Homeless in L.A. – homeless population surges 75% in past six years.Â
There is a homelessness crisis in Los Angeles County. The homeless population has surged by 75% in the last six years all the while home prices are back to peak levels. Yet the home ownership rate still hovers near generational lows. California has seen massive growth in rental household formation. Surveys continue to find that Millennials prefer different living styles than their baby boomer parents. Forget about surveys, just look at the actual market. Record low inventory is being driven by baby boomers staying put and the lack of home building thanks to hardcore NIMBYism. So it is no surprise that we now have a homeless crisis in L.A. County. Recently, in Orange County a large group of homeless encamped in various areas where set to be moved into affluent areas of the county and people went ballistic. So where do we go from here?
The rise of homelessness
This is a big problem and is happening to a group with really no voice:
“(L.A. Times) The number of those living in the streets and shelters of the city of L.A. and most of the county surged 75% — to roughly 55,000 from about 32,000 — in the last six years. (Including Glendale, Pasadena and Long Beach, which conduct their own homeless counts, the total is nearly 58,000.)â€
Keep in mind this has occurred during a booming stock market and a time when real estate values are soaring. The unemployment rate is low but you have a bimodal market – a smaller group of affluent buyers and investors and a larger working class that is simply unable to buy. You have this Puritanical notion from housing cheerleaders that somehow, younger people are buying too much Starbucks hence their inability to save for a down payment for the million-dollar crap shack.    And yes, crap shack is an appropriate term:
“People in Koreatown step outside their fancy condos to find tents, rotting food and human feces at their doorsteps. Buses and trains have become de facto shelters, and thousands of people sleep in fear and degradation.â€
Yet it is clear that some are living inside a housing bubble living a Wall-E type lifestyle – getting fat and lazy with myopic vision. They advocate a free market but only when it is convenient –more like social welfare for the real estate industry. You need only drive 5 miles in any way in L.A. County and you will find cracks in the system:
“We are moving more homeless families and adults into housing,” said Phil Ansell, director of the Los Angeles County Homeless Initiative. “What we have less control over is the inflow: people who simply are unable to pay the rent.”
Yet you have people paying the rent but in many markets you have people living like sardines and streets are filled with tons of cars because households need multiple paychecks to pay the rent. Of course many see no issue in this and pretend it is some sort of free market capitalism. No, this is cronyism and NIMBYism at its best. There is plenty of room to build more housing. Developers would knock down single family blocks and build New York style skyscrapers given current rents. But no, people want to keep their crap shacks and will fight tooth and nail since they got theirs. Not a free market at all.
The fact that homelessness went up by 75% in six years should be telling. You even see these issues in San Francisco where the typical home goes for $1.5 million. L.A. is becoming more like Gotham as the years go by.
Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information
Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.
Subscribe to feed
476 Responses to “Homeless in L.A. – homeless population surges 75% in past six years. ”
No way this problem is simply due to rising SoCal and Bay Area RE prices, Doc. Something else is afoot. As many around here are fond to drone on about, it’s always been an expensive and shitty value proposition.
My guess is that what we have is a convergence of economic fallout and cultural gluttony which allow this sort of self deprecating despair to be more permissible. Therefore, of course it’s primarily showing up in coastal California cities.
California is getting the governance it voted for. Vote for pussies giving hand outs, expect the same to show up with their hands out.
How many of these homeless people do you even think are getting handouts from the government? I’m guessing the rate is extremely low most people getting handouts live a lot better. I’d be curious though if there is a correlation between drug use and homelessness increase. What is your solution? Let them all starve to death in the street? Are you at least going to have the government hire people to clean up all the dead bodies?
DG, the symptom you see in homelessness has very deep roots. There are solutions which are not PC and everyone refuse them (this would be a subject we can talk forever but it is not the purpose of this blog). Definitely the government does not have any solutions. People are free to drink or use drugs into homelessness. If they fry their brains with drugs and alcohol, what can you do?!? Bring back the prohibition?!?…What you see is the symptom of a decaying society and mass immigration, legal and illegal. This problem would exist with or without democrats. What the democrats are doing is just exacerbating the problem with their policies of sanctuary cities/state.
Unless you have a family you are only going to get food stamps and medicaid.
The number one handout is permissibility and the solution can begin with stopping that.
AntiCoyte
May 1, 2018 at 4:46 pm
Unless you have a family you are only going to get food stamps and medicaid.
—————————————————————————————————-
Not really. Even you’re single you can still team up with other singles to qualify for section 8. I have a rental, 4 bedrooms. I have a group of section 8 applicants consisting of 5 adults, mother and son, and 3 other they called “relatives” qualified for voucher good enough for a 4 bedrooms house. Most of HUD programs (or I can say all of them) within Los Angeles County do not require a social security number to apply for section 8. I’d say more than half of HUD programs within Orange County do not check for social security number, which means illegals can apply too. Many people are in denial or brain-washed by democrats propaganda that illegals are paying tax without being qualifying any benefits is a BS. I work for government and I know especially in California, illegals have a better right than legal immigrants. At least they don’t have to report tax.
Soylent Green. No just kidding, this is a big problem, and a few of the homeless in our area I’ve talked to have come from other states. One man in general came out here form the Midwest. I just started noticing him when we’re taking break. He asked me if we’re hiring. He then gave his story.
Agree 100%. Rising home prices likely have little effect on the number of homeless in socal. Most of these people have serious mental health issues or drug problems, being homeless is a choice. If they really wanted cheaper housing they could get on the next Greyhound to flyover country. No reason to do that when you can enjoy socal weather, liberal policies and handouts and get high and drunk with your buddies all day.
Mr Lord Blankfein,
I respectfully disagree with you.
The homeless problem is growing in the states I travel to. Salt Lake City, Denver, Colorado Springs, Minneapolis, Dallas. It is not just a CA problem. This is turning into a nationwide Grapes of Wrath.
It is not liberal policies though it is likely a substance addiction problem My HOA just banned rehab houses in our neighborhood.
Is it a housing problem crisis? The local papers that I read when I travel blame the rising price of housing and the gentrification of former dirt cheap housing in skid rows for pushing people to become homeless. They also blame in Colorado the razing of the $5 per night motels where these people formerly resided for upscale condos.
Income disparity is the likely cause along with substance abuse.
Remember, during the times of the last Grapes of Wrath, Socialists won the Presidency for 16 years. We have food stamps instead of charity bread lines now. Maybe that will reign it in. Until the Republicans and Trump cut food stamps drastically.
Liberal policies may not cause homelessness, but they definitely make it worse by making it desirable. Homelessness needs to be made difficult. People become homeless through some combination of addiction, mental illness, and/or financial misfortune, and then they face a choice:
A) Get help in a sober facility, get clean, move to flyover country, get a difficult full time minimum wage job and a 1-bedroom apartment (or 2 with a roommate), and take classes to improve their lot in life. This is an intimidating, years-long slog of effort that many people are simply too weak or lazy to undertake.
OR
B) Live in a perfect climate, sit on a lawn chair all day drinking the booze and injecting the opiates that are provided by state benefits and theft, in front of a tent in a park where a church group brings them food twice a day. Their dealer lives two tents down, and the world is their toilet.
We have the wrong attitude toward the homeless. Vagrancy, crapping on the sidewalk, and being under the influence in public are all illegal. Time to get back to enforcing the law everywhere, not just conservative cities like mine. When they’re forced to either accept help in a sober facility or live in the desert and starve, they’ll get the help and work to get out of the shelters (which are not pleasant places to be). The alternative is winning a Darwin award for laziness, and I have no sympathy for those people.
For homeless people with a little money, may I suggest they go to Iowa where jobs are plentiful? If we had a policy to give them a little spending money and a one way train ticket, they could build a little life for themselves if they wanted to.
We used to call these people “bums†before PC culture beat us into submitting to calling then all simply “homeless.â€
Homeless makes it seem like they simply don’t have a home and thereby ignores the causative factors.
Do you see how this shit works?
The difference is the soaring rents. California has always been expensive, but it was only this expensive to buy during the peak of the housing bubble, and it has never been this expensive to rent by a wide margin. *Some* homeless would still be homeless if we were at 2003 rent/wage levels but most of that 75% were driven there by the prices.
The big long-term problem is that once somebody has been homeless for a while it become much harder to get out. They accumulate nuisance legal problems, lose friends, lack employment and rental histories, etc. Even if we could alleviate the squeeze (and it’s not getting fixed in the next few years) we’ll be paying for the aftereffects possibly for decades.
Good point Sire
https://seekingalpha.com/article/4161354-housing-market-heading-south
Clearly, there are handouts of food and other types of care. Also, who wouldn’t choosecalifornia as a place to be homeless? The weather is perfect! So they come from everywhere. Also. They are largely mentally ill, with overlays of substance abuse. Reagan got rid of mental hospitals, but they should be reconsidered as long term options, because antipsychotics are always effective, and when they r, well then, the user stops taking them? Can ur stupid governor or any governor put these hospitals back into existence and make California a better place?
Reagan was president in the last century and he has been dead for years but loony liberals are still claiming that he closed mental hospitals and that he’s too blame for the mentally ill currently on the streets? Why hasn’t Gov. Moonbeam Brown and his loony leftist Democrats who have completely controlled California for decades done anything about the homeless mentally ill? Worthless Democrats are too busy catering to their illegal alien voter base and making sure that they have all the taxpayer funded freebies that they need.
Let me tell you about renting. I worked in the East Bay for most of my life. I bought a house in 1998, which I sold for a huge profit in 2005. My sweetie and I rented for 7.5 years in Alameda, at which point one of my landlords lost his job, had to sell their house, and they moved into our rental. We ended up in San Leandro (the armpit of Alameda County) at a much higher rent and much longer commute. Two years after we moved, the owner decided to sell the house we were renting in order to buy an 8-plex. We looked for a rental that took pets for 3 months, and the best we came up with was a 1000 SF apartment near our office in Oakland that rented for $5300/month (!!!). That did not even include parking, which was an additional $150/month, but was only for overnight parking, because they rented your space during the day for commuters (so what do you do when you call in sick?). For heaven’s sake, I’m a civil engineer with 30 year’s experience, and my take-home was only $5302/month, leaving me only $2 for utilities, food, pet food and vet bills, gas, insurance, FOOD, etc., etc., etc. WTF?
Anyway, we moved up to Santa Rosa to a house he’d inherited over 10 years before, and commuted for over two years before retiring. We were two of the lucky ones, because we had a place to go to, and we could quit working. My question is, how is everyone else, without inherited housing and a high income, able to make it in California? What am I missing? It seems to me that only the very wealthy can have a normal life – which I grew up with so many decades ago – in this state.
I know a lot of people in the same situation as you. The only way to avoid this situation is after you graduate from college, you must buy the best home you can get a mortgage on as quickly as possible. That way, after about 15+ years of hard work, you have knocked down a lot of the mortgage, and after 30 years, you have a home with only a tax payment. Anyone who follows this formula lands up retired in SoCal. And, if you decide not to follow this plan by renting, in retirement, you can simply relocate to a nice area with a lower cost of living. Nothing wrong with that.
Buy a home immediately after college? That suggests only very wealthy millennials who are financed by their families can implement this plan, especially considering historic school debt and historic high rental fees. The trend is going that way it seems. California’s middle class and upward mobility feel like they are vanishing.
Meri,
Right now, low down mortgages have made a return. You can now buy a property with a small down payment. People graduating from college should take advantage of these.
Of course, the only problem is low down mortgage products usually appear when prices are high and they disappear when prices start dropping. But, for someone with modest means, they are the only way to enter the market.
Fact is, if you are young and have little money, the only way in is a low down mortgage when prices are high. Sometimes, prices head lower in the short term, but that is a non-starter since you will need a large down payment to take advantage of lower prices.
So, if you get in with a low down and you buy a good property, in the long term, you will do very well, and with people of modest means, that may be your only option.
Personally, I love the low down products … I took advantage of them in the 90s … right after college. For that period, they were available with lower prices … that was unusual. Remember, forget short term price swings … play the long game with real estate and you will be fine.
Meri, that’s why the smart and tenacious ones are getting out now.
Great insight Karin… I’ve lived in the peninsula (mid) for the last 12 years (in a smaller (privately owned) complex with a few small pets). The good thing is that the original owners kept the rent low (as long as the tenants were good), then when the kids took over they raised the prices every year from 2012 until now (about 10-12% year). The rent now is still lower relative to other complexes. I’ve heard of some folks finding deals, but it is more so rare. More than 50% of the tenants that left (due to the rent increase) ended up leaving the state
What are you missing, Karen? Peter Turchin explains in historic context in Age of Discord and other works. Peter Schrag, a long time observer of California, gets to the heart of the matter on pages 56 and 57 of Paradise Lost: Cailfornia’s Experience, America’s Future. He begins with “The most obvious element of that change is . . . a relentless population boom.” Look it up on Amazon.
Erik, you have to thank the democrats in Sacramento for promoting illegal immigration through sanctuary cities/state. The politicians in Sacramento are the biggest hypocrites out there. They tell the Sierra Club that they want less population to protect the environment and then they do everything they can to increase the population with legal and illegal immigration. Not only that but they have the guts to criticize Trump on one of the few issues where he is 100% right and they try to frustrate him in courts any chance they have on issues related to immigration.
Fine, Eric, but most of the population coming in does not have the money to buy a house or pay the rent in cities like Oakland (forget San Francisco!). The Mexicans used to rent or buy a place, and have several families share the property, but housing prices are getting so high that most can’t even afford to do that anymore. So who’s buying the houses? In Alameda, where I lived for 15 years, the Chinese were taking over, particularly in the Harbor Bay part. When I sold my house there in 2005, there was one Caucasian left on my block, the rest from Asia. Who will be left to provide services to the wealthy buying up the houses? Who will make their lattes, service their cars, and repair their houses? The wages of service people are not enough to live in the cities anymore. At some point, something’s got to give.
You hit the nail on the head Karin….having lived in both the bay area and now southern California, I’ve seen massive foreign investment, primarily from mainland China, as a huge factor in driving up housing prices. The terrible irony is that WE are the ones who facilitated it….we let our corporate CEO’s move manufacturing to China and bought their crappy products. We destroyed our own middle class and created the massive Chinese investor class. Hard to blame them for wanting to move their cash out of China and into American and Canadian real estate.
It’s not just* illegal immigration, it’s LEGAL immigration too. Those in power import 2+ million brown third worlders every year and bring in Indians for tech jobs all to depress wages. Doing this for 50+ years is how we end up where we are, and it’s only going to get worse.
I called it a while back – blue states become brown states with the influx of illegals and s-t covering the streets. Enjoy!
so we live like sardines…or move to Texas..
@Born to be poor,
The answer to your question is that , yes, that is the only choices you have if you currently live in CA. Sad but true. You have to thank the “bright” people in Sacramento who promote this and all your friends who support them in this insanity by voting them in power. If they had any desire to change this course, they would have offered all the assistance to Trump, including the national guard to enforce the existing laws of the land (which by they way there were not created by Trump and affects the people in SoCal far more than they affect Trump). Not only the governor did not do anything, he frustrated the federal LOE at any turn he could. What do you expect from a lawless person except to brake the law and bring in more law breakers in CA till the whole state is full of them. You, as tax payers, pay for all of this, not only in taxes but higher rents and and higher RE prices. I am glad I don’t live there.
The crazy housing prices are mostly because constructing new housing is mostly illegal, and that’s not Sacramento’s fault, that’s from zoning laws thanks to the local municipalities. Sacramento is currently trying to fix that with laws like allowing accessory housing, although the efforts are still far short of what’s needed.
Yes, please move here to Texas where the IQ’s are lower than the temperature,the air and water are dirty, housing prices are going through the roof, and people out here figure that all problems can be solved with a bible or a bullet.
Gov. Moonbeam Brown and his La Raza Democrats are “fixing” the housing situation? HA! Their solution is keep the borders open and bring in even more illegals to add to their voter base!
Sounds really alarmist. There are tons of affordable communities in the California, but of course they are not going to be on the Westside or in San Francisco. Not everyone can live near the beach or downtown, and why should they? I am against NIMBYism and I believe we should remove as many restrictions as possible to building new housing, but guess what, the Democrat controlled state and local governments don’t want to do that, so it is what it is. People will have to live further out from city centers and take lower paying jobs or suffer longer commutes, but that’s the consequence of the policies decisions made by our duly elected leaders. It literally is what the people want. As for homelessness, what these numbers disguise is whether these people are local folks who have been displaced by higher housing costs or if they come from somewhere else. I’m not sure you can make definitive conclusions about what is going on by saying there are more homeless people in Venice and Santa Monica than Omaha or Waco.
You can get a decent sized house in a nice OC city for 750k. You don’t need 1mil to buy a 2 bed / 1 bath. Maybe in SF; but there is life outside the bay area.
20% down and your PITI is around $3900/mo.
2 incomes and that’s easy peasy.
1 – we wouldn’t be having this discussion if homes in “affordable†communities weren’t also a shitty relative value.
2 – it doesn’t matter where these people come from, they’re here because the state condones and encourages the problem.
Of course you can say that there are more homeless in SO Cal. Look at the freebies that Jeryy and his bunch are giving away in a place where it is always warm. Have you ever been in Omaha in the winter? It gets cold and the same is true in NY where deadbeats abound. In Waco everybody hates the government after the fool Janet Reno killed that bunch and homeless people are met with guns in their face.
i lives in SF in the 60s ( before Jerry and the gays). Now it is more like BEIRUT.
Dean, you are wrong about democrats do not want to remove the restrictions on building new houses. They are doing everything to accommodate their illegal friends for votes. Just look at recent ADU law. And the other day I saw a news it’s regarding LA County suing an owner who “intentionally” leave his large land vacant without building anything, which LA County think it’s a waste of resource that can accommodate so many illegals. So county sued the owner, owner lost the case, judge ruled that county has the right now to build something to ease the burden of homeless. It doesn’t say if the owner will be compensate with the money of the land. To me it’s a shock. I thought this is a free country until I saw a news like this that makes me feel like living in a communist country.
Karin, I just wanted to thank you for all the civil engineering you did. 5k a month was a bargain, not sure how we could have managed otherwise.
Thank you, Milton, but the $5K was AFTER taxes and deductions. Having said that, I was still very much underpaid, as I was the principal engineer on projects up to $25 million.
Karin, I do not understand your story. You “fled” Oakland in 2005 by selling your then home for a 700k (which then became 500k and now a million). Had you kept your Oakland home, you would have paid much much less than 5k a month (more like 3.5k including taxes a month with portion of it being a principal). In the process of moving you made (saved) 270k, which is a huge chunk of money, fine. But now you are complaining about being on the brink.
I really do not follow what are you trying to say here. You said you “fled” Oakland, yet had you stayed you would be much better off.
Surge, I’ve said the same thing in the past. She admittedly correctly timed the market in 2005 by selling her place. But completely and totally dropped the ball by not re-entering the market in 2010-12. Had she kept her original house, it would likely be paid off, worth 1M and her property tax bill would be minimal due to Prop 13. No moving, no hassles, no paying 5K per month rent, etc.
The lesson here is DON’T TRY TO TIME MARKETS. In the long run you will always lose. Owning a home is a long term proposition, let time do its magic and enjoy!
Surge, at the time I sold the house, I had not had a cost of living increase in over 8 years under Gray Davis and Pete Wilson (I worked for the State). Meantime, my property taxes rose over 40%, my HOA dues and utilities were skyrocketing, and the 10-year-old house I bought in 1998 ended up needing about $35,000 in repairs and upgrades (the builder, Doric, was a huge contributor to Senator Don Perata, and inspections of their work were ‘drive-bys’). I was going through my savings rather quickly by the time I sold. I knew the market had topped out, but this was not the only reason I let it go. Plus, I had no intention of retiring in the East Bay.
As for your comment below about pets, that’s rather cold and callous. The only reason I bought the house was so that I could keep my pets. If it hadn’t been for them, I would not have made the profit off that house. I owe them big time. In fact, I donate quite regularly to over half a dozen animal rescues from funds taken out of my profits from that house.
Karin, I do not mean to offend you with pets, it just drives distorted conclusions because of your unique circumstances. I am sure that in Oakland you can find good living arrangement for 2.5k-3k (w/o pets). Pets are just cost of discretionary living, should not be added to cost of housing calculation.
Yes, repairs of the home might be expensive and untimely, that is unfortunate. However, for you it seems to be too many external factors (no raises under some governor, some drive by inspection, etc….) that impacting you. You always seem to assign the blame without admitting and learning from your missteps.
Karin, your property taxes are unlikely to rise 40% in 7 years (from 98 to 2005). You have prop13 from preventing this (it would cap it at roughly 14% in 7years). I do not know how your tax bill can be increased 40% in such a short period.
Karin, also your pets are limiting you.
If you remove them from equation – you will probably see a lot of 3k options in oakland
Nobody wants to deal with pets mess, sorry
Surge~
Regarding your comment on my property taxes being unable to rise over 40% in 7 years, you obviously do not own property in California. The way they get around Prop 13 is by adding bond measures and parcel taxes for ‘public services’. For example, I had 4 parcel taxes added on during my ownership just for AC Transit bus subsidies. We had at least one new school tax tacked on for each year I owned my house, each well over $100. One year we got hit with a $300/parcel tax per year for a subsidy for the failing Alameda Hospital, which doesn’t end even if the hospital goes out of business. Additionally, this hospital is not even covered under most insurance plans, but it is run by a lot of City of Alameda insiders. These all have to be voted on with a 2/3rds majority, but it’s obvious that the ballots are often fixed. There will be strong sentiment against the measures and taxes in the community, but yet they always manage to squeak by with a 66.7% vote. Of course, this is all ‘for the public good’, or ‘for the children’.
Karin, I live in Cali and I even opted for a home with somewhat high mello roos. It is a newer home and I figured Id rather pay mello-roos for great school and not pay for home repairs for multiple years.
Ok, I understand some bonds were added. Since your home was 700k in 2005, I would guess it was bought for ~340-400 in 1998. So your prop tax in 1998 was ~4k, and it was increased by 40% (or 1600 which is 120/month). $120/months tax increase in 7 years should not be something to complain about. Sorry.
You know Karin, there are 49 other states and about 180 other countries in the world. Nobody is holding a gun to your head and forcing you to live in California.
Mr. Landlord~
I’ve travelled all over the world, including Africa, where I crossed the Sahara desert, headed down into Central Africa, and ended up in Kenya (a 6-monther where I saw more than my share of sh*thole countries). I’m from Germany, and have taken about 12 3+-month trips around Europe. I’ve lived in other states, including Colorado. But there is no place like northern California, particularly Sonoma County. I’ve thought about moving elsewhere, but I can’t do it. I don’t even travel anymore. I have a smile on my face every day up here because this is truly God’s country. Of course, I don’t commute anymore because I’m retired, so that helps A LOT!
Karin,
Cool sounds like you’ve seen the world. I have too, travel is always awesome. But if you feel like NorCal is THE place to be, that’s awesome. But like with anything else, supply and demand determines price. Lots of people think like you and hence prices in NorCal are astronomical. You answered your own question as to why is it so hard to get a decent home for a decent price?
So you have two options; pay through the nose to be where you want to be or pay less and be somewhere less desirable. It’s your choice.
