I don’t catch it now I never will be able to. I really, really want to believe in those here who say that we are witnessing all signs of the end of a bubble – esp. when your waiter says he’s going to get into flipping houses, that’s a classic sign of a market about to bust.
It just makes me so angry, because I was closely watching the market in 2010/2011, wanted to buy then, but at the time could not do it in cash and wanted to wait ’til I could. Since then, FL real estate has recovered about 20%, and LA about 50-60%.
Look at this little 1000SF s%^&box that just sold for 500k. 500k!!!
https://www.redfin.com/CA/Woodland-Hills/4209-Morro-Dr-91364/home/4216797?utm_source=myredfin&utm_medium=email&utm_campaign=instant24_listings_update&utm_content=address&riftinfo=ZXY9ZW1haWwmbD0xOTU2NTg3JnA9bGlzdGluZ191cGRhdGVzX2luc3RhbnRfMjQmdHM9MTQzMzc1NTI1MDI3MyZhPWNsaWNrJnM9c2F2ZWRfc2VhcmNoJnQ9YWRkcmVzcyZwb3NpdGlvbl9udW1iZXI9MCZsaXN0aW5nX2lkPTQyMzcxODU0JmVtYWlsX2lkPTMxNjM3MC0xOTU2NTg3JnVwZGF0ZV90eXBlPTc=&reinfo=ZXhwSWQ9Njg1MjI3NiZleHBJbnN0YW5jZUlkPTMxNjM3MDE5NTY1ODcmY2F0ZWdvcnk9ZW1haWwubGlzdGluZ2FsZXJ0cyZjb2hvcnRJZD1Qcm9tb3MmdGFyZ2V0PWhvbWUuYWRkcmVzcyZsb2dpbklkPTE5NTY1ODc=
I was even thinking about just buying a s&*^hole ranch in Canoga Park for now until I can afford something better in WH/Calabasas, but the other part of me says “borrow as much as you can and get the better home now”, before prices go up more. I really, really don’t want to live in Canoga Park! 🙂
Really hoping for input from people here who are in the market daily. I watch every day the listings/price changes/solds on Redfin, and just recently am seeing a few more price drops than increases, but that’s probably b/c everyone is listing at the super-high bubble prices, hoping to get $380/SF for some POS just because the market is hot.
Since you missed the 2009-2012 boat, I’d advise you to wait up for few years
In socal things r crazy and is unsustainable.
People would tell you otherwise saying this time is different but history tells us otherwise.
you do have lot of cash which is a good thing and have been renting for long time..
wait for few more n you will be amply rewarded//
Looking to buy in West SFV – Need Advice,
I can just tell you what we are doing and what we are seeing, but take it with a grain of salt. I’m not a professional, just someone ready to buy a house.
We have $300,000 to put down and are looking in the $700,000 range in Woodland Hills. Honestly, we felt there were better houses for sale in the beginning of the year, January and Feb, than on the market now. We put an offer on a house in Jan. and went $15,000 over asking since we liked it a lot and there was another offer, but we ended up pulling out during the inspection. Too many short-cuts made by the owner on upgrades. It sold right away for $685.
We put another offer on a place in April, but an all cash offer over bid and got it. It was going for $700 and we went $705. It was perfect for us, but se la vie.
What we are realizing is if your cap is $700, you should not bother looking at those since if they are nice, and why would you want anything that was not, you will have to be in a bidding war and go over asking. So $685 should be your cap and be ready to pay more. Since anything for $685 in Woodland Hills is crap in my humble opinion, there is no point.
We are still look on line in disgust and annoyance every stinking day, but we are hoping that we can find something in the off season, November, December, January. We want a house with many rooms, mostly something a family with kids would want, but they can’t pick up and move any time they want since the kiddos are in school, but we don’t have this issue so this is our plan. I have no idea if this will happen, but I do know I’m not buying the crappy houses people are selling. I have no idea what is going to happen, but we are in a bubble and it will pop eventually, just not sure when that will be. I feel your pain, as I’m sure many on here do and can relate to everything you are saying.
Why don’t you just do a slightly smaller down payment and offer an additional 15-20k over what you’re doing now? In the scheme of the numbers you’re talking about, 15k is nothing. if its a number you’re worried about eating or (getting taken advantage over), you probably shouldn’t buy.
@Looking to buy in West SFV – Need Advice:
It appears that you’re somewhat apprehensive about buying now. Why not wait and see what happens? Do you really think house prices are going to further increase by any significant amount? Anything’s possible, but that would seem very unlikely. The potential risks incurred by waiting to buy don’t seem very punitive at this point.