“My question is, how is everyone else, without inherited housing and a high income, able to make it in California? What am I missing?”
______________________
California is a massive state. Much of California lies outside of the Bay Area and is far more affordable. That’s what you are missing.
As to your story, why did you sell your property for a huge profit and not roll that money into another property? Were you trying to time the market? What happened to your profits?
There is no way that someone who bought property in ’98 should be having an issue, even without an inherited property.
I invested the money and more than doubled it by 2011, and without all the hassles and expenses of home ownership. Also, I was years away from retirement from my job in the East Bay, where I did not intend to retire. So why buy there when I had a short time left before I moved up north? Too risky. I can feel a market turning when I’m in the middle of it, but I cannot predict the future, in other words, I can’t see years ahead when the market will go up again. The reason for this is because the markets are manipulated, and not naturally occurring.
Karin, you can’t have it both ways. When your house went from 250 to 700K in a few years, there was plenty of manipulation going on…and you profited handsomely from it. Yup, still manipulation today. 20 years from now, you guessed it, manipulation.
Just likely everybody else, you can’t predict the future. When opportunities arise to lock in a CA property at rental parity, you need to run, not walk and take action. I can’t predict the future either, but there are very good chances that both home prices and rental prices will be much higher 15, 20, 30 years down the road.
Great article Doc!
“You have this Puritanical notion from housing cheerleaders that somehow, younger people are buying too much Starbucks hence their inability to save for a down payment for the million-dollar crap shack.â€
And don’t forget avocado toasts! We heard many times how millennials buy too many avocado toasts that cost 14 dollars? Or was it 18? I don’t know, I have never bought one. I must be the only millennial that is not avocado toast addicted (and doesn’t drink coffee)
Am I also the only millennial who has a large down payment saved because I ate burgers, sandwiches or salads instead of buying avocado toasts? Who knows, but one thing is certain….if millennials would drink less Starbucks coffee and eat anything else besides avocado toasts the 200k downpayment would be a nothing burger.
I think there are quite a few people on the sidelines. The majority of my peer group (border line Gen X – Millennial’s) already own something and have down payment money saved for a bigger place. In my particular case we have a rental condo near Bart in Fremont that we out grew when the kiddos came into the picture. We now have enough saved up to jump in again but keep getting outbid.
I am not sure how it is in SoCal but things are insane in the East Bay (Fremont) area now. Since January decent 3/2 – 4/2 homes in Fremont have been listing for $1MM and going for $200k-$300k over asking.
Even homes in Union City are going for $150k-$200k over asking. The schools are horrible in Union City. Who pays $200k over asking in order to send your kids to Gladiator School??!
Yes, Bay area is insane. 21 day offers over asking with no contingencies.
Makes socal look very tame.
58k homeless? Wake me up when we have 580k. As long as my super-low property taxes are locked in (prop13 is your friend) I am not moving and I am happy! Who really cares about the rest?
Dems have a super majority in CA and run every city in the state. And whites are a minority. But who do we blame? White Republicans!! LOL
Liberalism truly is a mental disease.
Landlord, unforgivable!!!!….You were not specific enough. You were supposed to say “white straight male republican”. They are the biggest target for the liberal progressive globalists. Thieves hate to be challenged. They are not threaten by those invading from third world countries who do not understand their thievery and crookedness. Those who understand money, economics, history, constitution, their natural rights and have high IQ are a threat to them – they have to be eliminated. The totalitarians hate individualism. They want all the sheep herded.
Lol nice username, as if it wasn’t greedy old demoRATs who most recently shot down talk of repealing or reducing Prop 13.
From article, “Surveys continue to find that Millennials prefer different living styles than their baby boomer parents. Forget about surveys, just look at the actual market. Record low inventory is being driven by baby boomers staying put and the lack of home building thanks to hardcore NIMBYism.  ”
Looks like the doc even believes in the “inventory myth”, eh Millennial?
Coining a new classification, which I will call “Homeless within a home” is on the uptick.
These are folks who may physically live inside a home, but are financially so stretched that they are 1 paycheck away from joining the army of tents on the sidewalk.
Anyone who has driven DTLA lately knows that the whole area is inches away from becoming one giant recycle bin.
DTLA in fact improved significantly over past 10-15 years
It’s like your living in the moment only.
They sure have put a bit of shine on that turd!
Read an article recently whereby many cities across the US are buying their homeless 1 way tickets to CA and telling them how welcome they would be in CA.
Warm weather and crazy super liberal have homeless policies will surely attract (gasp) homeless people. A friend of mine works for the county and when she was down talking to the homeless encampment by Angel Stadium along the river she said something along the lines of more than half did not want housing did not want help just want to be left alone to do their drugs. The rest were single parents veterans and just down-on-their-luck people that absolutely wanted to help.
This is a very big issue right now down in Orange County where many cities are suing the county cuz they don’t want that relocation in their yard and I don’t blame them.
I am an understanding and compassionate person however nobody wants to be walking their kid to school past drug addicts or drunks or people just living on the side of the road not to mention the fact that you don’t want to take your kid to the park and be worried about needles sticking up out of the sand.
Crime has gone up and will continue to do so until a solution is found.
“Read an article recently whereby many cities across the US are buying their homeless 1 way tickets to CA and telling them how welcome they would be in CA.”
Not only that, but apparently dozens (hundreds?) of shady drug addiction centers (really just large private homes) are springing up in whatever so-Cal cities allow them. They advertise in other states, essentially saying “come heal in beautiful California,” when the reality is these fly-by-night places overcharge the insurance companies as much as possible, then kick the patient to the curb when the benefits run out – cured or not.
Dan, you are smart guy and I’m sure you have plenty of solutions which are not PC. The problem is with no political will to do something about it – not on the federal level but at the state level.
Even if the politicians in Sacramento are not too smart to come up with solutions, all they have to do is to copy those in AZ or support Trump policies of IMPLEMENTING the existing laws which were not created by Trump. But there is no will to deal with homelessness because that implies changing the course of action and admit that you were on a very idiotic course of action. That stubborn Moonbeam and his democrats will continue on the same course because the cost is incurred by others like you and middle class taxpayers.
Trump does not have to be too bright and he will get a second term for being pragmatic with a common sense approach to immigration. The democrats already lost some of the blue states and they will lose more because the cost of illegal immigration is supported by the democratic base through higher rents, higher RE prices and lower wages. Even the college educated work force is affected by H1 visa.
Homelessness and housing affordability are apples and oranges. They should not be compared. Homelessness is the result of a decaying social fabric where loafing around and using drugs is no longer seen as “sinful” but the result of some external circumstances. No, homelessness is an internal problem. A problem of the mind. We also live in an emotive society that wants to feed them. You put out the saucers of milk for the stray cats, they come a runnin’.
Housing affordability on the other hand should be compared to moves to lower cost cities, either inland or out of state. People who want a house, and can’t afford one, move to places like Las Vegas, Phoenix etc.
The reason we’re in this boat is 10+ years of depressed interest rates. It’s called asset price inflation, and people are taking out massive liabilities to afford this “asset” called a crap shack. If interest rates flutter up even 1% more, the whole housing market will freeze and then go into reverse. What about 3%, or 5%? Another problem here is that the Federal debt is so big and grotesque, that even a normal interest rate would blow a hole in all kinds of financing, government and otherwise.
As a society, we are financially like one of those homeless end-stage heroin addicts who needs a whole lot of smack to get high.
Finally, someone nails it! JR is absolutely correct. The market is warped due to the artificially low interest rates that have caused all kinds of assets to inflate in price as those with means are free to bid them up. We pass assets back and forth at ever increasing prices and kid ourselves that the economy is great as GDP keeps growing. How passing increasingly overpriced assets back and forth passes for economic growth is beyond me.
You nailed it.
Thanks!
But how can this be? JT has assured me that only the creme de la creme of America lives in coastal cities. And liberals have also told me that the blue state model of high taxes, sanctuary cities and insane zoning rules is the way to prosperity for everyone!!
So I call this fake news. Everything in LA is fine. Long live Governor Brown!!
I am in San Clemente and I think there may be a correlation between drug rehab facility drop outs and homeless population increase. The amount of rehabs has almost doubled every year for the last 3 years and now we are seeing a lot of new homeless around. This coupled with the bus of 40 homeless people that got dropped off here from tent city (as mentioned above) has our streets looking a lot different now. Just wondering if it’s all connected as it seems….need to find a solution to the current drug addiction problems (#opioidcrisis).
@scrdh – I think you’ve identified a significant issue that isn’t talked about much. OC Register did a series last year on this problem and I’m sure it’s just gotten worse. A real eye-opening article: http://www.ocregister.com/2017/05/21/how-some-southern-california-drug-rehab-centers-exploit-addiction/
scrdh – I think you’ve identified a significant issue that isn’t talked about much. OC Register did a series last year on this problem and I’m sure it’s just gotten worse. A real eye-opening article. (search for “How some Southern California drug rehab centers exploit addiction”.)
I’ve heard of this before (the example was in Florida). Rehab scams take in addicts, don’t do anything for them, and kick them to the curb when the insurance or welfare money gives out.
“you have this Puritanical notion from housing cheerleaders that somehow, younger people are buying too much Starbucks hence their inability to save for a down payment for the million-dollar crap shack. ”
The two are not mutually exclusive. Homes are expensive AND millenials spend money foolishly on $6 cups of coffee and $18 avocado sandwiches. Not to mention the $1000 iphones and $300 pairs of shoes.
Landlord, I agree with the millennial that those are not THE cause, but I agree with you that those are emblems of lack of financial discipline for most of millennials. If he is true in what he says, he is the exception from the rule, and long term he will go a long way especially if he is willing to take small calculated risks. No risk, no gain.
I borrow, too. However, for me, I have this rule of thumb of not having monthly payments of more than 25% of my cash flow from work plus investments without my wife’s income. What she makes is ALWAYS only for paying down debt, or investments or vacations. It served me very well over the years regardless of what the market is doing.
Millennials have given up on long term goals. What do you expect they been shown its okay to fail and fearfully run from any reality discussion. An Instagram snap with my avocado toast is instantly gratifying!
Unfortunately these guys will change the world, will feel their irresponsible burdens. Capacity to become independently successful is far too few with this set. Feel the burn coming?
I still think the entire millenial thing is a media created story. Yeah there are idiot 25 year olds spending $18 on avocado sandwiches. But there were idiot 25 year olds 20, 40, 60 years ago as well. What the MSM does is take the outlier $18 avocado sandwich and make it seem like every 25 year old lives that way. The MSM lives in a bubble in NYC mainly. And given there are 8 million people in that s**hole, they will always find the oddities about whom to write, and extrapolate that to the country as a whole.
I’ve worked with and personally know many millenials and generally speaking they’re no different than anyone else. They have silly haircuts and I will never get the skinny jeans on guys thing. But other than superficial things like that, they’re not that different than when I was their age. They own cars, they get married, they buy houses, they have kids. If anything maybe as a group they do all these things a little later than previous generations. But that’s a far cry from the MSM narrative that nobody aged 35 or under is ever going to get married or have kids or move to the suburbs.
The other thing I keep hearing is the “experience of things” preference of millenials. Riiiiiight. That’s why every time a new $1000 iphone comes out, there are lines around the block to get that “thing” that supposedly young people no longer want.
It’s all FAKE NEWS and sadly society is falling for the nonsense.
Of course, millennial is nothing but a marketing construct to sell specific time of product (lifestyle) to specific group of people.
The construct even works for people who hate “millennials” -> they just turn to other type of lifestyle and products (non-millennial).
Marketing is highly integrated nowdays. When you say millennial you sell lifestyle while in reality you sell: iphones, macs, subscriptions to specific magazines, coffee shops, avocado toast, specific barber shops, etc…
I can chime in as an older Millennial, who is a homeowner, married, and has two kids. I also don’t eat avocado toast, still use an IPhone 6 and drive a sensible older car.
Yes we do things later. For me the Great Recession hit a year out of college, and I got my first layoff after just 10 months in my first professional job. 2008-2012 was a struggle for both my wife and I. Her industry simply wasn’t hiring, and I was grateful to have a job with a 3 hour total commute time. In those days, I saw things like company pension programs shut down right before I hit my first vested year. Year end reviews with no raises, despite high marks. “You did great this year, but the company is in the red”. Things turned around in 2012, where I found a better job, closer to home and things are much better now. My story is fairly typical in my circle of friends of older Millennials.
Landlord, thanks for being the voice of reason here. It is refreshing to hear someone who doesn’t generalize based on what they’re told about a very small sample of a certain demographic. As a 29 year old, I cannot agree more with what you said. I am engaged, currently own my third house (debt free in 4 more years) and work for a mid-sized midwest law firm. All of my friends are in similar situations: married or soon-to-be, parents or soon-to-be, owning SFRs or looking to buy right now, buying boats, motorcycles, etc. It took millenials a bit longer to get there, but really we aren’t much different than our parents. My only contention, and this is just personal observation, is that we do value experiences moreso than material goods. Most of my disposable income is spent on travel, not expensive toys/gadgets, which end up breaking and depreciating more than they actually get used.
Well said Doc!
“Developers would knock down single family blocks and build New York style skyscrapers given current rents. But no, people want to keep their crap shacks and will fight tooth and nail since they got theirs. Not a free market at all.”
100 years ago, most of Orange County was owned by just a handful of family owned ranches. They sold out, and most of it was developed in the the crap shacks that currently occupy the space. Now it is time for the next evolution.
Eminent domain for enrichment of developers is not “free market”. It’s crony capitalism at its worst. I remember Mr Zuckerberg offering neighbors large sums of money for the houses they owned so he could consolidate them into his property. And as I recall the money talked pretty well. If someone offered me enough money for my Orange Co tract house, I’d give them a listen. Meanwhile, I can’t afford to leave at the current value.
Skyscrapers and eminent domain aren’t necessary. Accessory units and 4-plexes in most of the SFH lots would provide *plenty* of housing to bring the prices down, but they are not currently allowed.
Raising kids in an apartment is child abuse.
Raising a child in an apt. is child abuse? Oh, please. Only in the United States, a country of people who’ve never really adapted to urban life and don’t know how to behave with civility in densely populated places, do you see this attitude. Millions of European and a respectable number of middle, upper-middle, and upper-class people live in apartments happily and raise their kids in them.
As one whose family lived in a large apartment in my childhood, and who has lived in them by preference as an adult, I can state that I’d rather be raised in a nice apartment than in a substandard house. When I was a teen, my friends who lived in houses envied us our nice place, and their parents were not-so-secretly envious of my mother’s freedom from yard work and other intense maintenance.
WOW. This is HIGHLY offensive to thousands of families in SoCal who have no choice but to live in apartments right now, including my own. We have kids in private school because our district is subpar, and can’t afford a house in our area at current prices. You wouldn’t want to buy a $950k 2 bedroom house either that’s smaller than your apartment and needs a full gut job. Like countless other families, we are waiting for prices to come down, which they will. Shame on you for using the words child abuse and apartment living in the same sentence! Such an ugly choice of words, and I don’t care if you’re being “sarcastic” – this is simply unacceptable. This is the first time I’ve ever commented in years of reading this blog because I’m disgusted by your comment. It’s very easy to have a cavalier attitude like yours when you are not, in fact, a lifelong CA resident dealing with the traumatic state of real estate in your home state. Shame on you. Zero respect for people like you who hide behind their computers and spew their BS all over the internet. Have a nice day.
Landlord is a troll who does not live in CA or vested here in any capacity. He is a racist from the armpit of WA- Spokane WA. He comes on here to talk crap but he lives in one of the most crime ridden areas in the country, worse than Detroit. And there’s only white folk up there so he can’t blame the dirty immigrants.
We have a few families with young kids who live in my fine old Chicago condo building. I believe these are very privileged kids- they’re growing up in an architectural masterpiece of extraordinary beauty, with a huge indoor pool that is used year-round, a beautiful children’s playroom, an “adult” playroom with a little library they can use when they’re older, a nice neighborhood with plenty of public transit so they don’t need cars, and lots of urban amenity, including beautiful parks, Chicago’s northern-most beaches that are quiet and uncrowded, nearby or within easy reach of the el or the buses. Plus about 70 or so indulgent adults on the premises. We like the kids here.
The only thing that’s more difficult for them is that they’re required to have manners- no running in the corridor, no horseplay, no toys and bikes and such in the common areas outside the playroom. Clean up after yourself and don’t make noise. The kids in this building are very quiet, well-supervised, and well-behaved, and I suppose a lot of Americans these days think that requiring them to be so, is a form of child abuse.
I guess that means Landlords should only rent Singles or Seniors? Great thinking.
What LA Girl said. How dare you accuse me of abusing my children because I am unwilling to spend $950K on a sub standard home in LA! My children are happy, healthy and enroled in private school. They are expert skiiers and have traveled the world. We live in a lovely 1,100 foot apartment in a beautiful area and I remind them – and myself – every day how blessed we are to have so much.
I am a legal immigrant who rus my own company (which is unique to LA) but have only been getting well established the last few years since house prices have skyrocketed. This is also my first time commenting because I feel genuine rage at seeing a hateful accusation like “child abuse” directed towards parents like myself who are striving and exhausting themselves every day to make sure their children are safe, loved and secure.
I will never read one of your coments the same way again. You owe me and many others an apology.
Arrogant and patronizing statement by a hater/troll who hates Ca.
You give landlords a bad name.
Great article Doc! Best in years. The stench is definitely creeping here in the OC, and I don’t mean the increasing number of bums.
It is called increasing wealth inequality. More wealth in the hands of the few while the poorest grow in numbers and desperation.
If you have a fasttrack transponder and private parking at your business you never have to see the story on the streets.
Sounds a lot like the movie ‘Hunger Games’, no?
My Wife saw a sick looking old homeless guy outside a strip mall she was shopping at, and he looked so sick she and another person both offered him help. He was very polite and at first said no thanks, but gave in when they insisted. She didn’t ask him his story so I have no idea how he wound up there. A more common thing in middle income Orange Co. neighborhoods is former residents living in parked vehicles in their old neighborhoods (which I have seen). e.g. Children of old time residents who grew up there.
California is in decay. Wait for further misery if you stay.
California is now the 5th largest economy in the world. If that’s what you call decay, then I’ll take it.
Yea but millennials still don’t buy houses. Once we get the 55-75% drop millennials will get off the couch and look at open houses.
Being homeless in LA seems to be a better deal than being homeless in Nebraska or Ohio or New Mexico or Montana or South Dakota. As long as California “socially subsidizes” these other states and pays for basic rock bottom services of a homeless person coming from any other state without billing that state for the cost of services and using that money to house them, train them, educate or send them on their way back to where they came from. The warm weather and the job prospects in high tech sectors (even though out of reach for most folks in that spectrum) will continue to attract anyone seeing the lifestyle in CA on social media until they are broke and homeless and on the streets of CA.
People are free to move across US. No state can bill another state for people moving over, regardless of the reason. A state does not own the people – people are not the property of the state. So, what you propose is illegal and does not work.
No, what he is doing is seeding fake news that California “socially subsidizes†other states. When California starts billing Mexico for their citizens living in the state, we can then address the moronic suggestion that other states are responsible for their former residents.
Lordt,
They are not going to bill Mexico. They want all the people from Mexico and Central America to come and live in CA. Otherwise how can you explain the sanctuary cities/state and governor Brown stance on immigration to frustrate Trump implementation of existing laws and LEO activity in CA?!!???….The governor and the democrats supporting him in his insanity do not care about the cost associated with this position because it is paid for by the middle class. They don’t suffer any consequences and the ONLY consequences they care is at the election time. With a super majority they don’t even care about the elections – they can ask all the illegals to vote for them.
They should. Everybody has a Home-state and Resident-state. Otherwise States start shipping homeless around in Greyhounds, which they do by the way.
I don’t have the inclination or power to get that information out of people out on the street, but the ones where I knew about the case were mostly locals with vehicles as their last redoubt.
No walls!
I’ve had a lot of interaction with the homeless through my church part of the problem is that a large percentage of homeless people don’t want shelter because it comes with rules and regulations that inhibit their drug and alcohol use. There certainly are some people that want and need shelter and can’t afford it but there is a large percentage of people that with addiction or mental health issues that want to stay in camps or on the street. Unfortunately the mild weather, lax enforcement of homeless encampments and many resources available to the homeless make California and Los Angeles extremely desirable places to stay. I don’t know what the answer is it’s an extremely difficult issue. Due to mainly housing prices and the general difficulty of living in California my husband and I will be leaving in a few years as soon as he retires. California is such a beautiful state but they continue to raise taxes to ridiculous levels and pass legislation that seems to only help the very rich or the very poor leaving the middle class in an unsustainable situation.
Mary, you hit all the issues of homelessness, i.e. mental health, drugs, mild weather, lax enforcement and many resources available to the homeless in California/Los Angeles. LA mayor Garcetti is way out of touch with the crisis, and yet he wants to run for President in 2020!?
In LA, we also pay our own homeless tax, as a sales tax, in addition to the State Homeless Property tax.
LA, LA, LAnd.
Not In My Back Yard? what a minute, I can make money In My Back Yard?
Someday LA will be like the scene in the movie District 9. shanty towns everywhere.
“People are looking at what they can do to make our neighborhoods more affordable and help more Angelenos find stable places to live,” Garcetti said. “That’s why [backyard units] are attracting so much interest — they’re a relatively low-cost way for homeowners to play a big part in expanding our city’s housing stock, and make some extra money while they’re at it.”
http://www.latimes.com/local/lanow/la-me-ln-homeless-tiny-house-20180411-story.html
For decades Santa Monica/Venice was known as ‘home of the homeless’. Now I see it everywhere I look in the Valley. I even saw an old friend sleeping at Warner Park. it’s like Grapes of Wrath. Sad.
Very good point, Jed.
And do you know who got elected President for 16 years during the Grapes of Wrath era?
FDR was elected for 16 years. FDR was far more Socialist than Bernie.
2020 will be interesting.
So, the solution to the problems created by central power globalists (the low interest from the FED) is to double down and elect even more central power globalist – Bernie (a communist/socialist/collectivist) – that would surely solve everything or rather create a new Venezuela.
If you inherit wealth and the credit card balance is zero (or no significant debt) you can afford to be foolish for a while till the time comes to pay. The Great Depression (if you study real history) was also caused by the FED and like you say people naive as they are also today thought that electing another globalist to concentrated more power in the hands of Wall Street would solve their problems. It looks that after more than half a century of federal power concentration they did not become more wealthy, or more independent or more free.
The government is the problem, it is not the solution, it is not your friend and they exist ONLY to enrich their cronies regardless if they have a “D” or and “R” after their name. You must be a government shill to dream about Bernie.
Mr Flyover,
I respect your opinion and your experience in Eastern Europe.
However, do you understand why the Socialist FDR was elected in the US and why the communists took control in Eastern Europe, Cuba, Vietnam, Central America?
The majority of people were dirt poor, many homeless, and starving.
To the point of the good Dr’s article, what can be done for these people before they vote in a Socialist or Communist President?
It is in our best interest to help them or we may be doomed.
Free market capitalism has helped more people rise out of poverty in 1 day than communism has done in 100 years. Communism has never worked. It has never been close to working. Everywhere it was tried it failed miserably with hundreds of millions of people imprisoned, tortured and killed along the way.