I was living your situation last year. We had a high rent in Northridge, and we wanted to buy in the same area, but prices just weren’t/aren’t making sense. We were fortunately able to move to Oregon, but, if I had to stay in California, I’d wait it out, myself. The housing prices in California fluctuate so much that you can really get in trouble if you buy at the top of the market, maybe unless you know for sure you’ll be there 30 years.
I agree that prices in CA are high. However, if your REALLY have to buy in CA and don’t consider any other states with better value, then, good areas in CA were always expensive unless the economic circumstances were so scary that you wouldn’t buy anyway.
In terms of predicting the future, good luck with that. There are so many variables that not even Yelen can predict it. Any opinion you receive in terms of predicting the future is just that – an opinion. The dollar can increase in value or it can crash. Nobody knows and those who claim they know, they just lie.
If you have the money to buy in the bank and get zero return like most people while spending over $40,000 per year in rent, the question is – are house prices droping $40,000 every year to break even???? Again, I don’t know the future and you don’t and those who claim they do they just brag.
Personaly, I think you may get way beter value in other states, but that is my 2c.
Yep. housing in the midwest are not in any bubble. You can still pick up houses in lower income neighborhoods 25% less than peak 2007. These houses are priced at 1998 prices still.
Housing in nice school districts are now priced just around peak 2007 prices after dropping 20% from 2007 to 2013. Long term inflation trends pretty much means these houses are priced about right.
JN, I lived in Germany for over two decades. By law each worker has 30 days of paid vacation. On top of that you get more national holidays than in the US.
Thats more than twice as much of paid free time than the average American worker receives. I would rather pay more taxes if i get that much more paid time off.
You mentioned the socialized medicine. Of course that word socialized makes it sound so bad for most Americans….But I believe most Americans would rather
pay more taxes if they could get a basically free healthcare. You know the stories about bankrupt Americans due to healthcare costs. And lets not forget the free education.
State Universities in Germany cant charge you tuition fees, since its all subsidized by the “evil†social system. Also, the typecast you describe it misleading.
Yes, at a young age you get selected in one of three types of school based on your grades. BUT you can move up based on your development. Many students in trade school end up studying at a State University.
Dont get me wrong….I dont think that we should pay more taxes in the us….the taxmoney would probably be used for bailouts of wall street before the populace receives better healthcare or free education.
You are right that most people rent in Germany and the rest of Europe. It simply much cheaper to rent than to purchase a home. Also, buying a home is not considered as the “European dreamâ€.
Mike, paid vacation/holidays are generally for FT workers. Many jobs created in SoCal are PT, which offer sub 32 hrs/wk, no bennies, with a steady flow of new applicants so when PT worker can’t do the job of two people, their hours are cut to 3-4 hours per week (company won’t lay person off, would have to pay UE); new person given 30 hours. Also SoCal has unchecked immigration (both illegal/legal) coupled with broke Grandpa, 40+ y/o people downsized living back with Mom, recent college grads and illegals all competing for sub $15/hr PT jobs. Not to mention CA has one of the largest welfare populations in the US. A little different scenario than Germany, no?
Exactly. It’s not as if many European countries, particularly in Scandinavia, are bad places to live. They generally rank higher than the US in terms of “happiness.”
The rampant alcoholism of Iceland, Britain, and ALL of the nordic nations — yeap — goes by the wayside.
HAPPY?
Those extremely northern lands have the MOST consistent depression issues for their entire populations.
It’s those insanely long dark winters.
Which, BTW, are why imported Africans have total social meltdowns up north.
They are TOTALLY unprepared for E N D L E S S nights and bitter cold.
I’ve read that there’s such a thing as Reverse Seasonal Affective Disorder. People who are depressed by sunlight.
I think I am such a person. I feel uplifted by long, winter nights. By gray skies and rain. I find sunlight depressing, which is one of the reasons I’m considering leaving SoCal for Seattle.
Granted, such people are in a minority.
you’re not alone, I am an avid golfer and prefer to be out during hazy overcast mornings vs. the hot sunny afternoon. I also love it when it rains and when it’s cold I can make a fire and bundle up
NZ 1st post: “I’ve already witnessed 10% reductions in closing prices YoY in LA suburbs and the IE.”
NZ 2nd post: Ontario: Population 167,500. Manhattan Beach: Population 35,726. Pomona: Population 151,348. Laguna Beach: Population23,250. I’m sure you are smart enough to see where I’m going there. As I said previously I’ve seen a few 10% reductions on closing prices in the SGV and IE already.
@ NZ –
Nice how you backpedaled on the 2nd post from seeing “10% reductions” making it sound like blanket pride drops of closed sale to the reality which is you’ve seen A FEW price reductions. It is pretty clear that A FEW reductions do not make the market. Anyone can cherry pick a few price drops.
Now for some actual closed sale data of the cities you mentioned:
Ontario median closed price 5/2014: $324K
Ontario median closed price 5/2015: $351K
Pomona median closed price 5/2014: $308K
Pomona median closed price 5/2015: $316K
Laguna Beach median closed 5/2014: $2.050M
Laguna Beach median closed 5/2015: $2.351M
You have no data to support your claims of price drops. Just the same stuff you’ve been spewing since 2010 about how anyone who buys is catching a falling knife, rates are going up, prices will tank in 2014, no wait 2015, no wait really this time it’s 2017 and how you put your $ where my mouth is because you signed a rental agreement that says you MIGHT buy in 2017. LOL. Now go ahead with your personal attacks, requests for me to post my personal info, etc. since you have no facts to support your arguments..
Id request you to fuck off 🙂 If you were really a successful broker you’d have no problem standing behind your sales claims and I doubt you’d take such a personal interest in my comments. Shouldn’t you be depositing a commission check or something? 5 years of tracking my comments? Really? I see why you don’t give your info. The restraining order would be quickly filed LOL! And as you’re not to good at paying attention I posted how I just missed out on a house in 2012 and am trying to negotiate a buy option lease on my current rental. The math only works for me with a 20% reduction, so I’m trying to “short” the market in a very real way.
And every downtown begins with a “few” price reductions. Also great job misunderstanding my post by quoting LBeach prices which I said were disconnected from the “real” SMH market.
You may not be a broker but you’re certainly stupid enough to be a Realtor 😉
NZ, don’t allow yourself to lose focus on your market view; I value your insight. I know the Realtors/VI are playing their own end here, and many are complacently of the view we’re in a new-normal of ever higher prices. At the moment the market gives them a lot to support their view, but I like anecdotal information which at least hint of some underlying weakness, even if it’s not ‘official’.
Can only hope mortgage rates keep rising, with some global bond market unease, and then the realization that liquidity is not awash. (Others expect things to calm quickly, or more QE).
Something is very very wrong, with so many selective winners (globally), on the end of recent (2008-09+) global CB policies, which have favored older interests over young.
I keep looking to mainstream banks. When they’ve spread enough positions out to this wider Midas market, then they’ll crash it, imo. Question is when. Banks are in the lending business, and are not going to put other VI (REITS/outright owners/Chindians) before themselves / their shareholders. Setting things up for a ‘burning of the boomers’ (in the wealth sense) perhaps.
http://www.mortgagenewsdaily.com/consumer_rates/
Doc: There is debate how much power the Fed has over the bond market and we shall see.
And as a RE ummm “professional” you know a cities median means little in this discussion as it doesn’t account for the skew towards the high end of the market. If anything the “few” price reductions I’m referring to can be completely ineffective in affecting the median if a few McMansions are moving. In the low volume environment we’re in the median is incredibly unreliable as a macro stat because there isn’t enough input data.
PS Apologize for the language in the previous post DrHB. I hope you still let it through. This troll makes things a bit personal and extra stupid and my temper failed me 🙂
LOL OOOHHH I must have struck a nerve there NZ! Thanks for proving my point with the personal attacks. In all your lengthy posts you did not include a single iota of factual evidence to refute what I posted; you did, however, manage to hurl a string of personal insults.
I welcome a debate on the stats. Not a discussion replete with cursing and name calling. OK so median no good for you? How about avg?
Upland must have had some high priced sales or something close in 5/2015 which is really screwing with the numbers. 5/2014 is showing average sold price of $519K and 5/2015 is showing average of $1.5M. 4/2014 avg $454K, 4/2015 avg $520K. I will give you Rancho though. 5/2014 $540K avg, 5/2015 $521K avg. For reference median Rancho was 460k v. 453K.
SO about RH. You mentioned one neighbor’s transaction that was probably ridiculously overpriced to begin with. I looked at avg list price for RH: 5/2014 avg list was $751K, 5/2015 was $785K. Raising prices that high YOY will necessitate price drops to bring them within reason.
The fact that he removed it from the market shows you what can happen inventory wise when some of these pipe smoking sellers don’t get the number they want. They can and will just pull the listing from the market. They don’t HAVE to sell which is an important distinction of the transactions closed in the last few years being sold to mostly stronger buyers. RH: number of new listings 5/2014 – 49, number of new listings 5/2015 – 37.
So the hotbed of Chinese $ as you called it, 5/2014 avg sold price was $658K, 5/2015 avg sold price was $722K.
@CAB
You made it personal first Realtor Douche. And to reiterate, for the umpteenth time… Average and median price are near meaningless in a bifurcated, low volume market. Since you’re quoting statistical averages while I’m telling you to just look at the fucking houses in a particular track and see how they are moving. In many are areas the only way lower end stock is moving is with significant price reductions. However the luxury properties that are closing are skewing the statistics.