And yet for some insane reason, a good percent of Americans still want to give it a try here. Cuz THIS TIME it will be different.
Surge and SoCal Guy,
Why so triggered when I posed a question and stated some facts?!!.. Afraid that I give too much food for thought to others???!!!!….Why “crazy” if I state a FACT? I was commenting on another comment related to Hollywood. If I was wrong, tell me how many white movie directors are in Hollywood? I know of one, but I can be wrong and I will take correction. If this is fake news or FACT, I will humbly take full correction. Personally I don’t see too much DIVERSITY among the movie directors who SAY they promote DIVERSITY. Am I wrong on this statement, too? Personally I do not care about the Hollywood culture – I don’t even have a TV. I can have better use of my time.
In terms of DUI, I don’t deny it – it was bad and I don’t agree with that behavior. I never agreed with substance abuse of any kind. What surprises me is that he was singled out in a field where most drink and drive. And if you are cornered and attacked from all sides why are you surprised that he screamed at those attacking him. While he was wrong, I can see why he reacted the way he did under the circumstances. He was trapped and he was exposed; however, in the process the attackers were also exposed.
Flyover,
The only fact here is you know absolutely nothing about Hollywood. No one chased out Mel Gibson because he’s white (or other white directors) Mel also plead guilty for beating the $h1t out of his baby’s mother. Do you sympathize with that also? Or is just being anti-Semitic ok with you? I know you love zero hedge crap.
It’s no secret that Jews are prevalent in Hollywood. The executive producers are the people with the money who finance the films. It’s probably not a good idea to piss them off with comments of hate and then expect their backing.
No bucks, no Buck Rodgers.
I have several friends in Hollywood including producers, directors, writers, editors, etc.
https://www.google.com/amp/s/moneyish.com/ish/the-pool-of-hollywood-film-directors-is-still-alarmingly-white-and-male/amp/
https://www.hollywoodreporter.com/news/feature-film-directors-overwhelmingly-are-847331
SoCal Guy, on this it looks that we are on the same page. We agree on everything. Like I said, I don’t agree with anything Mel did and I don’t want to make any excuse for something which is inexcusable. I don’t condone anything he did; not like the other ones in Hollywood were saints. We just had a big exposure for Weinstein and I am sure he is not the only one. Sooner or later they all expose themselves.
Then you went ahead and named a nail a nail because it was a nail. Thank you for that. I appreciate honesty and freedom of speech. That is public info with or without Zerohedge. While I read some articles once in a while on Zerohedge, that does not mean that I agree with everything on Zerohedge. As much as I detest CNN, HuffPost, WA Post and NY Times because they insult the intelligence of their readers, once in a while I read some articles there, too. I read from a wide spectrum and on some publications more often than on others.
I really like the blog and love the comments. We finally bought after renting for a few years. Our home is new construction in the Monterey Bay area close to Monterey.
Our 3/3 1,900 sf. townhome has appreciated better than 15% since we bought in May 2017.
We are on the periphery of the real estate madness in Silicon Valley. a few commute from here but this enclave is attracting retirees and local business persons that prefer new construction.
Maybe a bust is coming but in the meantime we’re printing equity.
What did you pay for it?
Lmao! Printing equity!!
Yeah that was funny lol
Interesting pilot program in unincorporated areas of Los Angeles County to help house the homeless while helping you pay for your backyard guest house:
http://planning.lacounty.gov/secondunitpilot
Freddie Mac Launches “3% Down” Mortgage With No Income Restrictions
https://www.zerohedge.com/news/2018-04-28/freddie-mac-launches-3-down-mortgage-no-income-restrictions
Here we go again!
This program has been offered by Fannie Mae (freddie’s sister) for a couple of years now; so this is nothing new.
Max loan amount is around 450k; so, it’s at the bottom end of the property price spectrum.
“Here we go again!”
I posted this in the previous thread but I should probably do it again.
In short, I can see why this “Tyler Durden” hides behind a pseudonym.
The claim that you don’t need income to qualify for a loan with this program is a complete fabrication by the author. He took the term “no income restrictions”, which in this case refers to income limits of the borrower (i.e., the most they can make and still qualify for the program) and is attempting to pass it off as “no income required”. The ACTUAL news (and the whole point of the Freddie Mac press release) is that this program now enables many people who previously made too much money to qualify to now get into a low down payment mortgage.
However, as Dan pointed out, Fannie Mae already had something similar, so those people already had other avenues for financing. And they still must meet minimum income requirements.
If anyone ever had the slightest suspicion that zerohedge is not a reliable source, this is proof positive that they are willing to lie for page views. Either that or reading comprehension (of the press release) is at an all-time low for them. Take your pick, but it sure ain’t journalism.
John D, exactly!
What I really hate with some many posters on here is that they are headline grabbers and use these baseless articles as evidence the bubble is her or has popped; without actually looking through the content.
This zerohedge piece is exhibit A and all the 500 fico score sub-prime articles posted here in the past 3 weeks is exhibit B. I know these programs inside and out as someone in the industry, yet, when I delve into the details and peel back the blinders; I hear crickets.
As I have said many times; you cannot compare today’s loan programs to last decades pure and simple. It’s a different ball game as everything is based on Dodd-Frank and regulated to death.
If we want to debate a “crash” or bubble bursting due to:
Foreign hot money drying up
Low rates which are now increasing
Recessionary numbers
Etc…..
That is fine, I like debate and trying to absorb the info and think of it from all angles; but, I hate when someone posts a lending article and then screams “see, sub-prime is back which signals bubble” without actually examining the details.
In this case, you are correct they removed income restrictions as previously there were MAXIMUM income limits as it was geared towards lower income buyers. That is measured by census tract and you still need to qualify via credit, income, debts, etc……
I saw that Zero Hedge article. Thank goodness the economy is strong, we’ll never have another recession, and experts know that housing prices won’t ever fall again! Otherwise asking 3% down at the top of another bubble would be pretty foolish. How could the economy tank or housing collapse again since we discovered that printing money solves all our problems? By the way, I hadn’t checked this in awhile, but out of curiosity I googled what margin debt was like in the stock market. I recall buying a lot of stocks on margin from the tech bubble up until the housing bubble, but haven’t bought anything on margin in years. Margin debt is at it’s highest.
https://www.advisorperspectives.com/dshort/updates/2018/04/27/margin-debt-and-the-market
“pretend it is some sort of free market capitalism”
That’s been my argument with all this nonsense. The government has been bailing out RE for the last 17 years or more. And money laundering is the other side of the manipulation.
and Karin I give it 4-5 more posts before the you know who shows up and tells you that both of you making $5302 a month proves that housing is totally affordable and “worth every penny and more”. I’ve said many times that I don’t know anyone who can afford a house in socal …… followed with the typical “that’s your fault” and “find new friends” since, as we know, everyone on the internet makes at least $250K or more.
Here i come…. You know you can buy home in Southern Cal for 400k. (North East San Diego for instance)You can buy a condo in nice area starting at 400k . If you do not know anyone who can afford a 400k home…What do you want, homes to be 100k?
He’s right, you can buy either a 400K piece of crap in an alright neighborhood or a 400K meh house in a neighborhood far from where most people want to live.
400k condo yes
400k home? that will be a rough area
My Daughter and her boyfriend saved $100K after college and bought the dip when they married (but before it bottomed). They rode it out, and with our help bought a bigger place and sold theirs for more as the prices went up back in 2013. California families have to stick together and sacrifice to survive in this environment.
Yeah, let’s see how they “survive” when they are a tiny white minority in a sea of hispanics and other non-whites. California is a failed state. It doesn’t even have borders. It’s a third world country where 1 in 4 school kids is white. What future do those kids have when they are a minority in a classroom full of foreigners for who English is a second language and they’re being taught that white people are evil because of slavery and the holocaust.
Subjecting children to life in California is abuse. Get out of California while you can.
I love when people ask “who can afford these prices”? Well obviously someone can otherwise the prices would be lower. You guys always act as if there’s some grand conspiracy by THE MAN to keep you from owning a home. I hate to spoil the ending here, but there really isn’t. It’s basic supply and demand.
You guys also act like there’s some constitutional right for everyone to own a home in SoCal less than a mile from the beach. Hint: there isn’t.
You have two options:
1. Figure out a way to earn more money to buy the house you want
2. Move somewhere cheaper.
Instead you’ve chose #3: Whine 24/7 about how unfair the world is. It’s kinda pathetic.
Another question I have is how is Karin, with 30 years experience, earning only $60K a year as civil engineer? I looked it up and according t BLS the median salary for a civil engineer is $83K. That’s nationwide, which means in SF that has to be $100K easy.
https://money.usnews.com/careers/best-jobs/civil-engineer/salary
Pathetic? Maybe, but can you explain what you add to the economy and our country? Maybe you give generously or have served as a veteran or assist families in finding affordable shelter? Maybe… Fact: over charging a fellow American for a basic necessity IS pathetic Mr, SlumDumbLord…nothing but a small middle man
Mr. Landlord~
Mr. Landlord~
There’s no ‘reply’ button on your question below, so I’ll answer it here. The $5302/month is AFTER taxes and other deductions, and assuming a standard deduction. My annual salary was around $101,500. I can’t use my gross salary to pay my bills. It’s what’s left over that matters. In fact, in my post I mentioned that the $5302/month was after taxes and other deductions were taken out.
‘I love when people ask “who can afford these pricesâ€? Well obviously someone can otherwise the prices would be lower.’
Less people than you think. Many current homeowners could not afford to buy the house they live in at today prices. Taxes at current market prices would drown most of them.
JHK: You need to breathe amigi
JD: The price of something, be it a car, a house, a painting, is determined by what someone is willing to pay for it. At this time, there are people willing to pay outrageous prices for these homes. Someone is buying these house, which means some is willing to pay the price and someone can afford it.
As to people who bought before, yeah they can afford it since they now own a house that they can sell and buy another home with the proceeds.
Now a valid question might be “who in their right mind would WANT to pay these amounts?”. But that’s different than “who CAN pay these amounts?”.
“Many current homeowners could not afford to buy the house they live in at today prices”
I have said this here multiple times. I ask my home owner friends “which one of your kids could afford to buy the house you live in and EVERY SINGLE ONE says the same thing…….i couldn’t affords to buy the house i live in at current prices…….one guy said i couldn’t afford the taxes alone”
and there you have it folks, at some point reality will have to come into play and home prices will once again reflect the underlying income of the area.
and one other thing…….there’s only about 10 people that post on this blog…..mostly telling us how smart they are.
and lastly…..my industry must be full of losers. One of the companies I do a lot of work for was trying to hire another designer and this guys shows up with a masters in engineering and just out of college. The kid didn’t really know shit (there is a little test they give) but when asked what he wanted salary wise he wanted $80K……..the owner was talking about this in a meeting we were having some time after and laughed and said “I don’t even pay myself that much”. I always gross over $100K a year, sometimes by quite a bit and that is shit fucking money in socal.
JJHK III over charging a fellow American for a basic necessity IS pathetic Mr, SlumDumbLord
What do you know about what’s a “fair” rent amount? What do you know about a landlord’s expenses?
Property taxes, other government fees (sanitation, sewer, fire inspection, elevator inspection, etc.), liability insurance, property insurance, utilities, labor (onsite super, doormen, manger — most of whom are unionized in New York City), repairs, painting, accounting services, lawyer and court costs (to evict all the deadbeat tenants who live for months for free, while destroying the property).
The bluer the city — NYC, San Francisco, Berkley, Santa Monica — the more government imposed fees, inspections, and regulations, the ever harder they make it to pass these costs on to tenants, the higher the legal costs to evict them, the higher the cost of union labor to keep the building in good repair.
JHK III, I actually think you are greedy. Always want to underpay your fellow american landlord.
I continue to be entertained by Millennial and Mr Landlord, but I really need to point out the fake news they are spreading.
I am a late Boomer and I paid $9.95 for Avocado Toast at the Cheesecake Factory last week. It is NOT $14 as claimed by Millennial or $18 as claimed by Mr Landlord.
I just have to point out this fake news before it gets out of control.
If the news is fake or not it depends on the location, but that is besides the point and irrelevant to the subject of millennials. The toast is not THE cause for lack of downpayment for most millennials. It is just an emblem to describe the REAL cause – lack of financial discipline and no delayed gratification. Most can not or do not want to sacrifice today for a better tomorrow. I had to work hard on my millennial children to teach them the right course and explain to them why they have to live a certain way. I think I was successful at that.
They are few people who have the knowledge to manage money, who have financial discipline, who can delay gratification, who have a budget and a plan of action, who work hard and all in one. These type of people were always rare and that is the reason you always have fewer rich and most poor. The poor lack one or more of the above traits. Most of the millionaires are self made (more than 80%). Many children from rich families, if they don’t develop the above traits, very soon lose everything they inherit. For this reason the US has a very dynamic movement from one class to another, up or down. Yes, there are exception from this general trend with all the cronies from around Washington DC and Wall Street. They just steal till they get caught or lose the power; then it is over like for any thief.
I came to US with nothing and in few decades I am a multimillionaire. I saw many children from wealthy families lose everything when the dad was no longer in control (sick or died). I also saw people who came many years after me and today they have over 100 million dollars. The problem with me is that I am not a big risk taker and that is fine with me. I don’t need more money to make me happier. This way I can sleep better at night. I believe that the US still offers the most opportunities for people with the right traits, more so than any other country in the world. A good job is not necessary the best course to accumulate wealth. If you like it, that is different, but the business owners have the highest chance to wealth.
The real problem for Millennials is that housing costs about 5 times as much as it did 40 years ago but wages are the same. They are better at delayed gratification than other recent generations – lowest rate of teen pregnancy ever, 60-year lows in crime by youth, best educated in history, etc. – but no amount of delayed gratification allows you to buy a house which has a mortgage payment exceeding your take-home pay.
Fair Economist, I understand perfectly what you say. I used to live in CA in many cities. I realized that if I continue to live there I would never get ahead. I decided then, when prices were lower in Seattle (not as many jobs as today) to move. I found a so-so job and I moved. It was a fast growing city and my wealth increased with it. When the RE market matured, I moved again into another small fast growing city. My wealth increased again even more.
Sometimes, when you are a small fish in a big pond, it is better to move that swimming with the sharks. Everyone has the option of moving and there is ALWAYS a fast growing city on the map. If something does not work is pointless to fight hoping that the world is going to spin in the opposite direction. Of course, with every decision (moving or not moving) there are advantages and disadvantages. Everyone decides based on whatever bring them greater satisfaction (family, career, wealth, time with family, etc). Whatever you decide, you are the only one living with the consequences.
My decisions, for the most part were good and I don’t have any regrets. Today, I can live pretty much in any part of CA I want, but I’m very happy and content in my neck of the woods in flyover country.
Couldn’t have said it better myself. Financial self discipline, sacrifice, delayed gratification is the key to long term financial success. As you mentioned, few people have what it takes to forego all the shiny objects. Good life decisions also need to be made on the way. Hanging out with the wrong crowd, getting in trouble with the law, not being serious about meaningful education or job skills, having unplanned kids at very young ages all will seriously limit your success and lot in life.
I almost got laughed off the blog a few years ago when I had the gall to say saving for a socal downpayment likely takes a decade of sacrifice followed my signing up for a 30 year mortgage. The people who willing to do this will be rewarded. This is exactly why the poor greatly outnumber the wealthy. It’s not a hard concept to understand, but brutally difficult to live by.
Silly Boomer. The food at Cheesecake factory isn’t cool enough to be worthy of an instagram post, hence the half price on that avocado toast.
I make my own avacodo toast for $1.50 per slice, or a little less. More fun if I bake my own oat bread. There are many great variations you can make. Try it sometime.
Assuming sales tax and tip, you’re $9.95 avocado toast actually was:
$9.95 – Avocado toast
$0.90 – Sales tax (assuming 9% tax)
$2.17 – tip
TOTAL: $13.02
SLIGHTLY fake news, but not quite.
😉
Bob, the reason why landlord keeps bringing up avocado toasts and millennials is articles like this one:
http://money.cnn.com/2017/05/15/news/millennials-home-buying-avocado-toast/index.html
I never claimed an avocado toast costs 14. Just re-read what i wrote. I am confident you will get it the second time you read it. If you are still confused I am happy to help. I continue to make fun of boomers who try to make millennials look bad. These boomers are upset that younger generations don’t make the same mistake as previous generations(buy overpriced houses and believe the lies that if you don’t buy now you will be priced out forever)
As far as avocado toasts goes. I like them. I buy avocados at Aldi for 29 cents a piece. The bread I buy there is 2.25 (six slices). If you buy an avocado toast in San Francisco it’s 5-7 dollars.
Even if an avocado toast would be 20 bucks and all millennials would stop buying it they will still not get the 200k downpayment together to buy an overpriced crapshack.
Millennials don’t buy houses but every year we hear this is the year when millennials will go out and buy in droves. I do agree with you. This blog is highly entertaining.
It also shows how frustrated RE cheerleaders are now. They come up with the most nonsensical stuff. Just a year ago we heard interest rates all never go up again in our lifetimes. Cheerleaders like old Johnny boy like to deny it. It’s all good.
“before it gets out of control”
it’s been out of control for a long time. everyone lies………I don’t and never have BUT it seems those most prone to lie cheat and steal come out further ahead. That’s been my experience so don’t get all triggered…..like the friends that lived mortgage free for 48 months……like the the other “friend” that was the biggest liberal ever who BK’d on $100K of shit he put in his girlfriends name so he could keep it all.
it seems to me that our economy isn’t capitalism or socialism it more akin to swindelism………I have said this for decades……”i’ll never be rich because i’m too willing to let everyone have their fair share”
lets face it. If you play by the rules you’re a fool. just look at the big banks they are paying fines up the wazoo for fraud and yet no one goes to jail ….it’s a fucking charade….maybe I shouldn’t post when in a bad mood…..
Hello Avocado Toast Lovers,
I also like Avocado Toast and I hope you are all as amused by the responses to this sub-thread.
I am happy to hear many Avocado Toast lovers have not found that their passion doesn’t interfere with home ownership. It should not.
Please continue to keep it light, and real. Life is short.
Thank you for this enjoyable sub-thread.
The homeless situation will never be resolved. The more we house for free the more that will show up with their hands out.
As for housing, up up up! SoCal is the new NYC when it comes to housing. And the prices here have ZERO signs of going down. Bookmark this post and come back in 10 years and the prices will likey be double what they are today!
Someone, please check my calculation:
With new tax laws, mortgage 750k@4% (30k interest/year), 23% bracket, no AMT, married
1) W/o Mortgage – you would just take 24k deduction (Since SALT is 10k only)
2) W Mortgage you would take 10k SALT + 30k Interest = 40k
Difference between the 2 is 16k worth of deductibility, which at 23% marginal rate is roughly $3900/year. This is how much back you would get for carrying a 750k mortgage. This is federal only. (State CA would be another ~10%).
Anyone sees any calculation error in it?
Thanks Surge, I look forward to the replies as I have been trying to wrap my head around these new laws.
Surge,
This is a good analysis for 2018 Federal taxes, In the case you specified, a taxpayer will still benefit by over $3000 in tax savings.
The difference between someone who owned a house in 2017 and 2018 is the 10K cap on taxes.
I know people who had 10K in property taxes, 20K in CA state tax and 1K in personal vehicle taxes in 2017. This allowed them to deduct 31K in taxes. With the 10K tax deduction cap, they will have 21K fewer deductions. and will effectively pay 5K more in Federal taxes this year. Ouch.
Thanks, Bob.
Yes, delta from 2017 to 2018 seems to be 5k. But hopefully this will be offset by overall lower taxes.
Can you also double check logic if under AMT.
Let’s say someone under AMT both 2017 and 2018.
In 2017, they will be able to deduct entire mortgage (since no standard deduction)
In 2018, they will also be able to deduct entire mortgage (since no standard deduction).
The only difference would be effective rate…2017 – 35%, 2018 – 26-28%
In both cases, you cannot deduct state taxes, so SALT restriction is a mute point
Also, if they deducted 31k before, they will be able to do at least 24k now(assuming married)
Thats only 7k differential or 1750k
This is what I’ve been saying. Once the 10K cap hits homeowners in high state income and property tax states like CA & NY in April of next year, when they actually see how little their write-offs are now worth, real estate is going to start descending, and it won’t be pretty. I’m holding out until then.
Karin is smart.
Karin: Once the 10K cap hits homeowners in high state income and property tax states like CA & NY in April of next year, when they actually see how little their write-offs are now worth, real estate is going to start descending,
Why do you imagine that homeowners won’t “actually see” the new tax law’s effect until next year? You can see ahead. Why do you imagine others can’t?
The effect on RE is happening now. I expect a small effect, on lower end homes.
But people who can afford $2 million plus homes near the beach aren’t going to be too swayed by a few thousand in tax increases. Much less those who can afford $3 or $4 million homes.
Millennial will never get his 70% discounted beach home.
I had to check after Surge’s comment and retract my statement above.
Here is a good site to use:
https://smartasset.com/taxes/california-tax-calculator#Ce8KmgRuYD
For the case I described above, if a married couple filing jointly made 280K (after deductions in 2017), their state income tax would be 20K. If they have a 10K per year property tax bill, their total deduction in 2017 would have been 30K. For 2018, their total deduct is capped at 10K so effectively they are only allowed to deduct 10K of this number and their effective adjusted income in 2018 will be 20K higher, or 300K.
If you enter the numbers for married filing jointly, in the form for 2017, at 280K, adjusted income, their total tax is : $91,656
If you add the 20K back in for 2018 (You cannot deduct over 10K) and enter 300K for the 2018 taxes the total tax amount will be: $89,440.
This was an error in my comment above. Even without being able to deduct the extra 20K, this taxpayer will still save about 2K in taxes under the new Trump brackets.
Based on this, even a person who has high state income and high property taxes will still pay less in taxes for 2018. I don’t see an affect on buying a house due to taxes.
However, renters who make 300K will see a higher deduction (24K (compared to 13K in 2017) for married filing jointly so their taxes will fall even further.
A Renter’s taxes 2017 for 300K income: $100,986
A Renter’s taxes 2018 for 300K income: $89,440
A renter who makes 300K will save $11K in taxes between 2017 and 2018.
The motivation to buy for tax purposes is definitely less.
Son of a landlord, you clearly don’t know any truly wealthy people. Truly wealthy people hate to overpay.
The fact that they have greater means to pay doesn’t mean they don’t mind pissing it away.
That said, I don’t draw the conclusion that real estate pricing in CA is going to dump but I’d bet you dollars to donuts there will be enough truly wealthy people that are going to make reallocations and factor the increased tax burden into their decision making. What that translates into for CA I have no idea but I’d bet a few more dollars that it will work to the greater advantage of low/no income/capital gains tax states.
Lordt B Son of a landlord, you clearly don’t know any truly wealthy people. Truly wealthy people hate to overpay.
If that were true, there wouldn’t be any truly wealthy people living in Los Angeles (or New York City or London).
Mansions that cost tens of millions in Bel Air can be had for only millions in Kentucky. For that matter, $60 million will only buy you a co-op in Manhattan: https://www.forbes.com/sites/morganbrennan/2012/04/18/manhattans-60-million-home-will-be-the-most-expensive-co-op-sale-ever/#43185618221f
Yet the truly wealthy are willing to “overpay” to live in Bel Air or Manhattan, rather than save by living in Kentucky or Nebraska. Because it’s not “overpaying” if you’re getting what you want.
Nobody who’s willing to “overpay” for a $60 million Manhattan co-op is going to suddenly change his plans and move to Mississippi to save a few million on taxes.
you are confusing “overpay” (and hence overpriced) with either:
a) You personally cannot afford it.
b) You can afford it, but it is not worth to you for that price.
99.9% for you it is A)
“Millennial will never get his 70% discounted beach home.â€
Whenever people use the word “forever†or “never†be careful….
Not long ago people on this blog people said interest rates will not go up in our lifetime ever again. When you mention that, some jokers respond and say that people never said that. It never happened. Like our good old John D.
Same applies to when people say “buy now or be priced out forever†or “we will never see a 55-75% dropâ€. They are right until they are not. Just wait and see and have the cash ready when it happens. I know I am prepared. Cash is king.
https://www.dailynews.com/2018/04/30/for-homeless-people-living-in-their-cars-southern-california-churches-temples-open-their-parking-lots/
They’ll try anything.
Getting soft under the veil of compassion isn’t what most of these people need. They need to know that greater society will not accept this as a lifestyle choice.
This way there are enough resources for those who truly fall into circumstances outside of their control. For example, the gal whose husband died of cancer could use a hand whereas an otherwise capable yet drugged-out 20 something is wasting potential.
There’s a culture of social and political permissibility that attracts these people to coastal California. It’s not just the weather and it sure as hell isn’t housing prices.
This is why you’ve gotta ask yourself serious questions about the value proposition of mortgaging into a state where such permissibility is resulting in attracting this sort of problem. The political establishment in California not only doesn’t seem to have the will to truly solve the problem, they’re doubling down on stoking the flames of victimization.
How many new taxes and fees will it take to bring about meaningful change to this place?
This is a good post.
I love and hate CA at the same time.
Compassionate? Yes. You gotta feel for a normal family that had a run of bad luck and are now on the streets or their car.
But; this parking lot will turn into a tent city in no time with lots of drug addicts, alcoholics and crime. It won’t end well…..
Too many people competing for too few resources, including housing, jobs that pay a livable wage and un-congested traffic.
Add to it an all encompassing social safety net – but only if you’re the right ethnicity – illegal immigration, ever greater taxes, regulations that make it increasingly impossible to do the least little thing, and a big-government hell bent on spending even greater monies for solutions that will only benefit cronies and make things worse.
That’s Blue State Coastal California for you.
Here’s what I said elsewhere about the surge in homelessness and the Mayor’s latest showboating of a “Solution”:
Most of the Street Homeless are some combination of the insane, alcoholics and drug addicts. Back in the 50’s and 60’s they would all be in State Hospitals. There’s your solution for the homeless problem right there.
And I say that knowing full well the history of those same hospitals, that were closed for a reason. You can easily cite the abuses of that system: the involuntary commitments for gain, the slippery slope of exactly what behaviour is defined as “insane” vs merely eccentric, and by whom. (Psychiatrists have a higher than background rate of suicides for example, calling into question their own sanity.) Still, with workable safeguards, it **is* a partial answer. Disagreeable? Yes, but any worse than the streets being an outdoor insane asylum?
(That being said, the State is already broke. And imagine the tidal-wave of lawsuits by the various “Advocates” who otherwise wouldn’t let these same people into their own houses and neighbourhoods. Virtue signaling rarely involves having actual skin in the game.)
As for the rest, the working homeless and the people who’ve just had plain old bad luck, that’s a lot harder. Wishing it so won’t make housing any cheaper, either now or in the next few years. And Governments rarely solve anything, instead making things worse while adding a whole new layer of bureaucracy that once in place never goes away. Instead, it comes down to offering real vs make-work jobs, jobs with a livable salary and a future vs the pittance of dribs and drabs that only serve to make the dispenser feel virtuous and smugly superior at the same time.
And that means companies big and small have to step up, meaning they have to get their own internal bureaucracies – HR do-nothings for example – out of the way. To commit to no longer hiring quasi-illegals and H1-Bs, and do away with their incentives and biases for age-discrimination (and unemployment) all together.
And that probably won’t happen, because it’s become too ingrained in too many corporate cultures. That, and it’s bad for the stockholders. Still though….
And that leaves us finally with the actual bums. The can work but they don’t want to. There are vagrancy laws a-many on the books. Enforce them. And, using the Bird-Feeder analogy, cut off the access to social services – another useless pretty much useless bureaucracy unless you’re an illegal – and like the yard without feeders they will at some point disappear. Maybe.
Are the above workable solutions? I don’t know. But I do know that a Government Program that hot-houses the problems in what will turn out to be overpriced sheds will not make the problem go away. Instead, it will only become far worse, and to the detriment of neighbourhoods and cities where they are located.
But hey, the Mayor and his cronies will get to virtue signal and claim that they’re “doing something.” (Albeit with your money and not theirs.)
Ain’t that swell?
Just a thought.
VicB3
L.A. crap shack for one mil has a way to go to match The City , with 1.5 mil. Nobody is forced to live on the street, they can move to Porkland OR or Seattle. California is a one party, the Democratic Party state. Complainers are secret Trump supporters. This is paradise, the good life. Of course, some people like the weather and CHOOSE to live on the streets without taking their meds, given out by HHS free of charge. They prefer the weed and etc. These are life choices people can make in a free democratic society.
If people don’t like it here, they can move to Texas or Nashville Tenn, the buckle of the Bible Belt.
Nashville is the bible belt? LOL!! I can tell you’ve never been to Nashville.
You are a typical liberal who has never strayed more than 20 miles from his home but thinks he’s “worldly” because he listens to NPR.
I’ve been to Nashville last Fall for more than a week. It doesn’t look like bible belt to me. It looks like a cosmopolitan city, clean and nice. It is the musical capital of US. Because of that it attracts lots of tourism.
Nashville is home to Vanderbilt University (famous medical center; ivy league university, one of the best in the world). Legendary country music venues include the Grand Ole Opry House, home of the famous “Grand Ole Opry†stage and radio show. The Country Music Hall of Fame and Museum and historic Ryman Auditorium are Downtown, featuring honky-tonks with live music and the Johnny Cash Museum, celebrating the singer’s life.
In my opinion, Nashville looks far better than LA, offers an excellent quality of life at a fraction of the cost from LA. Most jobs pay close to those in LA for similar experience and education. I wouldn’t mind living there, but I like where I live and I can live only in one place. I hope no one on this blog is from Nashville because they will curse me for leaving the cat out of the bag.
Nashville is nice as most non-coastal city. And I mean it. And I have visited it.
Problem with it, and it is defenitely highly subjective, it lacks global feel.
It would just feel small and too local after southern cal…just too small
If I ever moved there, I would no doubt like it but I would take a comfort in the fact that railroad station is only few steps away
Pribably the same feeling that makes people not living in Cali keep commenting about it
It can not happen to a nicer guy than Moonbeam:
http://www.foxnews.com/us/2018/05/02/homeless-man-breaks-into-california-governors-residence-says-hes-open-door-policy-kind-guy.html
Since he is all for “open doors and no fences” he got what he is preaching. It is all inclusive. That homeless man should invite all his buddies over to the governor’s mansion. That way Moonbeam will get a taste of his own medicine. So far ONLY the middle class in CA suffered the consequences of his idiotic policies. It would have been nice for him to have a bunch of minor children in the house like many middle class CA residents have…and the middle class people don’t even have security guards and Moonbeam wants to take all the guns away from the CA residents. By the time the police responds (if they are lucky to have a chance to place the call), the intruders are already gone or killed everyone in the house. But the “elites” in Sacramento do not care; the middle class in CA is disposable.
For the CA democrats with Moonbeam at the helm the agenda is – if you support an idiotic agenda, support it all the way regardless of the outcome. Pelosi should also give up her security and guns, open all doors on her house and eliminate the fences on her compound in the spirit of “open doors and no fences” she is preaching to the deplorables.
The AIDS Healthcare Foundation announced Monday that it has purchased a historic — and nearly unoccupied — downtown hotel as the next step in its initiative to provide affordable housing for homeless people. The foundation’s new homeless division will refurbish the King Edward Hotel on the edge of skid row and lease its 150 rooms at rates as low as $400 per month, President Michael Weinstein said.
http://www.latimes.com/local/lanow/la-me-ln-king-edward-hotel-purchase-20180430-story.html
I can’t even imagine what that place will look and smell like inside after a month.
Better get used to it. This is the result of the Third Worldization of America.
America used to be a WHITE nation. A nation established by anglos and built by further white imports who brought their strong work ethic, moral character based on Christianity and civilization from Europe. We’re not supposed to say that America was a white nation. We’re supposed to say it’s a nation of immigrants. Until 1965 it was WHITE immigrants.
We’ve had our racial pride and culture stripped from us by a group that dominates our media and Hollywood. Why do you think we can never have a movie about great white historical figures unless it’s something to make whites feel guilt like the holocaust or slavery? It’s because the media and Hollywood are not run by white people or Americans of European descent.
America is a captive nation. It wasn’t conquered by military force. It was conquered culturally and socially by an alien group.
If we do not turn it around we just become another third world sh*thole.
And a lot of non-whites brought here as slaves that supported the whites that owned them and, after the Civil War, took advantage of and suppressed them. Those good ol’ boys made it by themselves – yeh, right!
Actually Mr Cohen, you will find that many of the slave traders and slave owners were jewish. The vast majority of white Americans did not own any slaves and most white Americans have no history of owning slaves in their ancestry.
Jews and arabs have enslaved blacks and whites. Look up the Barbary slave trade.
Mel Gibson was the last white director in Hollywood. I wonder why was he attacked merciless and run out!!!!….For now, we see a cultural war, but it is getting hotter and hotter!….The massive illegal immigration and homelessness did not happened in a vacuum. It is a very complex situation and they are all related directly and indirectly. Only blind people don’t see it and only the stupid are not able to connect the dots. They don’t see it even you spell it out for them and connect all the dots for them.
Flyover – you are crazy. So are many commenters here. Just plain nuts. And I was trying to talk math-based examples here
Flyover,
Mel Gibson was at the Oscars last year and won some awards for Hacksaw Ridge.
Aside from that, making anti-semantic remarks in Hollywood will get you blacklisted.
“F—ing Jews … the Jews are responsible for all the wars in the world,” -Mel Gibson during DUI arrest.
If there’s anyone to blame for the 3rd Worldization of America it’s Ted Kennedy and his 1965 immigration bill. May he burn eternally in hell.
The number of people on unemployment is at the lowest level since 1973. That in itself is incredible. Now adjust for the population of 1973 and as a % of the population, we’re at the lowest level ever. While CNN is 24/7 Stormy Daniels, real America is too busy working to care.
Remember how all the “experts” in the MSM predicted a depression after Trump won? Ahhhh, good times man, good times.
It’s also why Trump’s approval rating has shot up to 44% (RCP Average) in the last couple of weeks. It always comes down to the economy as Bubba J Clinton’s alien looking advosr famously said…it’s the economy stupid. Economy does well, people like the prezzy. Economy tanks, they hate the prezzy. The rest of it, Stormy, Muller, etc is just noise to entertain the freaks on CNN and MSNBC.
This country wasn’t conquered by force? Native Americans would disagree.
I suppose you believe the world is flat.
All peoples have fought over territory. Native Americans fought brutal tribal battles long before the white man arrived.
European settlers built America. If they had not come to America it would still be an untamed land with scattered primitive Indian tribes.
Slaves did not build America. They were used on plantations by a few rich plantation owners and jewish clothing merchants who used slaves to pick the cotton for their clothing trade.
What kind of history do they teach you people?
Regardless of how evil you think white people are and how much self hatred you have if you are white it doesn’t change the fact that America is becoming a multicultural sh*thole and California is leading the way as a multicultural failed state.
It wasn’t taken by any force it was formed by force against England. It didn’t exist as a country when less advanced people occupied the land. The Indians were weak and lost the land get over it.
america wasn’t built by white people who brought strong work ethic, it was built by slaves who were exploited by white people. holy **** are you serious
All of America was buily by slaves? Even in CA that had no slaves.
It’s an idiotic statement to make in the first place. The slaves were just manual labor. They didn’t design anything, engineer anything. They provided brute strength. It’s like saying Elon Musk didn’t really build Tesla, the janitors cleaning up his office built Tesla.
But in post-Obama’s America everything white people did is evil, everything non-whites did is genius.
Could you quantify what the slaves built in America please? What exactly did they build? The last I looked my computer was not made of cotton.
The slaves did the tedious work while the more advanced people were busy building complexities that have much more to do with achieving the greatness of this country. You’re not fooling anybody.
This is some racist nonsense. Comedy!
I’m starting to see the light! All this fake news RE the housing market…someone please get ahold of greedy Danny Boy and Mr, Lucklord and tell them they’re right!
If we have this sort of homeless issue in the boom times, heaven help us when there’s a downturn. Don’t know when but nothing ever goes up in a straight line.
Lt, the boom times were only for about 10% of the population at the top and heavily tipped towards the 0.0001%. For the rest it was a continuing depression.
If use REAL inflation numbers for the adjustment of GDP, the GDP for a decade was negative – real economic contraction. That is what 90% of the people experienced. Why the CPI is altered? Because of COLA adjustments, in order to cap entitlement and mask the massive thievery by Wall Street.
Agreed. The so-called recovery has been lopsided due to financial engineering.
Many on this blog seem to think that homes in California are immune to the economics that other markets that other places in the US face. All I can say is to keep an open mind because change strikes when you least expect it.
My market has been hot but I sense a shift afoot.
REAL HOMES OF GENIUS
Hey Doc, its been a while since we have seen a ‘real homes of genius’.
How’s this:
Sold for $800K in 2005. (2005 was the height of ‘buy now or be priced out forever)
Sold for $585K in 2012. (2012 was the height of all-cash flippers)
Now you can purchase for a paltry $1M.
Not bad for a shady neighborhood!
Let the bidding war begin…
https://www.trulia.com/p/ca/los-angeles/1842-alsace-ave-los-angeles-ca-90019–1029114971
I live close to here. This is practically the ghetto. I really want to know what individual or family is okay with commiting to and living in this neighborhood, that had a job/income that allowed them to save 200k for a down payment, and are comfortable in job security to pay 5k per month for 30 years… I’m renting one mile away right now as I type this (in a slightly better area) and I constantly hear sirens and ghetto birds every fifteen minutes day and night. Not to mention the 24/7 major street sounds and random gun shots. Many people also rent out their garages in the area to poor people who love to “party†are get into loud dangerous sounding arguments. And the deranged homeless people that sleep on your streets or park their lice and roach ridden RVs in front of your house (luckily you no street restrictions) and thieves that randomly try to walk into your house in the middle of the day when just your wife and kid are home, oh, and how is the quality of those schools…
It is a generally shitty nabe but to be honest though, the location has good proximity to job centers and cultural opportunities (ethnic restaurants). This area will likely improve over time. It used to be much worse around there. That said, the house is cute but still a ripoff. Some of the things you mentioned like the ghetto birds, bums, and overcrowding effects are a fact of life in most of L.A. Those are the sort of quality of life things that make it a poor relative value to other cities.
The blue tarp on the adjacent garage – priceless
Someone tell Greedy Dan!!! He won’t make money if people don’t/can’t buy overpriced homes!!!
http://money.cnn.com/2018/05/02/investing/ge-subprime-mortgage-bankruptcy-wmc/index.html
I think you have some mental problems that need to be addressed.
In case you did not notice you posted an article regarding a company that went bust over 10 years ago and is now just filtering its way through the courts so what does this have to do with today’s market? Also what does it have to do with me? Greed? Sorry no that is not a very good description of me, if I was greedy I would work twice as much to make more money but I like my work and life balance with my family.
Lastly the increase in home prices is actually not good for my business, as I write loans that are primarily conventional FHA and VA. I do not compete in the jumbo Market Arena because that is dominated by the big Banks so actually lower prices would mean lower loan amounts which are more of my wheelhouse. So say it with me lower prices equals more business for Danny Boy. So please reenter reality and stop making stuff up because soon you’ll become a waste of time like millennial.
Really got in your head didn’t I?
Btw, remember when you told us about the upcoming pot boom in California and how it will skyrocket house prices in California? What happened with that? Is the pot boom about to start? Are we already in it? Will it happen next year or do we need more pot? Interested to hear a status update!
A similar article with the one published by the Doc. about homelessness in CA:
https://www.zerohedge.com/news/2018-05-03/crisis-cali-workers-face-buckets-feces-and-needles-homelessness-worsens
That article is correct. I worked for Caltrans for 30 years (just retired), and they don’t pay our field maintenance people enough to live on AT ALL. They’d be better off on welfare. For the new hires (all of them, including the engineers), Jerry Brown’s cut the benefits, specifically, the health insurance and pensions, down to the bone. My crop of engineers, that came in in the late 1980s, are currently retiring in droves, and they can’t replace us. I think our Hydraulics department lost 90% of its people. When I was putting out paving projects, they were starting to have us design the culverts.
So much hateful racism in this thread. There’s. No available housing because of greed. Just around the corner from me, the powers at be are tearing down an affordable 1920’s bungalow rental complex & cramming in multi million $ “garden†homes. So tearing down somewhat affordable housing to build housing for super rich Saudi, Russian & Chinese investors is going to solve the housing crisis? This is happening all over l. A. Life here is becoming hellish.
You imagine the former tenants are all going to immediately be living on the streets. They’re not. The vast majority are going to find other housing in more affordable areas.
“So tearing down somewhat affordable housing to build housing for super rich Saudi, Russian & Chinese investors is going to solve the housing crisis?”
Enforcing the law is going to solve the housing crisis. That isn’t currently being done in LA.
“Racism” is just a slur used by people with no arguments. There’s nothing hateful or racist that has been said in this thread. We’re talking about California being turned into a third world sh*thole by mass immigration and open borders that are radically and rapidly changing the demographics of the state for the worse. That’s why the taxes are so high. That’s why the freeways and roads are packed. That’s why most people are struggling to get by and can’t afford homes. That’s why everywhere you go it’s a gaggle of foreigners speaking in foreign tongues. Have you tried visiting any mall in Southern California? Does it look American to you?
With the die off of the boomers we will see white people as the tiny minority in California and they won’t be a welcome minority. The tide of color is even coming for the liberal elite white professors who have been pushing the anti-white anti-American liberal narrative for so long. Now the tide of color says there’s not enough diversity in university teaching roles. So they too will be purged.
The point is that 20 years from now California will be almost completely non-white. So think about what that will do to your property values.
LOL….the guy who whines about raaaaaaycism blames Chinese and Saudis.
my parents own a lot of property they picked up in 2011 and they’re never selling. negligible property taxes, cashfow positive, they’re just gonna put it in a trust at some point. house prices will hit a plateau soon just because there’s a lack of qualified suckers now. but i’d be surprised if they dropped either; no external force requiring anyone to sell.
wait for the next job loss recession. 2020 or they’ll pin it all on kanye 2024. either way we jave a ways to go, good luck to all
Wonder if 2024 will be Pence/Kanye or Kanye/Pence?
This happened when you have limited resources and try to accommodate unlimited people. If California can only accommodate no more than 30 millions of people to live and work here while there are 40 millions of people, you will have some legal resident as well as citizens who are at the bottom of the society forced to be out of job or habitats. It’s a simple math to me.
When all else fails yell racism loudly and you win. Everything JonnyOk and Mr. Landlord stated above regarding the history of slavery was 100% true. You have been brainwashed. Actually study some history research you morons. You are like the citizens of the film Idiocracy watering crops with Kool-aid.
Thank you Dr. Housing bubble for speaking the truth!
We have so much land to build but yet good people are left on the street. Liberalism at its finest. I do hope the renters and others can rise above the dwindling group of homeowners and push for more housing in the near future.
That Target on Sunset Blvd is a perfect example. It would provide jobs and basic necessities for the neighborhood but because it is a few feet too tall the thing has been deserted for years now. Looks like something that would happen in soviet russia!
Homelessness spike caused by:
1) Insane housing prices
2) Good weather
3) Lack of supportive mental services
No easy solutions.
You can hate all you want on CA; but, it doesn’t change the fact that there is an enormous amount of money and wealth here. More so than the entire UK:
http://www.sacbee.com/news/business/article210466514.html
California is now the world’s fifth-largest economy, according to data released Friday morning by the U.S. Department of Commerce. Its 2017 Gross State Product was $2.747 trillion, surpassing the United Kingdom’s $2.625 trillion Gross Domestic Product.
Oh wait a second, I’m confused. I was told by very smart people we should be more European. You know, higher taxes, “free” medical care, $10/gallon gas, unlimited immigration from the 3rd World. Just like the UK. And now you’re telling me, that socialist model doesn’t work after all?
Weird man.
That’s about as useful as pointing out that the fat guy craps more.
Nice try but nobody is being fooled by this. You must hope that people are going to read it and think golly gee the combined output of cramming a lot of people into a relatively large area totally makes all of the shitty problems we have no longer matter.
It’s just like repeating the weather is perfect lie as if that’s going to cover up the declining standard of living.
Here’s a truly meaningful comparison as an example of something that might actually matter – https://www.statista.com/statistics/248063/per-capita-us-real-gross-domestic-product-gdp-by-state/
Even GDP per capita is kind of useless though since it’s still an average. You have a few billionaires in a state and it totally skews the GDP per capita numbers. Californians love to talk about the income side, but they always forget the cost of living side. What good is earning $200K a year if a 2 bedroom apartment costs $4K a month? They sneer down at someone earning $75K in flyover, but forget that the same apartment costs $750/mo. And after taxes that $75K is $60K, while their $200K is $150K. So they make twice as much but have a cost of living 8 times as high.
Texas is the sweet spot. Its income is just a little below CA’s but it has no income tax (which is a 10% increase in pay vs CA) and its cost of living is significantly lower than CA as well. Relatively speaking Texas is much richer than California.
The liberals in CA never heard of PPP (purchase power parity). They just look at what they make total, before the taxes. By that criteria, those in Zimbabwe are richer because all are billionaires. What they buy with their incomes is irrelevant. In terms of purchasing power, after ALL taxes and fees, with the exception of a small percentage super rich, the vast majority in CA are poor like in a third world country. That is the sad reality.
How much you make means nothing. What counts is the purchasing power after ALL the taxes and fees.
Because of a small percentage of super wealthy, the average means nothing. If I do my average with Bill Gates, Bezos, Paul Allen, etc. all billionaires in my state, my wealth and income are impressive. In reality they are a million times richer than me, and I am not poor by US standards.