One of the things that touches my nerve is stupidity. You’ve got is in spades and no amount of stats from your MLS login is gonna change that. My thesis is that the current run-up is unsustainable and a correction is inevitable. Yours seems to be that a correction is nigh impossible. You present no persuasive argument aside from the “numbers are up”. There were posters like you all over Housing Panic from 2005-2007. Not surprisingly most never came back in 2008. We’ll see if you can pull yourself away from the MLS in a few years. I expect you’ll be going over a lot of listings…
NZ, you prove you have no argument every time you respond with personal attacks. Thanks for making it so easy to point that out. In a nutshell you state that the statistics don’t matter…because you posted anecdotes about unspecified listings that you have seen with price reductions. I post real data and you resort to name calling and anecdotes. Hilarious.
I have good news for you, though. You will eventually be proven correct. Even a broken clock is right twice a day. Prices will surely drop as they always do, though not below the previous trough, and rents will remain at current levels or increase as they always do over the long term. As far as a tanking, that is not going to happen unless we have a recession with heavy job losses across the board. And as of now, there has been no meaningful decrease as proven by the data I posted. I wish you the best.
I was going to call out NZero on his 10% price reduction. Anybody can attach a WTF price on a house and then it might sell for WTF-10%. Wow, we just witnessed a 10% price reductions. Get back to me when the sales prices is 10% less than the most recent comp. And that ain’t happening!
Regarding bringing up the trendy areas, most people on this blog do NOT want to buy or live in the IE. Prices there are still relatively cheap for socal standards. They were literally giving those places away 5 years ago, why didn’t people take the plunge and buy then?
They were 10% less than the recent comp! North Upland and Rancho Cucamonga. Take a look on Redfin. If there was the market momentum you claim you’d see ZERO reductions in this low volume environment. You guys don’t want a real debate. You cherry pick statements and you don’t respond to direct challenges to your arguments. So you didn’t call out shit LB and your lack of response to my direct answer to your thesis while piggybacking on CABs lame personal attacks are unimpressive if not expected.
BTW the SGV and SFV as well as the IE will always be leading indicators so they are quite germane to the discussion whether one wishes to buy there or not. As with the last correction I don’t expect metro and near metro LA to match outlying area price declines, but the IE is part of the SoCal market this site discusses. So outside of you being a total douche snob as usual, many people here benefit from those areas being part of the conversation. I’m in Rowland Heights and a neighbor just removed there listing after 6 months and it was priced at a comp from 2014, which sold for about 5% less than a comp from earlier that year. And RH is considered a prime LA suburb and destination for hot Chinese money. Beyond that you can look-up more empirical data on your own…
And for the record I think your a troll who doesn’t own Jack in the South Bay. I work for a few millionaires with beautiful homes and none of them troll RE blogs. I’m here because I enjoy debate and IT work by it’s nature has downtime. So consider YOURSELF called out 😉
Raise your hand if you knew that the government was going to bail out the RE portfolios of financial institutions through ZIRP, toxic MBS purchases, and the suspending mark to market accounting? Where was the mythical fire sale for organic buyers?
“They were 10% less than the recent comp! North Upland and Rancho Cucamonga. Take a look on Redfin.”
You answered my question and proved me wrong. I apologize, you are right and I was wrong. I have been wrong many times in my life and will gladly admit to it. NZero, do not take things personal on this blog. This is an anonymous blog with opinions from all view points. I enjoy reading most posts and get a good a laugh out of some of them. The housing information you can get on this blog is second to none…you just have to know where to look and what to take with a grain of salt.
Peace. Relax. Good luck.
Don’t you just love it when someone comes across as a pompous ahole and then gets all just relax brah when you call them out on it as if there’s something wrong with you. Such dbagery appears to be in no shortage in trendy areas.
Omg look who’s back! It’s CAB the realtard riding into town in his leased Mercedes, ready to save us all from our ignorance lol
I think rent and home price reductions may happen in unison if this drought continues into next year. No way to escape it unless you leave the state or pray for desal plants to come online in every coastal community including for IE or central family communities.
eden – $705 was us adding on $15-$20k since $685 was our cap at the beginning of the year. We don’t want a jumbo loan, so we are keeping it to $700 for now. The last house we bid on was not worth more than $705 anyway, so we would not pay more for it. It had many issues, but it worked for us.
When I first moved to CA, I worked as a temp at a property company. It absolutely blew me away how many rental properties the company owned under multiple names. The primary reason rents are so high, is simple – a handful of companies own most of the properties and they continually push rents higher. When you check out apartment reviews of these mega corporate slum lords, people absolutely hate them but they have few alternatives.
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