Why is this a local problem and not a state problem? Or Federal? Most of these people are chronically homeless. They won’t ever be able to take care of themselves. Why not move them to cheaper and less populated areas of the state and provide some kind of shelter and food for these people? Under the current system everyone loses. Homeowners have to deal with high mortgages and taxes while these people are ruining the quality of the areas they occupy. This is unacceptable. I’f you can’t take care of yourself I want to help but you don’t get to dictate the terms. Move them into less populated areas and help them
“Why not move them to cheaper and less populated areas of the state”
Because this isn’t a dictatorship where people are moved by the govt from one place to another against their will. And why should be people in less populated areas suffer because the people who run LA are idiots? What do you think happens when the homeless show up in Fresno or Barstow? They’ll still be homeless. You don’t really care about their well being you just want them out of sight and out of mind. Let the deplorables deal with them. Typical fascist leftist mentality.
Homelessness…. a tough problem that keeps getting worse. Causes of homelessness:
1) Obscene housing prices
2) No supportive mental services
3) Great weather enables outdoor living
Actual cause of homelessness
1) Substance addiction
2) Criminal behavior (dozens of felony convictions)
3) Mental Illness
Usually it’s some combination of all three.
Mostly true, with a few exceptions, and they mainly are the people with a RV /van/SUV/car who camp on a street or in a park. Its a lot cheaper than finding a room to rent. That the “homeless” issue is not linked to housing is something we should all agree on. You can see them all over America, not just out here.
4) Local liberal governments that encourage and even reward it
Only way to solve is that you need to take each one in and rehabilitate them. Clean them, heal them, train them, get them a job, and then check in on them. No one will take them in as they are concerned for their personal safety. The government will just have to step in and do it.
However a homeless person can not be forcibly removed from the streets and taken in for rehabilitation. They have the constitutional right to be homeless. As long as they are not committing crimes, they can live on the streets.
Giving them housing will not solve anything. The homeless will go back out to the streets. Each homeless person is a human being that needs to be taken care of.
Agreed on all, but you can still forcibly remove them from the streets/public places for violating city ordinances; and they do violate many of them. Any city government exists to keep order and implement the existing laws (like any government).
I’ve always wondered why every homeless person doesn’t go to California. For nothing else, you’d think people living outdoors year round would want to be in the best climate possible. If you’re homeless in Chicago or Detroit, just start walking towards LA. You’ll get there in a few months. It’s not like you have anything else to do with your time.
The answer is easy. Weather isn’t everything.
You might just find yourself in a burg that will be willing to give you a one way Greyhound therapy trip to the Golden State.
On the topic of the homeless, I thought this was interesting. How some cities are dealing with the homeless problem by putting them on a bus to other cities. https://www.theguardian.com/us-news/ng-interactive/2017/dec/20/bussed-out-america-moves-homeless-people-country-study
I hadn’t seen your post when I commented on Mr Landlord’s post. Glad to see some documentation of my attempt at humor.
“When the world is running down,
You make the best of what’s still aroundâ€
Sting
Wow, who’s the interior decorator on this item: https://www.redfin.com/CA/Los-Angeles/2796-Bottlebrush-Dr-90077/unit-7/home/6831905
No professional staging here.
I’ve guessing most of the value is in the acreage that house sits on. Because that wallpaper isn’t adding much value.
I think I had a seizure.
There has to be some kind of award for a house like that. Kitsch Palace of the Year or something like that.
A buyer might want to leave the place totally intact and run it as a museum of sorts and charge admission- a museum of bad taste. It’s really kind of amusing…and I don’t even want to think about removing all those ugly surfaces.
I wonder what would happen if all trash was not as easily accessible as it is now. What if all owners were required to put padlocks on all cans regardless of what you are disposing of.
What would the homeless do then?
Would they carry around bolt cutters to get into anything?
The point here is if you cut off the supply or create too many deterrents what is a homeless person to do then? Would they take up theft or something worse? Sometimes those handouts or acts of kindness are necessary to avoid other things we can’t imagine.
“What would the homeless do then?”
They would move on. This is already being done in conservative cities all over the country – where vagrancy, public defecation, and public drug use laws are actually enforced. Many homeless are inherently lazy. They don’t want to work, they don’t want to be clean and sober. I’ve met many of them (volunteered) and they’re proud of the lifestyle. If it takes too much work to get by in a city that doesn’t tolerate their behavior, they go somewhere else that does – like LA and the bay area.
In today’s world, if you can’t afford a home in a good location, then you need to do a few more years in college … get an advanced degree that is in demand. After you graduate, you will be able to afford that home. What you might think is a housing bubble is not. It could be you needing to upgrade your education. Plus, going to school is much more fun than working. Sounds like a win win to me. Return to school and have lots of fun. Then get that house.
https://www.cnbc.com/2018/02/15/heres-how-much-the-average-student-loan-borrower-owes-when-they-graduate.html
“These significant financial burdens are impacting the ways Americans save, spend and live their lives. The Federal Reserve Board of Washington, D.C. found that an increase in student debt has led to a decrease in home ownership. A study from NerdWallet predicts that students who graduated from college in 2015 will have to delay retirement until the age of 75, in part because of the increasing burden of student debt.”
You were saying JT….
This might be the most naive thing i’ve ever read.
Increasing your income with advanced degrees so you can afford that little beach house … you call that naive? What is your plan?
I’m not offering a plan, but you act as if higher education is free. Like it’s a cakewalk. I never agree with mr landlord who whines incessantly about liberals, but he’s right about your simplistic and naive statement. Might have been a good plan 30 years ago but not anymore.
Median income for a lawyer is $118K
Median income for someone with an MBA: $99K
BLS data, look it up for yourself.
‘Splain to me how $99-118K gets you a beach house in CA.
I’ll wait…..
I work for a major Fortune 100 company and sit on the new hire interview committee.
We could care less if candidate has a college degree. In fact a college degree *can* be a negative because much knowledge passed on is structured, out of date and basically useless.
We hire those who know how to think outside the box and can solve problems.
(Which, BTW are amazingly hard to find)
My advice: Save your self 4 or more years of expensive college and get a job early. A four year head start earning a salary – student loans will get you that house.
“We could care less if candidate has a college degree.” It’s couldn’t care less.
“because much knowledge passed on is structured” What?
A fortune 100 company has you doing the hiring? Sure dude.
Dumb asses are like trees, they are everywhere.
jt, how much fun school is depends on your degree. I got a civil engineering degree at Berkeley, which, btw, was so based on research and theory that what I learned was about 98% unusable in my chosen field. One of the happiest days of my life was the day I took my final final, and got my life back. Maybe school is fun if you have a soft degree like social studies or history, but what kind of job can you get with that? If I had to do it over again, I would have taken classes at the Owner Builder Center in Berkeley, learned how to fix up houses, and bought fixers sequentially. No school loans needed for that, and it’s a helluva lot more fun than studying Dynamics or Hydraulics.
HI Karin. I happened to do OK for myself. I went to engineering school and in my junior year, realized the thought of sitting all day with a calculator, blueprints and CAD systems (i graduated in 87) was going to be a disaster. I went to my counselors and explained that I realized I want to work with people, not numbers. They encouraged me to finish my degree and go work for a company as a ‘sales engineer’ (ie: many hi tec companies want their salesman to have engineering degrees). And it worked out well for me. Within 6 weeks of graduating, I landed a job as a sales engineer for one of Emerson Electric’s companies. From that job, I went on to be hired as a Technical Sales Mgr at another company, then a Regional Sales Mgr at another company and eventually started my own company in technical sales. The pay grade for a sales engineer was much lower than a design engineer for the first few years, but then after about 5 yrs, I was making more than the design engineers. my point is rather than abandon my engineering degree, I had counselors at Cal State LA who had enough real world experience to send me in a good direction.
This is part of the problem.
You did a wonderful and most useful degree of engineering
Did almost nothing with it, working for a government (which you love to criticize) is not as rewarding financially, but very good hours and good pension plan. It is useful work still, you should be proud of it.
And now you wish you were into flipping homes, because it is more profitable.
See, if you go to STEM classes now, it is 90% immigrants or children of immigrants.
Language barriers, cultural upbringing and etc drives immigrants into STEM. This is where the most value and productivity is (not sales engineering or home flippers, although these are also important segments of economy).
America is a wonderful country and still heavily rewards brains and initiative. It is not an aristocracy which rewards long term ties (although massive wealth accumulation creates a notion of that).
Sorry to criticize you, Karin and some folks on this forum, but you are very good at mapping your problems onto someone else – government, demographics map, solar panels, Feds, etc…
You just happen to like the area which a LOT of people like as well (for whatever reason), so it is competitive.
Surge~
Regarding the work I did, I would not have chosen civil engineering if I had been more aware of what it entailed. You can make a lot of money in private, but the hours are horrendous, and often there is extensive travel involved when projects are in different states. I worked in private my first two years and did a great job, but I was salaried (no overtime), my workweek was 90+ hours (15-hour work days, 6 days a week, and sometimes 7), and I was moved from state to state. Nearly my entire graduating class started at Caltrans, and I made fun of them for wasting their education on a government job. However, after two years in private, I quit and went to work for the State.
When I first started there, the work was interesting and I got to work with a lot of the old-timers, who were very willing to show me the ropes. I was very lucky to have had the opportunity to work with these guys. I particularly enjoyed working in construction. Unfortunately, in my eighth year I got stuck working for a boss from hell, and after a year of working under him I transferred to our district office to put out plans and estimates. I put out some huge projects, with very few change orders on them after they went out to construction (since I had years of construction experience and knew what was needed), but as time went on, we were buried under more and more paperwork and environmental hurdles. The bureaucracy involved honestly became well over 90% of the work, and sometimes caused cancellation of projects altogether, even after they had been worked on for a year or more. The waste of time the paperwork caused became overwhelming and completely nonsensical to me, so much so that I retired a few years earlier than I had planned to due to this and to my commute (120 miles roundtrip, which entailed from 4 to 6 hours on the road each working day). We could barely put anything out, which explains why the roads in California are in such bad shape despite all of the money our transportation department gets every year. I keep telling people that working there was like watching sausage being made.
As for the competitive housing market, I never wrote that I wasn’t going to buy another house here. All I wrote was that I didn’t want to buy one NOW. I explained earlier that I was planning to wait at least until April of next year, when the effects of the new tax laws hit homeowners in the pocketbook, due to the reduction in their write-offs in areas with high state and property taxes (like New York and California). Remember, I’m all about timing the market. And although I worked in a well-paid profession, by far most of my savings came from real estate, not earnings. So I get it.
I do agree with JT on the waiting part. During the biggest housing bubble in history you def do not want to buy when houses are overpriced. You get great value out of renting and saving and investing in crypto. I could easily buy now but want to wait for a nice crash so I can buy the house in all cash. All we need is a correction to 55-75% below today’s prices. Give it a couple more years. Until then you enjoy flexibility and a dirt cheap rental rate(compared to buying). Why waste your money by overpaying when there are much cheaper options(renting)?
“All we need is a correction to 55-75% below today’s prices. Give it a couple more years.”
So is it 55-75% off today’s prices, or the “today” back when you said the same thing last month? And the month before that? And last year? Is it 55-75% off today’s prices applied to a 2020 drop, or 55-75% off 2020 prices?
I am glad you asked! For those who don’t understand the sentence. Today means today.
So you’re unwilling or unable to answer the question – instead pretending that what you’re saying makes obvious sense, just because the alternative is admitting that you don’t understand your own writing.
I’ll put it as simply as I know how. 75% off $1m gives you a completely different number than 75% off $1.3m. Are you with me so far? That’s how much a coastal property could appreciate in 2 years. Here on Earth, your 75% off coastal properties will never happen without an economic catastrophe that would make 2008 look like ants ruining a picnic, and the 30% off that likely will happen could be after two more years of appreciation, making the drop more like 10% off today’s prices, except with higher interest and without the two years of principal payments you would have been making.
You’re not going to get the discount you think you are. “55-75% off” – I get a good chuckle every time you post it. Why not make it 60-80%? It was a nice even number back when you were saying “50-70%”. On second thought, don’t change. 55-75 is much funnier.
John,
I know that most (especially RE cheerleader) cannot agree with my prediction of a crash of 55-75%. It will happen without a doubt. You can deny it daily all you want. Just wait and see! Also, I am glad I entertain you. After all, that’s what it’s all about!
“…my prediction of a crash of 55-75%. It will happen without a doubt.”
If you have no doubt, there must be a reason for it, right? And simply saying “because houses are way overvalued” is not good enough. If you actually looked, which you won’t, but if you did, you would see that coastal properties dropped about 30% in the last crash. Whether you believe it or not, the current housing market is on more solid footing than it was then. Laws prevent the liar loans that infected the economy like a cancer the last time. Even if the next correction is just as bad as the last (it won’t be), the best discount you can hope for on the coast is 30%. That is why your “55-75%” is nothing more than comedy and wishful thinking.
55-75 % drop is a given. Just Have some patience. If you want to do some research, expand your horizon and look into reasons for the last crash. Hint: it wasn’t the liar loans.
This bubble is not much different at all. Wait, see and enjoy! Until then the question has to be “when moon .it means when does the next crypto bull run start!
“55-75 % drop is a given.”
You can’t provide a single data point that backs up your theory – not one good reason for such a correction. At the same time, you ignore all evidence to the contrary. Willfully ignorant with worthless opinions.
“If you want to do some research, expand your horizon and look into reasons for the last crash. Hint: it wasn’t the liar loans.”
You’re parroting talking points about the housing market from other (wrong) posters that agree with your theory, without actually doing your own research on the topic. Your claim that subprime loans didn’t cause the housing crisis is false. It was a massive contributor, but just one part of the puzzle. This claim in particular originated from conservative talking points blaming democrat government policies for the crisis, which the democrats fired back as “Fannie and Freddie didn’t cause the housing crisis,” which for some reason then morphed into “subprime didn’t cause the housing crisis”, because the press loves a controversial headline and because people like you love to repost anything that agrees with your baseless theories. The substance and truth behind it is that private lending institutions made most of the bad loans, not the government, and those bad loans – along with inflated appraisals, no underwriting oversight, and speculation – caused the crisis. If you had actually read anything at all on the topic, you would know that.
This reminds me of that stupid f*cking zerohedge article that claims mortgage lending standards no longer require a down payment, when nothing could be further from the truth.
And all that is ironic, considering you’ll spout this stuff even when it’s contradictory – “subprime didn’t cause the housing crisis,” while in the same thread posting a link to that zerohedge article saying “subprime is back.”
You do this to yourself, Millie. And it’s why no one can take you seriously.
* Correction – the zerohedge article claimed no income was required. Even worse.
John,
55-75% drop is my educated, conservative opinion.
You are entitled to have your own opinion.
It’s not my job to convince you. You can believe whatever you want. My promise is that I will share some details the minute I buy my first house.
Until we don’t see a nice collapse in home prices I don’t see a reason to buy. That was actually one of my reasons why I shared my strategy in the first place. To see if i am missing something. Over the years I have not found one reason why buying an overpriced home is a good idea. Everything points to a dramatic crash. Just wait and see and hate me until then 🙂
But you’re not educated. That’s my point.
The reason you catch so much heat from me is because you ignore data and can’t ever answer simple questions. Like where you imagine this 55-75% drop taking place, and why. If you really think it’s possible for that to happen on the coast:
Imagine a nice but not extravagant $2m house in El Segundo or Manhattan Beach. One that has never dropped more than 30% in a down market, in a perfectly manicured neighborhood dotted with mansions – not tract house McMansions, literal mansions – and great schools, with retired Northrup engineers, doctors, C-level execs, celebrities, and professional athletes as neighbors.
Considering the desirability and the median household income in an area like that, do you honestly think that property would drop all the way to $500k before someone snatched it up? A buyer with 10% down and $90-100k household income would qualify for it. There are millions of one and two-income households in so-Cal that make that much. A Costco manager and his waitress girlfriend would qualify, and make an offer, along with a sea of other lower-middle class people, and all would be instantly outbid by the people with real money.
List one of those for $500k in any market and you’d end up with hundreds of offers bidding it past 7 figures in the first hour, sight unseen. One of those 7-figure offers would be from the mansion owner next door who already sits on two lots and has spent years designing his dream garage, just itching to bulldoze that house.
Prices aren’t just determined by comps and location. It’s about the quality of connections and the wealth that is already there. It’s also not always about it being “a good idea.” Sometimes it’s just a home.
Not to sound like a broken record, but my brother-in-law bought on the coast in 2005 for $600k, close to the peak, which seemed really excessive at the time (back when I thought more like you). Comps are now at $1.6m, and his balance is $300k. Even if the value drops 30% tomorrow, he still nets $800k after the 13 years of principal he’s been paying on. Oh, and his payment is about $2k, while it would rent for $5k+.
The 20% down payment for that property came from a condo he sold in the same neighborhood, which he bought at the prior peak.
So tell me, was either purchase a mistake, since the whole point was having a place to live close to his job? Would it have been better for him to rent the whole time? Not by a long shot. In fact the difference is staggering.
He made a lot more than I did, and I bought in 2009. Location is everything.
Jt,
I disagree.
The road to wealth today is not through working hard for a wage that doesn’t keep up with housing inflation
The road to wealth today was to invest 100K in the stock market 15 years ago. You would have $1M today to invest in a cr*p shack.
If you had foresight, you would have invested the 100K in Apple and had $31M today.
The US doesn’t reward workers today for producing real metal products.
If you don’t make enough to save money and invest, you won’t make money.
A job that allows you to save is just the first baby step.
If you have done both, then you can afford a beach house.
This sounds cynical but it has been reality.
Degrees in business, engineering and other useful majors are definitely worth the money.
Degrees in gender studies, the equivalent of taking $150K cash and burning it.
Plus it also matters where you go. A degree from a top 30 school is worth exponentially more than a degree from Never Heard of it State U.
So to summarize: engineering degree from MIT…..worth the money. Gender Studies degree from Obscure College, save your money.
And then California decides to bail out Elon Musk and new homes to have expensive, inefficient solar panels or roofs. Driving up the cost of already expensive California housing by $25-30k.
Liberals
Monday: Housing is too expensive the govt must do something!!
Tuesday: Today we are imposing new regulations that make housing even more expensive
Wednesday: We need more govt to do something about expensive housing!!
That’s nothing. New houses built in California require interior sprinkler systems. They also must be checked annually and signed off on to make sure that the homeowner doesn’t disconnect them. So what happens if you burn something on the stove? Water can destroy more than fire can.
SPRINKLERS? In every house built?? As though getting new houses built weren’t difficult and expensive enough already?
As usual, idiots tremble in terror of the exceptional event, while being unconcerned about the very high risks they take daily. When someone died in a fire in one of Trump’s buildings a couple of weeks ago- a fire the late occupant caused by overloading electrical circuits- millions of people asked why the building didn’t have sprinklers. Never mind that only 3,362 people in the U.S. or 10 per MILLION population, died in home fires for the last year recorded- the number ranges from 3,000 per year to 3,600 per year….. vs the 33,000 per year who die in car wrecks, and the 500,000 or more every year who die from cancer and heart disease. Yet these stats do not keep people out of their cars, nor do they inspire people to eat healthier food and lose weight.
Here in Chicago, an ordinance to require all residential high rise buildings was defeated under pressure from landlords and condo associations, about a decade back. Most of the occupants of Chicago’s older high rises are moderate-to-middle income tenants and condo owners who would have been financially crushed by the cost of a retrofit, which ranges from $5,000 for very small apartments, up to $15,000 or more, easily, at least as much as a Space Pak air conditioning system, if not more. It was pointed out that since deaths in house fires are relatively rare, and deaths in high rise fires are EXTREMELY rare, that the affected residents would be in far greater danger from living on the streets or having to move to cheaper, inferior dwellings, than they were from fires.
“So what happens if you burn something on the stove? Water can destroy more than fire can.”
Sprinklers are set off from heat, not smoke, and one at a time, not all at once. I have them all over my house and I’m glad I do. It could mean the difference between a kitchen with water damage and losing the whole house to a fire.
These things never have anything to do with safety or saving the earf or whatever. It’s all about the money. Every house has to have solar panels. Who profits? Solar panel industry. Who gets donations from solar panel industry? Democrats. Same with sprinklers. Same Find a “safety” regulation and I’ll show people who became millionaires many times over once it was implemented, including politicians. And then the flip side of it is the inspector racket. You have to spend money to implement all this nonsense. Then a county inspector has to show up and give his approval. But that approval comes at another cost of course, the bribe. Or if not an outright bribe, the inspector says these 2 things are not up to code. And it just so happens that his brother in law runs a business that sells these two things and if you want, he can have is BIL here in 30 minutes to fix your code violations and you’re good to go.
You can live in cave, it is much much cheaper.
You do not understand few things about this life.
1. There will be technological progress. It will require extra expenditures, but will bring improvements in quality of life. See, how everyone of you complained about the cost, but nobody mentioned reduction in electric bill. (along with marginal improvement in greener technologies). 200 years ago there was no school tax, because there were no compulsory schools.
2. When you say Solar Industry is donating to California government -> it is true. But, no donation can overcome already build-in popular support for this measure. Donations will just accelerate political process. (in case of gun control, slow it down). No matter which political party/government/figure you support – they all receive donations from someone. You just pick moral component of it.
In 100 years, real estate became more expensive relative to the salary and taxes got higher.
But in return, people are living significantly longer, more educated, have much higher quality of life, etc…
Correlation does not equal causation, but you need to look back 100 years ago and people were bitching about added costs of compulsory schools, total vaccinations, etc..
Now is no different. Your timeframe is too short to understand how silly your notions are.
I know it all because 200 years ago.
100 will do for you
The Golden State may soon make history for its use of the sun–and for lacking common sense! The California Energy Commission will vote on a plan Wednesday to become the first state to require that solar panels be built into new homes, condos and apartment buildings from 2020 onward. Tomorrow we will know if California is as crazy as we think.
“Tomorrow will know if CA is as crazy as we think”
Gary, they are far more than you think. If the houses were expensive prior, wait till this new regulation will be added on top of thousand of other regulations. That will make houses cheaper!..Not.
Cost of solar panel add-on on sfr – 20k
Thats 100$/months morgaged, but your electric bill reduced.
Payout roughly 10years
Minimal impact
Pffft…what’s an extra $100/mo? After all housing in CA is so cheap already nobody will even notice, right? If solar were the financial windfall liberals claim it is, why would you need the govt to force people to do it? Hint: because it’s never a financial windfall. It’s a scam that enriches the solar industry that gives millions to Democrat politicians. See also electric cars (yeah I’m looking at you Elon Musk and your $5B in tax subsidies).
This is the same mentality you hear every year at election time. Vote YES for this new bond measure. It will only cost $8/mo for the average home owner, and isn’t $8/mo worth it for THE CHILDREN???? Yeah $8 for every $100K of assessed value. Which means on a $500K house it will cost $500/year. And this is on top of the other $500 increase last year which was on top of the $500 increase the year before and so on. It’s always for the children and always “just pennies a day for the average home owner”.
And then people wake up one day with $20K property tax bills and ask how did this happen, it was only supposed to be 25 cents a day for the children?
If $8/100k per year equals to $500 for $500k home for you, you need to go back to elementary school.
Out: Grammar Nazis
In: Arithmetic Nazis
Surge, he said $8 for every $100K of assessed value, using a $500K house as an example. That’s $40 ($8 x 5)/month x 12 months = $480. His math skills are fine. Your reading skills need some help, though.
Surge do need to work on his reading skills but I am afraid that’s not enough. Surge tried to tell us that there is rental parity in SoCal. His example was that paying 200k down and still paying 1500 more per month as a buyer compared to a renter is rental parity. Apparently, he doesn’t know what the word parity means I call this rental parody. In another instance he told us that your down payment somehow pulls in 10% profit and his explanation was 2*5 equals ten. He has mastered the RE cheerleader school.
I told him he would be the perfect real estate agent but he won’t listen to me.
I was off in the fact that I did not see /month. Apologies.
Millie – please stop clowning around. You know perfectly that rental parity does not exist as it is a function of a financing type. In your world of rental parity, people with 10/15year mortgages are stupid because they not at rental parity, but an ARM with low introductory rate will be a steal even at today’s prices. yes, it is a rental parody for you because your timeframe is around 1 day.
In the Nineties, Mayor Giuliani was credited with getting the homeless off the streets of Manhattan. The city’s biggest industry is tourism, so that was credited as a huge success by mot New Yorkers. People wonder where they went. One day my wife and I stopped in Far Rockaway while visiting Fort Tilden Park. The town was very big as a beach resort in the 1890’s and through the 1920’s. The real decline began when the average person could afford air conditioning and didn’t have to go to the beach for 2 weeks in August to escape the heat. The town turned into rows of shabby, semi-abandoned hotels. When I first drove down the tine main drag by the end of the LIRR line, I was amazed by the hundreds of weird characters walking around. Mentally ill men bundled up in winter coats on a 90 degree day, people talking to themselves and arguing with invisible people. Brown bag of booze in their hand, obviously drunk in public. Classic homeless. Then it clicked. Manhattan got rid of these people, and the hotels got Section 8 and other government programs to pack their previously empty buildings. And it’s all less than 30 minutes from Wall Street.
CNBC NEWS FLASH:
Homeowners are bullish on prices, while buyers may find there’s no inventory
https://www.cnbc.com/2018/05/08/more-americans-expect-home-prices-to-rise-over-the-next-year.html
Right now is a great time to buy (crypto).
Before the next bull cycle starts. Make a killing with crypto and buy houses when the housing bubble pops. You will be able to pick up a nice house 75% below today’s prices.
The two of you deserve each other.
said it 20 years ago; la is like nyc now except without the culture and with shittier people; all the tools from nocal are now down here destroying rents whilethey add value to ur lives with apps that recommend what outfit to wear! saving the world! adding exactly zero value to the already empty lives of people who need an app to dress themselves hahahahahahahahahahahahahaha late stage monopoly capitalism read as recovery summer! the worst of the worst!
What is the matter with these cities led by the radical left???!!!…
https://www.zerohedge.com/news/2018-05-07/seattle-becoming-city-hostile-middle-class
Now, even the liberals who voted in liberal politicians, run away. Now, even the liberals agree that liberalism is a mental disease. It looks that SoCal does not have a monopoly on homelessness; Seattle has one too. Seattle does not even have good climate. So, what attracts these homeless to these liberal cities? Not only the highly educate liberals can not stand them, even the ultra liberal Bezos from Amazon got fed up with the idiocy coming from their beloved liberal politicians. Everyone wants to flee. It can not happen to a better bunch. Those who don’t think ahead are going to feel the result of these idiotic policies on their own skin.
This world would be a better world if people would think ahead, step by step, through all the causes and effects. But liberals go by feelings not logic.
And those liberals move to their new city/state and vote for the same progressives that destroyed their previous home. That’s what makes liberalism a mental disease…..voting for the same policies over and over yet expecting different results each time.
That’s why I left Oakland. Virtue-signaling (yet wholly corrupt) politicians running the place into the ground.
It is the same in all liberal cities. Look at Chicago, soon to be bankrupt by pensions they can not pay. They promise to tax everyone to death to pay their political contributors, except, the people with money (at least those who made them) are not that stupid to stay still till Chicago mayor nationalize all private property via astronomical taxes – they are smart and leave.
Seattle in 1989 (that is almost 30 years ago) used to be a nice clean city with good traffic and bad weather. Not anymore. The idiotic policies in the last 2 decades will turn it into a sh__hole. You know it is getting bad when even the liberals can not stand it anymore.
Be honest. You left because of prices or because you like the other place better (50 miles away)
Has nothing to do with local politics
Surge, one of the reasons I like the other place (Sonoma County) better is because of the relative lack of politics and virtue-signaling. I’ve had diversity shoved down my throat ever since my family moved from Germany to Oakland in 1959, and I’m sick to death of it. Diversity means anyone but white people, and the East Bay has always treated white people with disdain…and it’s reached a frenzied pitch in the last few years. I refuse to live in a community like that anymore. In fact, I compiled a demographic profile of all counties in California, with racial and political profiles highlighted, just in case Sonoma County goes bad. If it goes the way of the East Bay, I am out of here, no question.
Meanwhile, California failed liberal policies have now caused them to be the 5th largest economy in the world?
“Failed” is such a relative term in Capitalism.
Correlation is not necessarily causation. A crusty old idiot who claims to be a wise owl that knows everything would know that already, right?
Sorry, Conservatives hate when I point that out. Some even start name-calling.
I then point out the great Conservative experiment in Kansas. We can all see what a disaster that is.
So much causation going on that it is hard to ignore.
You get a gigantic economy just from a large population, sea ports, and Fortune 100 companies. It has nothing to do with whether the state is successful, or whether it’s rapidly declining, which it is.
Just ignore the over $1 trillion of debt, and the part about rising crime due to violent prisoners being released prematurely. And then there’s the $100b train from nowhere to nowhere that democrats are still fighting to build in spite of running out of money and even while the feds are beginning an audit. Liberal metros have the worst pension crisis, the worst roads, the worst vagrancy problems, etc. We’re among the highest taxed while seeing the least benefits from those taxes. Extremely unfriendly to business. I would go into detail about a teachers’ union with more power than God yet with students near the bottom in the nation, but that only makes me angry.
There’s liberal, there’s conservative, and there’s common sense.
The worlds largest economy elected Trump. According to your GDP causation formula Conservatives are doing quite well.
Dear You also need a better argument,
People elected GW Bush and it took him 8 years to crash the economy so hard that Millennial’s dream of 50% off housing came true.
Just give Trump another 2 years to do the same.
For the low low price of $1M you too can live in Santa Monica and have bums at your local liberry.
https://www.usnews.com/news/healthiest-communities/articles/2018-05-09/in-santa-monica-california-a-haven-for-the-homeless-seeks-to-do-more
California has become the first state to require that new homes be built with solar panels. The rules go into place in 2020 and are part of the state’s ambitious efforts to cut greenhouse gas emissions. But these requirements also make it more expensive to build in a state where housing is already extremely expensive.
The additional $20,000 cost would add at least $120 a month buyer’s monthly home payment. And that assumes that the unit doesn’t require any maintenance over the years.
“And that assumes that the unit doesn’t require any maintenance over the years.”
Actually it does require quite a bit of maintenance and the energy produced is “dirty energy” not like the clean one from power companies. I talked to 3 electrical contractors, and they told me the same thing. They had decades of experience in both residential and commercial. None would use electrical panels on their homes. It is 100% politics. Look at Hawaii, who care so much about a cow fart polluting the environment and climate change and now they have astronomical amounts of CO2 and SO2 spewed into the atmosphere by the Volcano. Maybe they should start a new tax per gallon of Co2 spewed into atmosphere – you know, in the name of “climate change”. Or maybe that doesn’t count because it is “mother earth”, “mother nature ” and it is “organic CO2″….liberal insanity in display!….What are those corals going to do with all the acid raid and CO2???!!!…yes, it is all because of those tourists and people polluting. Since HI is always following CA, I wouldn’t be surprised to pass the same law to decrease the CO2 emission. Of course the volcano emissions do not count regardless if they are millions of times greater – always try to decrease the emission of the 0.000001% of the total to make a liberal “feel” good.
Flyover, can you explain what maintenance is required and how the power is dirty? This is news to me; and have no experience with solar panels.
In the 1980s, the Mission Viejo Co. built about 500 homes with solar panels in the City of Mission Viejo. Guess what happened? Over the years, ever single homeowners has removed their solar panels. If they really saved money, why did every one of those homeowners decide to discard those devices? Apparently, the cost of maintaining the panels was greater than the cost saving from using them.
Not to mention the fact that when your roof needs to be replaced, you also have to take down and probably replace your solar panels. Additionally, solar panels are made from materials that cannot be re-used. Where were the environmentalists when this new and onerous regulation was being considered?
Just more incentive to buy already built homes or move out of state.
these 2 are highly orthogonal proposal.
Who gives a shit. Solar panels should not influence whether you buy new or existing home or move out of state. It’s just so stupid
Surge~
A heck of a lot of people that lost their homes in the October fire last year (Sonoma County) cannot afford to rebuild because the new regulations add so much expense to the final cost. They thought they were fully covered, but were actually far from it, despite the addition on most policies of an additional 20% above their insured amount to accommodate any new building codes.
Personally, I would not buy a house with sprinklers in it, nor would I buy one with solar panels. When I look through the listings and see panels on a roof, I don’t even look at the rest of the house. Primarily because once the roof needs replacement, you also need to deal with the panels. Additionally, you have even more maintenance issues than you already have with a panel-free house. No thanks. I have better things to do with my time and my money. The simpler the house, the less to break down.
California has always been a boom and bust state. I’ve lived in West Los Angeles just 20 years and already seen ups and downs. My wife and I bought a place in 2001 and sold it in 2005 for double. We moved away, then moved back and decided not to buy because of personal uncertainty. Then, we didn’t buy because prices became crazy. I was regretting that decision up until last year, when I realized just how far the quality of life has deteriorated.
There are people camping all around my neighborhood. A homeless man took a dump in the street in front of my kids’ school. The streets are filled with potholes, people have packages and cars stolen, and the City of LA does nothing to help.
Meanwhile, I am in a very nice rental paying not much more than I’ve payed for the past 12 years. If my rent is raised, there are a hundred places available within 2 miles, and several hundred more units currently under construction in that same area.
The bigger question is why anybody would choose to invest long-term here. The government is unreliable. In the end, the state will be filled with either people who have nothing to lose, or people so rich they don’t care if they lose something.
I know what you mean. I lived in west LA for years and although it has always had a dingy weird side that I liked, I noticed in the last few years signs of disparity that in my mind don’t bode well for the foreseeable future. The place will always have great memories for me but I moved out of state last year because the value proposition for where I moved to was too compelling to pass up. For what it’s worth I was a white collar six figure tech earner and where I moved it seems like every 3rd person I meet is of a similar class also from California. I came back for my first visit a couple of months ago. It’s wild how after being gone from a place can reset one’s perspective. The increase in homelessness is really striking, no actually it’s shocking. It feels like a regression to the 80’s when the last time vagrancy was so high.
My friends and family still in the area don’t really seem to grasp the severity of the situation. I think package theft and stuff like that is also up in other cities but yeah, it’s not getting any better in LA. I don’t have any answers, I left.
Newport Beach is the answer. You can still get in for a little under 2M … just watch out that you don’t get right under the airport jet path.
Why would I spend $2,000,000 on a house? Nobody with that much money keeps them in the bank; they keep them invested. Why would I liquidate a $2,000,000 investing which produces $20,000/month? It doesn’t make any sense. With $20,000/mo I don’t even care about jobs – just quality of life.
Flyover, it’s obvious from the comments here that many of these people have very little perspective of how truly wealthy people operate. They think the new tax law changes are nothing to worry about in terms of keeping wealth in California. The comment from jm is how a high income earner maxing out leverage would think.
Lol.
You obviously do not know what AMT is
LOL You’re obviously not truly wealthy, nor have you ever been.
2 mil buys so little in Newport it’s laughable.
If you go out to a nearby city, you can spend 800-900k and get a huge house on a huge lot in a nice area. That’s a house you can enjoy with the family for life.
because they are sheeple…..S. California is full of them, thinking they know a lot but know very little…..It was great in the 70’s, alright in the 80’s and a big rathole ever since….
I rarely visit my family as they are sheeple too…..soon they will all be feeding off each other like some zombie movies….wait, I take that back, they are everyday when sitting on a freeway for hours each way……
I see we have some sheeple above in the comment section that don’t think homelessness is caused by fed induced bubble pricing of housing…..
sheeple are so easy to spot….many right here in this comment section….
Is this what you mean?
https://www.youtube.com/watch?v=QPKKQnijnsM
You hit the nail on the head. The Feds have repeatedly manipulated the housing market through interest rates and tax incentives to create booms and busts, driving many into not being able to afford to buy a house. Now a new game is afoot, whereby rents are so high nationwide that people can’t even afford a rental either. Thus, the homeless population is growing, and becoming more dependent on government handouts, and on governments themselves. You don’t want to be vaccinated? There goes your welfare and your other subsidies (see Australia, who did just that not so long ago), as one example of where we’re headed:
“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.” ~Thomas Jefferson
The vast majority of homeless are not homeless as in they “lost a home.” Their situation was not caused by any housing crisis. They are vagrants – either mentally ill, lazy, addicts, or some combination of those three. People who actually lose a home are homeless only as long as it takes to get to a shelter, find a new job, and then find a new home – maybe in a less expensive area. If they need to move to a different city, they do it – whatever it takes to care for themselves and their family. They are like you and I. The next time you see a “homeless” person, take a good look at their face. You can see 15 years of premature weathering from a hundred yards away. That is a vagrant.
Note that I’m not saying we should cast them all aside. I fully support helping the mentally ill. But encouraging a jobless, addict lifestyle (as LA is doing) is not the answer. A good example of the right way to handle people who are merely enjoying the jobless life is Grape Day Park in Escondido. I grew up there, crappy town for the most part, but this park was always a family place – barbeques, birthday parties, school outings. In the last few years it changed, and the vagrants took over. Recently the city council made the decision to take it back. They did so by interviewing every one of them, finding and contacting relatives, and then enforcing the rules. No smoking, no drugs, no drinking, no camping. The vagrants who weren’t helped by family didn’t like those rules and left (no doubt for LA). Now the families are back.
For people who think California is not affordable to renters, I’ve done the math. The apartment where I lived with a roommate in my 20’s (north San Diego county inland, decent neighborhood) is more affordable now at $10/hour pay than it was then at $3.35/hour. And yes, I included things like utilities, gas, and groceries. The bubble areas are just that – bubbles you can escape from, and you don’t necessarily have to leave California to do it, although it certainly can’t hurt.
It does not. At least that’s not the single cause of it. Homelessness is extremely complicated issue (economical, sociological, policy). You prefer simplistic solution -> point fingers to fed manipulating fiat currency (well, currency is made to be manipulated by design, that is the main feature of it)
Karin, if you understand how the money system works you are among a small percentage of ladies. Most don’t even care about. The new Bernie generation want a stronger and stronger government around the FED, to take care of them; or so they think.
FED~
If you want to know how it really works, search-engine ‘Secrets of the Federal Reserve’ by Eustace Mullins. It will blow your mind, and it’s still available as a downloadable pdf. online. Another good read on this topic is ‘The Creature From Jekyll Island’ by G. Edward Griffin. Both Mullins and Griffin also wrote about the medical and pharmaceutical cartels, which are run and controlled by the same families that own the Federal Reserve.
Will the Fed try to keep interest rates where they are until after the mid-terms? We could all become rich if we knew the answer to that question.
I see some evidence suggesting that they will soon stop supporting current rates:
1. Banks and savings and loans have been increasing their savings/CD rates which suggests that they expect interest rates to continue to increase.
2. The Housing Index chart is forming a descending triangle formation which suggests that the builders and their stock holders are getting increasingly pessimistic about future home prices and sales.
3. Home prices are now so outrageous that they can’t continue to go up even if rates just stay the same as they are now. Homes sales volume continues to drop! Prices are likely to eventually follow sales just as they did in 2006-2007. Home prices are likely to be 10% lower next May than they are now. Sellers are very greedy right now.
the new fed is selling off MBS paper fast and about to get faster, now investing in treasuries with rates higher and a national deficit to float.
the fixed income people can finally be rewarded after all this bailing out of specs…..time for the specs and High DTI folks to get a cleansing…
Housing doesn’t go up forever, keep pushing the serfs closer to the edge of hopelessness via rental pottersvilles and you will see the serfs fight back, its happening a bit already….
the fed knows this, expect rates to move over 5% fast….
Just got back from my home town of Los Angeles or now called a big rat hole..
Anyone buying a home in that rat hole is just plain stupid. It will fall so fast it has no bottom. The only reason housing is where its at is the laws that were rescinded about foreign ownership (Obama 2014) allowing funny money to buy homes so they could sell treasuries. A give away to reimburse China. Plus the housing overlords or Bulk purchases by Scum PE…then add low rates and sheeple people….wala….you get what we have here today…..
LA was nice up until the 80’s, since then it has become Tijuana on Steroids….Never seen such a rat hole in my life, from downtown to the beaches…..Sheeple buying homes that will be 50% less before they pay if off…..seen it before, now coming to a neighborhood near you…..
Nice! Good to see there are still people that get it. Not just the propaganda from realtards and lenders bored out of their mind because of historic low sales.
Millenial,
You are a firm believer in a housing crash it seems. How long do you think it will be?
2020!
FAKE NEWS!!!
I have been told that Obama was a champion of the little man and did all he could to make housing affordable. How dare you blame the greatest president of all time? RACIST!!!! It’s all Trump’s fault. He colluded with Putin to make CA housing unaffordable. Everyone knows this.
I love how this blog has changed from everyone screaming the fundamentals just dont add up, wait for the crash to now complaining california is just too expensive to live in we can’t make it. Now its 40% higher than 4 years ago when the “fundamentals didn’t add up”.
Actually it changed to how big will the drop be during the crash. We all know it’s just a matter of when it will happen. My educated guess is that prices will crash by 55-75%.
“55-75%” – lol
“educated” – lol
Don’t ever change.
who is We? You got a mouse in your pocket?
We, the educated ones. The non-RE Cheerleaders. The ones that have cash and wait for a beautiful crash. The ones that save in good times and invest in assets during downturns. We, the ones that made a killing in crypto. We, the ones that have no debt and live with parents or rent a cheap apartment. We, who don’t buy the lies previous generations bought “buy now or be priced out foreverâ€, “rental parity is paying 200k down and 1500 more than a renter per monthâ€, “interest rates will never go up again in our lifetimesâ€.
I could and should write a book. But if more people think like me I can’t profit as much. I need suckers to buy high.
Happy mom’s day.
I went on a business trip to the Bay Area and stayed a couple of days in SF and Oakland with relatives. What a sh** hole this Area is!!! It gets worse every year. You guys really deserve the homeless, the poop and dirt on the street, the smells, the fuck** up streets, the crapshacks and the horrible customer service. I hope it gets worse! Whoever decides to live there voluntarily deserves all of these perks. Keep up the “we welcome refugees and immigrants†signs on your door. The tent cities even have solar now. Lol
“fuck** up”
You really don’t think at all before posting, do you?
Took the kids to the Exploratorium a couple years ago. Witnessed a large woman in a super short dress spread her legs and urinate right on the sidewalk. A mile up from that saw a homeless man cross the street with his butt hanging out of his pants. A friend of mine lives there and she’s had a lot of problems, even had a homeless man attack her on her way home.
Stay classy SF.
Karen,
Horrible. It’s like a third world country up there. Who are these stupid people wanting to live up there or even wanting to buy a massively overpriced crap shack up there? I don’t feel sry for these buyers when they lose their crap shack and all their equity during the next crash.
I used to see that almost every week when I left my office in Oakland after work. I’d drive (with all doors locked!) down a main street in the downtown area, and see both men and women just crouch down and take dump on the sidewalk. They don’t even hide behind the cars! Oakland wasn’t like that when I was growing up there.
But if we don’t let half of Mexico live here, lettuce prices might increase by 0.00065%. And that would destroy the economy. So I have been told by very smart liberals.
You’re a f’ing parrot. “Liberals†bawk, bawk, “liberals fault’ bawk, bawk, bawk.
Jeddie old boy,
As usual you don’t address the actual substance of the statement, you go red herring. CA is a 3rd world state. It is Brazil where a small white elite dominates a predominantly non-white serf class, with nice beaches and good weather. The favellas of Rio are indistinguishable from the homeless camps of LA.
Bwok!!
I’m melting!
LOL@ solar powered tents…. tents are indeed eco friendly housing!
Great news. Millennials are saving money and finding ways to survive the severe housing bubble.
https://www.zerohedge.com/news/2018-05-12/happy-mothers-day-america-12-million-millennials-age-24-36-still-live-their-mums
Once prices drop by 55-75% millennials will go out and buy. Smart. They don’t repeat the silly mistakes of former generations: Buy high and foreclose. Millennials figures out that buying low and selling high is the way to go. That’s how I got wealthy in crypto and that’s what I am gonna do with real estate. Watch millennial and learn!
Yes! Homeless are also very smart, they are saving by not paying rent AND mortgage. They will be in perfect position when prices drop 90% from 2017 levels.
We live in an Orwellian world where obese people are praised for being body positive and 35 year old losers living in mom’s basement are praised as being wise investors.
Landlord, I agree to some extend. A 35-40 year old leaving with the parents doesn’t necessarily mean he or she or it is a loser. A loser to me is someone who can’t handle their finances. For instance, someone who buys real estate and can’t really afford it is a loser to me. Someone who lives with mommy and daddy in their 40’s and has no drive/career/cash is also a loser. Someone who is successful in his career, saves and invests money (crypto?) and lives with his parents to save more – that is a winner. He can buy for half the price once the RE bubble crashes. We all know it’s just a matter of time.
So really it depends. My commute to my tech job is about 15 minutes. I would live with my parents or in-laws without a doubt if the commute would be similar. It’s not unfortunately. So I rent a cheap apartment, save and invest and wait for a beautiful crash.
Millie,
I don’t care what housing costs. Living at home past 25 = L-O-S-E-R. Period.
Landlord, that was certainly the case 20-25 years ago. Back than housing was priced correctly. But during the boom and bust cycles you certainly want to play it smart and buy when houses are 55-75% down from current values. It would be such a waste of money to buy now. I need to say though that I am strictly speaking of California. In Spokane I would buy now. I checked and they are very close to rental parity and I could buy in all cash a very nice house. But, I have never been there and have no intentions to leave. So, I agree with what you said in certain situations. Here, you are a winner if you live at home with mom and dad as long as you can until the market corrects. A buyer who bought high can never catch up with you.
In Spokane where you live, yes. Because there you have dirt cheap rents and cheap house prices compared to California. I would buy in Spokane (in all cash) if I live there. But you can’t really compare the two areas. It’s like bitcoin compared to bitconnect. Bitcoin is digital gold and bitconnect is a pyramid scheme. In California you make out big if you stay with mom and dad and save on rent. You can easily buy when the market crashes 55-75%. Living in California with your parents as an adult is like winning the lottery. You will have a ton of cash available and can profit big from crypto and housing crashes.
Millie,
When I was 25 I lived in NYC. And it was expensive as hell then too, like NYC has always been. I made pretty good money (at least for my age) but it wasn’t enough to live well in NYC. I shared a quasi-dump of an apartment with a friend. But it was still 1000X better than living with my parents.
Now that I think about it…..yea, you are right! There are situations I can think of where living with your parents is not ideal. What if your parents run a side job and bread dogs in their backyard and part of the deal (living with them) is to pick up the poop daily and fed them? What if some dogs hate the guts of the adjacent dogs and bark at each other all day all night?
I would not be cool with that.
Another situation I could think of is, what if your parents like to utilize illegal substances and listen to loud music all night. What if you come home with your wife and walk in to a party where your parents and their friends are high and half naked and don’t want to go to bed? Maybe earplugs would help but maybe not?
Or, what if your parents don’t have a car because they spend most of their funds on pot? Dan is expecting a pot boom in California. What if your parents are part of it and need you to drive them to work and pick them up afterwards? What if that becomes part of the deal? Who likes to be in traffic or have an hour commute each day, just driving your parents?
I guess it depends on your parents. If you don’t face the above mentioned situations you won the lottery by living with them. If you do face the above, you might consider renting a place somewhere else.
Millennial: What if your parents run a side job and bread dogs in their backyard
It might not be so bad if they cooked a tasty breaded dog.
Hahaha, good one! Love these typos
This is one of my favorite articles on homelessness in LA (from last year): http://www.latimes.com/local/california/la-me-ln-manchester-square-homeless-20170208-story.html
Mr. Frank R sums it up perfectly — ‘“I’m not working on housing. Housing is negative equity. It costs money, and if you take the cash allowance and food stamps, that’s not enough,†said a two-year resident who gave his name only as Frank R. “I make that recycling.†As for shelters, he added, “I’m a drinker and you can’t do that. Where’s my cocktail in the shelter?”‘
Sounds like he made a choice.
Homelessness has become big business in California. More homeless mean more city and state jobs for homeless outreach, mental health experts, etc. The city and state governments are happy to get more tax money for more services so why would they want to solve the problem? The homeless in the San Diego city-operated circus tents even get free veterinary care courtesy of the local tax payers, yet we still can’t get the city to sweep the camps out of the canyons. We had 2 canyons catch fire in SD within a month due to homeless camps — one in Mission hills and one in Hillcrest — areas with potential for tremendous loss of life/property if the fires had not been contained quickly.
The Bel Air fire last December was caused by a homeless camp: https://www.youtube.com/watch?v=KQ8SnS9wxr8
Hola, I have enjoyed this blog for the past 5 years .
I watch the beach homes on the market daily. For the last few months, it certainly looked like a slowdown. Some better deals were sitting. I was starting to wonder if the higher rates and tax law changes were going to hit the prices. Then, all of a sudden, last week, many went pending. For now, looks like the dam broke and it is in favor of the sellers. Rates continue to rise. I keep watching. For now, all clear and the sellers market remains in tact. Since the stock market is shaky, many are cashing out their stocks and buying expensive homes. Hope it stays that way.
How do you define “beach home”?
On the beach? Within one mile of the beach? A half mile? Five miles?
Within 1/2 mile of the beach … quiet street. I am thinking this beach home bidding spurt is being caused by people selling stock and purchasing coastal homes. That is just a hunch. But, they are selling, especially in the 1.5M to 4M range.
I don’t know enough about inland markets to make a statement as to what is going on over there. I only know the inland markets.
But, I also know the metro Boston market is very strong … below 1.5M.
JT – Driving to work yesterday I started thinking. Bond market yields rising, fed raising interest rates, stock market overvalued, commercial real estate market overbuilt and overvalued, REIT’s performing poorly, etc. Where are the wealthy going to put their money to work? That’s where I want to be with my measly pittance.
Residential real estate? Perhaps. People still need a place to live or rent. Wealthy will be unfazed by rising mortgage rates and can still buy homes to rent out to the serfs and wait for price gains years later to sell back into the market after many years of rent. In the end this could yield more than the bond market or the stock market over the same time period.
If this plays out I think we may first see it in areas heavily dominated with investors (Phoenix, Las Vegas) and extremely expensive, exclusive areas (coastal and world class cities). Reports are already out that Phoenix and Las Vegas inventory is wayyyyy low.
San Francisco reached a new peak, coastal markets still hot. Buy and hold until the future would be there plan.
SumTingWong
Hard to tell what comes next. The yield curve is backing up quickly. I don’t mind slowly rising rates in the midst of a strong economy. But the rates are rising so rapidly … there is a 25% chance that something is going on here. Perhaps investors want more yield because of the high US debt levels? So far, real estate is doing just fine. But, I am keeping my fingers crossed. I am nervous that this rate rise is something more than a strengthening economy.
Bay area dwarfs so cal in its frenzy.
Anecdotal:. Doing a loan for a friend up there in the San Jose area in the 1.2 to 1.3 million-dollar range and my initial conversation with his realtor was that we need to write 21 Day offer with no appraisal and no loan contingencies. I finally talked my friend into writing an offer with at least a 12 Day Loan contingency and the listing agent countered with no contingency and we finally settled on a 7 Day Loan contingency.
He has been trying to buy for a year so finally when something he likedt came on the market he is now writing an offer with relatively no contingencies 100,000 over asking price and is doing 40% down.
Basically he explained that every open house has a huge amount of traffic and there are multiple offers within the first weekend many of which were over asking price and no contingencies. That’s a tough situation to be in. The demand vs supply up there is just so skewed.
How does situation looks with attached? (condos, townhomes).
What I feel might happen is that higher density (condos, townhomes) will pop up more and more and will enable more people to buy their home (not house). SFRs will be much more limited and there will be more demand for them.
I am very torn on this escrow situation. On the one hand he is putting a huge down payment and had perfect credit, however, the PITI seems pretty big compared to his income, but, on the other hand he’s single and there will be 2 other empty bedrooms in a single family home in a desirable area which he could rent out easily to cut his payment in half.
Funny thing is that Millennial thinks he’s stupid, yet, he resembles Millennial more than anyone I know.
Millennial
No debt
Lived at home to save the 400k down
Invested in crypto that contributed to the large down
Dan, what is your opinion on PITI of 5.5k on 270k income (after 401k), 20% down, other debt being cash-flow neutral condo with 70% equity.
The monthly housing nut is less than 25% of the gross monthly income. Nothing to see here. On the other hand you could wait for the 70% drop in prices that is right around the corner. Your decision.
70 drop across the board? If I givr you a zip code, could you provide more accurate number? Or 70% all zipcodes?
Surge, the 70% price drop right around the corner was pure sarcasm or should I say a Millennial’s dream…if you know what I’m saying. 🙂
Lol. You can’t fix stupid
I also think that this further illustrates the point that in that area the increase in rates the tax implications the supposed slowdown in the economy has not had a negative effect on demand.
Dan, gotta Hand it to you. You are actually pretty close to my financial situation. However, the buyer does not resemble me because I would never buy high. I don’t get his reason. Does he think House prices will never go down again, does he think there won’t be another recession? Who knows. I like it. We need as many people as we can to buy high. Less competition later when it crashes.
FAKE NEWS!!! I have been assured by man here that housing is tanking and 70% off fire sales are just around the corner.
Almost. 55-75% will be the drop from current values. We are overdue with a recession. Wait a couple more years and we will have a fantastic buying opportunity.
Median CA housing prices have doubled since 2012. 6 years.
The Dow Jones Index has tripled since 2009. 9 years
For people who invested in stocks, the housing market is still a bargain. Take out your millions in gains and buy a cr*pshack Money for those who have invested in stocks is flowing freely.
IMHO, stock market is more of a bubble than housing. When it pops, the housing market will follow.
It is highly unlikely to see a 70% drop in housing prices with today’s economic conditions. The housing market only dropped 50% during the last true economic crisis. However a 50% drop in the stock market will dry up the funds for the people who want a house and have made more money sitting on their couches with the market gains than they did working for a living.
I wanted to throw out an breakdown of an offer I have on a house in central coast California. If anyone can give feedback pros and cons I would appreciate it. I am coming in on the house with everything I have but am hoping to keep it long term and slowly fix it up. I know most people here feel that we are in a bubble but unique houses don’t always come on the market.
Buy!! Don’t waste your time posting here. The next potential buyer might already be sending a strong offer! Houses are super rare these days. When you get a chance to find a house for sale (almost impossible) you need to act lightning fast. What? The house is unique???? UNIQUE?? Is this guy serious. Dude, you need to do one thing and one thing only. Turn off your computer, forget about this bubble crap talk and RUN! Put in an offer -at least 30k above asking price!! Now!
This might be a once in a lifetime opportubity for you to get a UNIQUE house!
Can’t believe these people.
Disclaimer. Wish I could put this in fine print. I like people buying high. More people buying high means less competition when the market crashes by 55-75%.
Ignore Millie – he’s our resident willfully ignorant permabear troll.
There’s nothing wrong with buying a home in a bubble area if you can easily afford it and plan to stay very long term. It is a very risky time to buy in those areas if you’re in any way considering it to be an “investment”, but of course after a few decades you’ll come out ahead. There are still good deals to be found on rental property elsewhere.
Millie, you still do not make sense.
If you want more people to buy now, this means that you want prices to increase more before the crash.
But since you are fixing the crash range ~65%, it is still better that prices do not increase then crash 65% vs increase then crash 65%.
So, why is this again you want more people to buy now and drive prices up before the upcoming crash?
John d, why ignore me? I am encouraging him to buy. Same as you. Permabear? Huh? I am incredible bullish on crypto. Most of us know there will be a RE downturn. If you would follow the market / economics you would know there are cycles. Especially, in hot areas like California. We call it boom and bust cycles. As soon as people mention the next crash they are called Permabear?
Surge, you make it too complicated. I will dumb it down for you. More people buying now means they are buying sky high and are likely to not buy again when the market crashes. People in general hate paying for something that is way more expensive than the market. When prices crash many will walk away because they hate if a millennial buys next door for half the price they paid. That happened during the last crash and the same is happening now. People buy sky high and will foreclose later. That’s why I encourage anyone to buy now. They will be locked to a massively overpriced crap shack. Let me know if you have further questions. Always happy to help. BTW, the ones that buy now are likely to be the ones that believe in “buy now or be priced out forever†or believe that paying 200k down and still paying more per month as a renter “enjoy†rental parity.
You’re pulling a range out of thin air (55-75%), without specifying where, because you’re apparently unaware that location influences the degree of correction, and I assume you’re dumb enough to think that 55-75% range applies to the coast – and of course that kind of drop in a desirable area doesn’t happen in the U.S.
We have very little housing data prior to the mid-20th century, but we do have data on New York city – and even during the Great Depression it didn’t drop as much as you’ve decided it’s going to next time. When I ask why you think it will do this, I hear crickets. So you’re not only making a claim that goes against history and logic, you’re providing no reason for it – not even an idea. There is literally nothing happening between your ears.
“…you would know there are cycles.” No shit, Sherlock. You should actually go and look at them sometime.
1) Chance of 55-70% crash in next 10 years – 10%
2) Chance of you being in position to capitalize on such a crash – 10%
So, your strategy has about 1% composite chance of working out for you
If you are referring to the Hearst Castle, I say, “Buy it.” Homes like that one, don’t come on the market very often–if ever. All other homes are replaceable. It pays to wait and buy at the bottom.
Which town you talking about? I love Cambria. I lived there in the ‘90’s.
Thin air? Whaaat. Come on now. It could not be more obvious. 55-75% drop baby! RE market will be great again and Milli will buy a beautiful house – maybe in all cash. Just need crypto to explode one more time!
Seattle….. Idiots
Maybe California will follow, we have a lot of crazy politicians in here.
Here is how idiotic Seattle is….the city imposed a $25 tax on sales of guns last year. They said it was for safety training or some BS, but really it was a way to get rid of gun stores in Seattle. And within about 10 nano seconds every gun store in the city closed shop and moved across the border to a neighboring city. Mind you the number of guns bought didn’t decrease, they were just bought a couple of miles away. Liberals cheered this and patted themselves on the back for being oh so clever, they made Seattle a “gun free zone” by taxing guns.
Now they are imposing a $275/employee tax and they think it won’t affect businesses in the city. I think they are imbecilic enough to actually believe businesses will just sit there and say OK here’s the $275/employee, back to business we go.
Yes….they truly are that stupid.
Those liberals leading Seattle now are a special kind of stupid – I call it “Maduro†type of stupid. He managed to take a super rich country like Venezuela and make the people starve. The same way, they take a very rich city like Seattle and they will turn into a new Detroit. When you have stupid at the helm, every one will suffer. Detroit at one time was one of the richest city and the liberals turned it into a Venezuela. Chicago will follow soon, and then Seattle. No surprise when you elect people from third world countries in leadership position. I know I’m not PC, but I do not care – it is the truth.
There is a really good book “The New Urban Crisis.”
One point made is that some cities are “superstar” cities that are extremely attractive to the creative class, ie Amazon employees and others.
Seattle is one of these.
There is a limited amount of them. So the city of Seattle is smart. They do have quite a bit of leverage and this small tax won’t make much difference.
Now, the city could over do it. If the tax were thousands instead of hundreds or the city starts making more and more demands it could cause Amazon to consider leaving.
LOL not this creative class nonsense again. There are a handful of cities in the world that can get away with this stuff. New York, London, Paris. Those handful of mega superstar cities that will always draw people. But Seattle is, by world standards a podunk town. Oh, I know people in Seattle think otherwise, but it’s a provincial outpost as far as the rest of the world is concerned. They got lucky that Bezos decided to set up shop there. And as is obvious to anyone with 2 functioning brain cells, he’s setting up his exist strategy with HQ2 which will over time morph into HQ1. Have you ever heard of a company setting up a second HQ? There is no such thing. He’s moving his HQ and none of the dullards in Seattle seem to recognize this fact.
As Flyover mentioned, Detroit in the 50s was one of the richest cities in the world. And 40 years later houses were selling for $1 in the heart of the city. Oh but the good weather in Seattle will keep people there. Oh right. OK so even if it rains 8 months a year, at least it’s centrally located so it can be a transportation hub. Oh right. But at least it has world class universities like Stanford or MIT. Oh right. Uhm uhm uhm, well at least it doesn’t have a homeless problem. Oh right. But at least it has a business friendly environment that will attract businesses. Oh right. So crappy weather, off in the corner of the country, no top tier colleges and a fiercely anti-business political climate. If that’s not a recipe for success I don’t know what is!!
Yo, Mr L! I didn’t consider that Amazon might be doing the HQ2 thing as an approach to dumping HQ1 but it seems plausible. I’ve been assuming it was just a weird way to buy government influence in the other Washington. Just the idea of a 2nd headquarters is ridiculous. A headquarters is a singular place.
Seattle is a podunk town? Then what is that shithole you live in, Spokane, WA? You are the biggest troll and hypocrite on here.
Let’s see. Seattle is home to some small, $h1t employers like Amazon, Boeing, Microsoft. People you never heard of… not to mention one of the highest median incomes for married couples. but you chose to live in the garden of eden AKA Spokane that seems to employ a lot of Walmart stockers. Gonzaga has a decent basketball program, I’ll give it that.
Aside from working on base or public/county jobs there are no industries where you live. Pretty glum if you are young and looking to move up in the world. And let’s talk about crime. Violent / property crime higher than Seattle. Actually it’s worse than Detroit! WTH is going on in your lovely, sterile, vanilla kingdom over there? No immigrants, no MS-13?
Look, you are a big fish in a small pond. But the reality is people need some hope of making it in the big city. Otherwise, they end up old and fat and spend their evenings hanging out on the housing blog for other states.
Landlord comes on here and slams everyone but lives in a very depressing place with no opportunities for the ambitious. I suppose he needs a steady stream of Walmart employees as tenants for his slums.
Bruh,
On the world stage Seattle is a blip. Ask someone in Paris about Seattle and they’ll ask what the hell you’re talking about.
I grew up in a big city, lived in in New York and the Bay Area for several years in each. I had my fill of “important” people to last me 10 lifetimes. At least in NYC and SF/BA there truly are important people. In Seattle…other than Gates and Bezos it’s a town of nobodies who think they’re somebodies. I made it in the “big city” took the money and got the hell out. Only fools stay in the rat race all their lives. Winning the game is knowing when to exit and leave it all behind. Unless you’re a narcissist in which case you’re never happy and have a need to be loved/admired by other narcissists.
I never claimed Spokane was anything special. But that’s why I moved here to get away from all the A-Holes in places like Seattle. It’s cheap, low taxes, awesome lakes and mountains all around and between May and Sept best weather imaginable. It’s 80 right now with 25% humidity and not a cloud in the sky. I don’t really care what people do or don’t do for work, doesn’t affect me. And once again you guys forget that income is only 1/2 the equation. The other half is cost of living. Seattle’s income is 50% higher but housing is 400% higher. Which means relatively speaking you’re worse off. $100K in Seattle is barely above poverty, maybe gets you a 1 bedroom in a so-so part of town. $60K in Spokane is a decent middle class life living in a 4 bedroom home in a nice part of town.
The bad wrap Spokane gets is about 15-20 years out of date. That was the era of biker gangs and stuff like that. In that time the city and especially the surrounding areas like Coeur D’Alene have changed a lot and for the better. Lots of money has moved here, escaping California in particular. People like me who had enough of the “big city”, called it quits and moved somewhere more peaceful after cashing out. Technically I don’t really make a lot of money. Cash poor asset rich. I don’t need a lot of income since my living expenses are dirt cheap compared to Seattle. I control my income so that I minimize taxes. I plow everything I can into my SEP, which minimizes it even more. Judging solely from my AGI, I’m poor, lol. I was talking to my neighbor about this a while back as well. He’s from San Diego, very similar story to me. He doesn’t work full time either, does some contract gigs as needed. He has a paid off house, sizable nest egg, and doesn’t need a lot of income. He’s in his 50s. I do a little consulting on the side here and there but I’m more or less retired in my 40s. I couldn’t do that living in Seattle. So in between visiting this blog I play a lot of golf and get out on my boat in summer and ski as much as humanly possible in winter. Granted I don’t have 182 Ethiopian restaurants within walking distance, but hey what can you do….life is all about trade offs right? Personally the whole retired at 40 thing outweighs the 182 Ethiopian restaurants. But that’s just me.
And I can honestly say, unlike Seattle, I have never seen a bum taking a shit in broad daylight in downtown Spokane. And also unlike Seattle, I can actually read street signs here. In Seattle it’s very difficult since every single sq. inch of traffic signs is covered in graffiti. I dunno maybe it’s just me but shit free streets and little to no graffiti is a plus for a city. Your mileage may vary of course. Some people enjoy defecating bums and gangs, I guess?
I don’t really care what you think of the city or what you think of me. You are an angry little man always lashing out with a superiority complex like bashing WalMart workers. Kinda pathetic dude. Really. You enjoy the big bad city and the rate race until you’re 70 year old and die of a heart attack at 73. I’ll take it easy in my podunk neck of the woods for the next 40 years.
You got me curious about employers. Here are some of the bigger ones in Spokane.
Health Care:
Providence Health Care – 5688
MultiCare Rockwood Clinic – 1155
MultiCare Deaconess Hospital – 1110
Pathology Associates Medical Laboratories – 820
Inland Northwest Health Services – 750
Kaiser Permanente – 640
Frontier Behavioral Health – 640
Community Health Association of Spokane (CHAS) – 600
Blue Cross – 585
Valley Hospital – 485
Inland Imaging Clinical Associates – 315
Columbia Medical Associates – 190
Spokane is a regional health care center. Anyone within 200 mies that needs any medical care other than routine stuff, comes to Spokane. I think doctors make good money? I could be wrong. Probably all minimum wage jobs in health care, now that I think about it.
What about higher education?
Gonzaga – 1289….running that basketball program takes a lot of people I guess
Eastern Washington University – 1,381
Whitworth University – 485
Probably minimum wage jobs, especially the professors.
Fairchild Air Force Base – 5935….Air Force is all minimum wage jobs I believe. Pilots especially.
Engie Insight – 935…more minimum wage jobs at this Energy consulting company. Consultants and especially in energy make like $8.75/hr
Alorica Business Solutions – 875….CRM software vendor….nothing but minimum wage jobs once again
Banking…if they make $10/hr they’re lucky
WA Trust Bank – 647
Umpqua Bank – 537
Banner Bank -350
US Bank – 210
Wells Fargo -200
Manufacturing (which are all low pay jobs as we all know)
Huntwood Industries Inc. (windows and cabinets) – 580
Itron (electric components for utility companies) – 550
Triumph Composite Systems Inc. (aerospace parts) – 400
Wagstaff (aerospace components and casting) – 350
KeyTronicEMS – (telcom manufacturing) – 300
Pyrotek Inc.(auto and rail components) – 200
and yes your favorite…WalMart with 1417 employees. This is for a city of 250K people. In Seattle, a city of 700K people, Walmart employs….drum roll please…..20,000 people. So in Seattle more people work at Walmart, proportionally speaking than in Spokane. Funny that, huh?
Gonzaga,LOL
what I love about larger cities is that larger proportion of the population does not give a shit about sports team
Landlord, you listed mainly jobs which are service jobs (yes doctors are providing a service). These will be present in any city
What you do not list:
1. Software/hardware engineeers
2. Programmers
3. Researchers
4. Inventors
5. Startups
Also, Spokane does not have much of theathre, art scene, opera, live events, etc…
This is the point
Landlord,
Obnoxious, isn’t it?
https://www.krem.com/mobile/article/news/local/verify/verify-are-spokanes-crime-rates-the-worst-in-the-nation/293-494087652
“Therefore, we can verify that Spokane does have one of the worst crime rates in the U.S. per capita.†Even your local news and police agrees.
I assume you live in the nice part of town. I don’t live in “big city†either. I live next to the beach (OC). Crime rates are low, no graffiti, I’ve seen a couple bums but no one crapping on the side walk. The county tried to build a homeless shelter here and the city put the kabosh on it and threatened to sue.
I’m not angry at all. If working 12 days a month while commuting 2-3 times a month to LAX is a rat race then I’ll take it. I park my car and ride my bike everywhere on my days off. My AGI is high, I pay a lot of taxes. My company maxes out my 401K every year (and then some, deposited on Jan 1) Plus a B fund pension.
You have a lot of valuable knowledge that could be helpful to people but it’s often skewed with political rhetoric (along with blatant racist comments). What’s pathetic is spending your time on a CA housing board when you don’t live here nor have any interest in this place. I don’t really care about Seattle (or Spokane for that matter).
CA is a big state. Not everyone lives in DTLA or SFO. (Or in the rat race). I could live anywhere and probably have a lot more money but CA is great if you can afford it.
Thanks millineal and Gary. I put the offer in and am working as much as can to get the sale to close. Once again I have followed this blog for some insight and enjoyable reading for years but haven’t posted. I definitely agree we are at a high price point but I found a home I really do like and would love to live in and fix up. I tried for a lot of places at the bottom about 4-5 years ago but cash offers pushed me out then. Once again thanks for all the continual posts and insights.
yea Sure! Enjoy your Hearst castle!
Yeah, do what you think is right. Do not listen to neither true “housing cheerleaders” nor to negative mofos like Millie.
Mille is either delusional or just likes to troll.
Further down in the comments about the eviction of the 30 year old at first Millennial stated it was a fake story which of course is proven incorrect and then states that parents should actually pay their kids to continue living at home. Looks like this New York brother from another mother of millennials is his hero, lol.
Got to hand it to you your comments are truly shocking but I guess that’s what you go for and get your rocks off.
“Shocking†?!
It’s shocking that people still think adults living at home with mom and dad is not normal or a smart thing to do. Who cares if you are 40+ and live with your parents? 40 is the new thirty and plus you save money! Once the biggest bubble in history pops and house prices are back to normal (55-75%) below today’s values people will get out and look at open houses and buy again. I bet it’s just a handful of realtards, lenders and RE cheerleaders who think like that.
While I think buying now is a mistake, and i say this because incomes haven’t really gone up that much from the last “bubble” so how can this now NOT be an echo “bubble” but I’m glad for you that you can afford the place.
I have no idea what you’re paying but I just did a quick monthly payment calculation on the median home price in OC of $795,000.
source: https://www.ocregister.com/2017/06/20/orange-county-house-price-sets-record-795000-realtors-report/
I assumed a $150K down payment and the monthly nut on that mortgage is a $4,642.67 Payment with PMI. No mention of Income to qualify for that loan but if you use the stand metric of 1/3 your income for housing you would need a household income of ~$160K (which I realize is chump change to the people who post here)
that is insane but i’m happy for you that you can afford that…….I wouldn’t be able to sleep at night…..that’s 3-1/2 times my rent.
How did you calculate the PMI and what interest rate are you using?
@20% down the PITI with a 4.75% rate, 100/mo homeowners insurance is $4245.
To qualify conventional; the PITI + other debts reported on your credit report cannot exceed 45-50%.
So; assuming with 20% down and with little to no other debt (yes Ideal situation); they can technically qualify with $8500/mo gross income.
Now if you want some breathing room or to assume some car payments/credit card debt; just round up to $10k/mo. or $120k/yr.
A lot of people can qualify to buy in OC at that income.
$4460 in PITI (very decent home) cannot be compared to $1500 in rent (probably 1bedroom appt)
Good luck, there will be a real estate correction soon, but no one knows whether it will be a 20, 30, 40 or 50% decline. It is only a guess at this point.
Or it could be 5%. And it could happen tomorrow or in 5 years. It’s impossible to time these things perfectly.
The same people who were predicting 70% off in 2006 didn’t buy in 2010 at 20% off and now they’ve missed out on 100% gains once again. You can live your life and enjoy where you live or you can try and time the market perfectly and rent for the next 30 years.
Think of it this way, had you bought a house at the absolute peak in 2006/7, the house today would be worth 10-20% more than the last peak, you would have had 12 years of MID tax deduction worth $10sK and you’d have $100s K of equity built up.
Instead you rented and got none of it.
55-75% drop is pretty much set in stone. I would bet one of my bitcoins.
Mr Landlord, a real estate market top is easy to spot. There is a 99% certainty that it is occurring right now. Prices can’t go up anymore mainly because there is no more buying power left to propel it higher. Interest rates are going higher, building stocks are crashing, home sellers are dropping their asking prices, etc. It is obviously to anyone who is following the real estate market.
Like I said, the only mystery is how far prices will drop.
“Think of it this way, had you bought a house at the absolute peak in 2006/7, the house today would be worth 10-20% more than the last peak, you would have had 12 years of MID tax deduction worth $10sK and you’d have $100s K of equity built up.”
I bought in the best school district in the nicest city in the inland empire in 2009. I made a huge profit when I sold in late 2016. Good call, right?
Turns out I would have been far better off putting the same amount down on the coast in 2006 instead.
“55-75% drop is pretty much set in stone.”
And prices have gone up how much since your original prediction of 50-70%? 20%? 30? You’re gonna have to start saying 65-85% soon. And when you do, it still won’t be based on any sort of logic, or history, or data.
55-75 % drop is good for now. I’ll let you know once I adjust the expected drop.
Millennial might be interested in this.
Parents have gone to court to evict their 30-year-old son from their home: http://philadelphia.cbslocal.com/2018/05/21/parents-30-year-old-son-new-york-eviction-court/
If he didn’t already disclose he rents a cheap apt; I would bet majority of us on here would absolutely think this is him!
Actually, a significant amount of adults live with their parents to sit out the biggest housing bubble in history. It’s absolutely normal in California. It’s the right thing to do. Parents should encourage that and actually pay their kids on top of that to recognize the millennial frugal lifestyle and for being financially responsible.
Millennial… it’s not normal, although it may be common these days.
It won’t change until we see a nice crash-it’s the new normal
This is one reason I never wanted children. If I had a kid like Millennial that felt I owed him a roof over his head for as long as he wanted it, at some point I would have put his stuff in storage and changed the locks. Him and his parents are ripe for ending up on the Dr. Phil show, where the good doctor would tell him to ‘man up’, grow up, and get your own place.
That could be an Onion headline.
Apparently they did a terrible job raising him and now they’re paying for it. He’s never suffered consequences, ever, or done chores, and I bet mom still does his laundry. Regardless, I hope he gets the boot. Maybe someone will give him a reality show where he tries to do grownup things and ends up in wacky misunderstandings.
“He doesn’t pay rent†rofl
That’s the point of living with mom and dad. To not pay rent!
First off, the story is fake of course. A desperate attempt by RE cheerleaders to rally against adults staying at home to save money. No wonder, with historic low sales you get desperate and creative!
But it’s an entertaining story. The defense for the millennial could be that he can be the gateway for a money printing machine. Most millennials know how to set up a crypto trading account on a good exchange. They can share that knowledge with their parents and help them to get filthy rich. That alone is worth having millennials live at home. Also they can provide financial advice. Buy low, sell high. Dollar cost average when investing. Don’t believe when a RE cheerleader says buy now or be priced out forever and paying 200k down plus 1500 dollars more a month than a renter for the same house is not rental parity it’s a rental parody. Given these benefits who would really want their 30-40 year old kids to move out?
How is the story “fake”?
There’s now an update: http://www.charlotteobserver.com/news/nation-world/national/article211676059.html
Photos, videos, names, etc. Not fake.
Parents won. Son can be evicted.
You live in an alternate reality where you think everything is fake.
i dont understand why you are discussing extreme outlier case…this is obviously just a media story
It’s not a fake story:
http://www.pressdemocrat.com/news/8356782-181/judge-rules-30-year-old-new-york?artslide=0&sba=AAS
Talifornia~
One of the secrets to good negotiating is that the party that wants the deal the least (or, and this is important, APPEARS to the other party to want the deal the least) has the upper hand. Never fall so in love with a house that you can’t walk away from it. A smart seller can smell desperation. When I sold my first house in Alameda, the market was starting to tank. What would have been a multiple bid situation turned into only one offer after 3 weeks on the market. The seller had a 1031 exchange, and needed to close within 60 days of the sale of a commercial property he’d sold so that he could roll over the gains tax-free. I was told that because the contract stated that I was not to try to delay the sale past his final date. So he came up with some crackerjack inspector that wrote up all kinds of BS about the property, like the heater wasn’t working (it was, but the jack*ss inspector couldn’t figure out how to turn it on), and the seller wanted the price reduced by $6,000. I knew the buyer was running out of time, so I told him I’d give him 100% of the deposit back, and he could go find another house to buy. I threw $1000 at him just to get the deal done (he was Chinese, and I knew I had to give him something, as they always want to get something out of the other party). He took the grand.
Secondly, I earlier called a turndown in the housing market, which I feel started about two months ago in my area (Sonoma County). A few days ago, I read that fixers in my area are having trouble selling. Then this morning, I heard that new housing sales are down over 10% from a few months ago. I already see houses in my range ($700-800K) down about $50K on average from the beginning of the year.
Remember, the house you bid on won’t be the last house you’ll ever be able to buy. Just be patient. If you’re not desperate, it’s fun to negotiate.
I wanted to post a update on current home purchase. I definitely think that a housing correction is coming at some point due to the high prices of everything around me on the central coast near Pismo Beach . Me and my family camped last summer for the first time thru Yellowstone area and then thru Arizona and New Mexico .It was the same story in every town with people I met. Every person in the bigger towns thru those states has said that prices have jumped or doubled in the last 4-5 years. I am not sure how people in these areas can afford the high prices we see today. We came in on our offer here a lot lower than asking so we could possibly ride thru any soft correction.Seller has stalled negotiations and seems to be holding out for close to full price. Thankfully I am sane enough to walk away if the purchase ends up falling apart. Thanks for all the responses >
Instead of thinking how to waste money on overpriced real estate consider what happens during the next economic crash. We all know it’s just a matter of time don’t we?
https://www.zerohedge.com/news/2018-05-23/can-bitcoin-become-flight-quality-asset
“There’s an old saying on Wall Street that when times are good, you should focus on the return on your capital, but when times are bad, you should only care about the return of your capitalâ€
All consumer liabilities in US is expressed in $$$.
The reasons assets go down in price, is because $$$ needs to be raised to pay off liabilities (food, housing, debts, taxes, etc…)
Crisis = cash flow crunch (less lending, less growth, less jobs). This is why people sell off homes, when their income drops but liabilities remain.
If someone who owns a home and bitcoin and loses a job and needs to continue paying mortgage, what do you think will be sold off first?
If someone who owns a bitcoin Apple stock and loses a job, what do you think will be sold off first?
If someone owns bonds that produce some cash flow and bitcoin, what do you think will be sold off first?
If there is a crisis, BTC will be sold off like crazy by regular folk. Yeah, you might say they are a sheepie, but sheepie behavior determines value of YOUR BTC holdings.
BTC will only go up over time. And when centralized systems falter the demand for btc and other cryptos will increase of course. You will see…https://www.zerohedge.com/news/2018-05-23/can-bitcoin-become-flight-quality-asset
In regards to bitcoins price dropping….you make it sound like that’s a bad thing. I would love bitcoins price to be at 2k or less. I would go in hard. Remember surge, buying high is not what you want to do. I know. It’s hard, when asset values increase you want to jump on the wagon. But you make a killing when you buy low, during capitulation. When nobody wants to buy. And then you sell when everybody including your mom wants to buy. You will get it eventually. I will keep educating you. You will thank me later.
It is a good thing if you do volatility trading…aka options…or trying to time the heck out of it.
But we are talking when crisis hits…trust me, all $$$-value will be sucked out of BTC going to support other debts of BTC owners.
Point is, BTC will be first in line to sold off
“Trust me†LOL
It did not happen during the last recession. When trust in fiat is lost people will put even more money in btc. Just wait and see
As an avid supporter of BTC you should probably know the history of btc and how well it “did†in previous crisis of 2008-2009.
🙂
BTC is expressed solely in terms of fiat currency (which is usd).
You feel orgasmic when btc goes up because it goes up in dollars.
So, $$$ is the ultimate value
BTc goes up during a crisis. It’s an alternative to the broken fiat system. It’s a once in a lifetime opportunity to make a killing.
In the meantime…
LA home prices break another record…
“…It’s been a tough spring for Los Angeles homebuyers. With fewer than usual houses on the market to choose from, prices bested an all-time record in April, according to a new report from real estate tracker CoreLogic.
That makes three months in a row in which the region’s price record has been broken, and homes are now selling for well above prices seen in the buildup to the 2007 mortgage crisis. In April, the median price was $590,000—close to a 1 percent gain over a month ago and 7.3 percent higher than the same time last year.
Price bumps seen across Southern California are likely driven by a lack of supply in the housing market, according to CoreLogic analyst Andrew LePage. That’s reflected in the fact that far fewer homes than normal are selling in the area. In LA County, for instance, home sales in April were down more than 8 percent since a year earlier…”
https://la.curbed.com/2018/5/23/17385230/los-angeles-housing-prices-cost-2018
Wait a minute there QEA. This data doesn’t line up with some of the bloggers here. We’ve had several people here claim home prices and rents are going down and will very soon go down 70%. Which one is it?
That’s correct lord Blankfein.
The longer we drag this fake boom cycle along the bigger the crash will be. At this point a 55-75% drop from current values is a given. Once that nice crash happens people will have interest again in buying homes. Until then we will continue to see historic low sales/ownerships.
I just finished reading the book Nomadland which describes the rise in people who have checked out of ever owning or renting a home again after the crash in 2008 and are now living in old campers and vans.
Many interviewed were in their 60’s and 70’s had lost their homes, jobs, pensions, and life savings during the crash. They drive from Amazon CamperForce sites to CamperForce sites, campground hosts, beet pickers, carnival workers, etc to make $8 – $11 per hour to keep their vans running and to buy food. According to the book, this number has tripled since the crash. They are one engine failure away from homelessness.
It reminded me of the Joads in the “Grapes of Wrath” except currently there are jobs to be had by driving to them. For now.
Many of them are on Social Security which for some amount to $500/month. How can anyone survive on $500/month other than living in a van?
I think the moral of the story from 2008 is:
1) Don’t put all of your financial eggs in one basket.
a) Buying a house now at a near peak means putting most of your eggs in one place for most of us. Be like Millennial and wait. If you are overextended, lose your job, and have to walk away from your house like many of these van dwellers did when their houses lost half their value in 2008 and rent costs skyrocketed, just hope you have enough left to buy a van and not become homeless.
b) Many of these people had relied on collecting a private pension. Many of them never received it because their employer declared bankruptcy or were laid off before they could collect. Some had 401k’s but stocks also crashed 50% in 2008.
c) Will Social Security still be there when I retire? Republicans who are in power now want to eliminate it and they work hard to weaken it. If it is will it be equivalent to $500/month? How will we survive without living in a van?
d) FDIC insured bank accounts are safe during a downturn like 2008. My mom was raised by Depression parents and was happy to collect 6% on a CD when stocks were making 10%. Now stocks had been making 30% and if you are lucky, a CD is making 1.5% Less than official inflation.
If it definitely tempting to play the housing/stock/bitcoin market with such high returns but if you are older than your late 40’s, is it safe? It was not safe in 2008.
The financial advice to have a secure safety net and at least 2 years of cash tied up in CDs was what saved many including my mom. She was old enough and had seen inflation rise enough after she bought the house and was still working to not as large of an effect. Currently, wages have not risen with inflation in 30 years. It will be worse if this time if the crash repeats.
That is why there is such a rise in homelessness, and if they were lucky and ambitious, van dwellers.
After reading this book, I am putting more money into low interest paying CDs so at least I can survive (Hopefully not in a van). Like my mom, I won’t be wealthy, but I won’t be homeless.
The real moral of the story from 2008 is that NINJA ARM loans don’t fix poor nor greedy. That show is still on hiatus.
“1) Don’t put all of your financial eggs in one basket.”
You could have stopped after this one. It takes a series of bad decisions to end up living in a van, and those include:
Buying a house with an option ARM (at ANY time, not just the peak) and not bothering to understand the terms, or assuming that everything with their career and the economy would be hunky dory forever.
Buying up to the limit of what you are qualified for when you’re a single income household, or your job is even remotely at risk. Relying on a pension or SS is financial suicide at this point, but it’s understandable that older people were blindsided, because they had known stability all their lives.
Selling anything (stocks or housing) at a big loss. The people with diversified portfolios in 2008 who stayed in it ended up making a killing. The people who bought property in the right location in 2005-2006 and stayed in it are doing very well today.
John D and Nah,
ARMs were the downfall for many. I took out a 10/1 ARM to qualify for my first house when fixed rates were at 13% and 10/1 ARMs were at 11%. We haven’t seen that spread now but if we do, I suspect ARM loans will grow.
Here is a hypothetical for someone buying an overpriced cr*pshack today.
Would they qualify for for a loan for a $500K house?
Income: 100K
Downpayment: 100K
PITI – 2500/month @4.5% fixed rate loan. 30K/year.
Living expenses: 50K/year.
401K savings 200K.
If the crash of 2008 happens again: Housing and stocks drops 50%
Income: 0
House value: 300K
401K savings 100K.
PITI : 30K/year
Living expenses 30K/Year -40% cutback.
They would have to find money to survive somehow.
1) Cash out the 401K the 401K at a 10% penalty plus Fed/State taxes. After that, they have 60K. As you pointed out selling at a low, is a terrible decision but you have to eat.
2) They can’t sell the house since it is 100K underwater. With only 60K cash, they might last a year with the PITI, food, clothing. If they were smart, they might budget 10K for a van.
My point is that the people in the book went from comfortable to van dwellers within a year of the 2008 collapse
Many made bad financial decisions out of necessity (ie sell low) to afford living as long as they could.
My renting co-workers fared better in 2008.
1) Their rent actually dropped 20%
2) If they still had a job, and if they hadn’t invested in risky stocks (or Bitcoin) (hmm Millennial). they had enough to buy a house at a 50% discount.
I didn’t lose my job and my mortgage was low so we just watched our 401K halve and rode it out to today.. We were the lucky ones who were past living on the edge.
Bob,
By your logic, you should just always wait.
When economy is good and prices are high – you should wait, because it might just become bad.
When economy is bad and prices are low -> well, prices are low because economy is bad and nobody has a job.
And besides, even you when your income is zero and you get rid of your mortgage by selling, you immediately have new liability – RENT. yes, it is more flexible but liability nevertheless.
Home is not a financial asset and should not be treated as such. World thinks otherwise, so in my opinion there are only 2 options:
1) Accumulate cash and wait for a crash and hope you will be able to buy -> requires long term timing/planning and if crisis hit and you lose a job -> you miss out. Meanwhile life goes on.
2) Buy when ready, get your downside protection from negotiations, have 12months in reserve.
3) renting is always a viable option.
RE is a very long term game. Timing it requires proper timing at least twice.
Bob, imagine this person keeps the 100k and does not but a home.
He will probably put 100k into the stocks
Crash -> loses the job. Zero income.
Stocks go to 50k.
Back to the same story, yeah rent a little lower but nothing groundbreaking.
You will have either mortage or Rent liability. Difference in the 2 will not save you if you lose a job.
Surge, you know I agree with you about owning a house long term. It is the best way to retire with a low cost of living.
However, today, in the everything Bubble, I think 2 years worth of cash in a low paying CD, is a good idea. If you can’t do that, you will likely lose any house that you purchase now. Unless you have a nice Trust Fund to fall back on.
Bitcoin or the stock market is not the answer since risky investments lost more than housing during the last downturn only 10 years ago.
Buying a house today prohibits many from having this cash buffer.
Seen it all before, bob
Fantastic post! Couldnt agree more with your points!
I will order that book.
Or just check it out from the library to keep your cash. I did. 🙂
Anecdotal here:
Friends are in contract on a step up property in Newport, but are contingent on their property selling (also in Newport) as obviously they need the down from the net from the other property.
Listed 3 weeks ago at 2.2mil
Offer came in yesterday, 2.05mil CASH
A little bit below the ask but in that price range and all cash that seems like a decent offer.
Cash is coming from Hong Kong, so it still looks like there is plenty of money out east still and that money is able to skirt any Capital controls instituted by those countries.
Clearly this is not the norm for this amount however it is a good example that there’s still a lot of hot foreign money swishing around out there.
Yawn
“Big money from Asia is comingâ€. We hear this since years. How many Asian foreigners have bought in your neighborhood? Exactly! None! It’s all fabricated bs to make you believe there is high demand for overpriced crapshacks. There isn’t. Historic low sales and historic low ownership rates. The trend continues until the bubble pops.
We sold our last home in 2016, to an older Chinese couple who paid cash and are now renting it out. One of our next door neighbors in the new ‘hood is also Chinese. We’ve met her, although they live in San Diego and the house has been empty for over a year.
Must have been my imagination.
When I sold my house in Alameda in 2005, there was one Caucasian left on my street, and it was a long street. All the rest were Asian. One Filipino family, but the rest were foreign-born Chinese. With Chinese accents. And that was 13 years ago.
I forgot to mention that my buyer was Chinese, and paid all cash.
I agree with John D.
Sadly, my mom passed away last year and we sold her house to a Chinese National. All cash with no contingencies.
It was a solid house, last updated in the 1980’s, and we received a fair price (based on our estimated cost to update it to the 21st century) with no hassle and a 5 day close.
It was tempting to keep it for a rental with the $1200/year Prop 13 taxes but my brothers and I thought it would be too difficult to manage it from 400 miles away.
We didn’t pay capital gains due to the outrageous law that allows a house that was inherited to adjust the house cost basis to the date of death. Trump just upped the Estate Tax limit from 5M to 10M this year. It is a good time to die this year if you want to protect your dynasty.
Chinese and foreign money are still out there
Lol
Reminds me of people saying the same thing back in the 80’s about the Japanese
https://www.google.com/amp/s/amp.businessinsider.com/japans-eighties-america-buying-spree-2014-9
It was BS then and it’s BS now
House prices are overpriced by 55-75% and realtards and RE cheerleaders will tell you anything to sucker you into buying high.
Got a little more info, buyers are in fact Chinese and will not be living in the property. They have friends family that have bought in the vicinity and will treat it as a vacation home, planning on coming just a few times a year. Otherwise property will remain vacant.
So, let’s see 4 or 5 of us on this thread have verified first hand that the Chinese cash buyer is out there, yes, mille says it’s fake and a myth. Once again living in his alternate reality.
Fabricated, to make people believe that there is demand for overpriced crapshack. There isn’t. Only a few last suckers buy now before the big crash.
How close is the next real estate bottom?
My best guess is that it is 2 1/2 years away. Once homes reach that bottom, they may stay there for 2-3 years, but I am anxious to buy so I plan to buy early–about the winter of 2020/21.
When do others posting here expect the bottom to be reached?
My educated guess is a 55-75% drop during the next crash. A buy opportunity will happen anywhere between 2-4 years from now. The longer we prolong this fake boom cycle the deeper the recession will be.
I have a totally different perspective when it comes to buying than the avg American. The avg American is a lousy saver and gets into deep debt. In my mind Nobody ever needs to buy. It’s not a goal in life. A goal in life is to find the woman of your life (and don’t divorce), stay debt free, get a great career going, live healthy etc. You most likely end up with owning several houses in your life anyways. Your grandparents and your parents own several houses and all of that will be handed down to us. Even if you can comfortably purchase a house during this peak, why would you overpay 55-75% of what it’s really worth? Buying an overpriced home is not the American Dream, it’s a nightmare. 7 mio foreclosured Homes during the last crash….. lose everything, all that stress? A house is just a box to live in. You rent the box and save a ton of money or you waste your money by renting it from the bank (“purchaseâ€) and way overpay. Financially you will never recover from that mistake (to buy high).
To me it doesn’t really matter when the bottom is. I can buy now but wait until the big crash happens. 2 years, 5 years, 10 years from now. Doesn’t matter to me. Until then I will share my strategy here.
So you’re prepared to stay at your parent’s house for another 10 years?
Karin,
I wish I would live with my parents or in-laws. I would save even more money. My wife and I rent a cheap apartment. And yes, we will stay there as long as it takes for the bubble to pop. The rent is a steal compared to buying.
Gary,
As I have sadly stated before, my crystal ball fell off the shelf during the Northridge Earthquake in 1994 and hasn’t worked very well since. It missed the 2008 housing bubble crash and the 2001 tech stock crash.
However, based on when it was working:
1) I think the Fed is trying to control the economy via the interest rates and so far, the stock market hasn’t crashed and has been flat since January.
2) The Fed is also trying to increase and control inflation to 2%.
My prediction if the Fed can achieve this, housing prices will remain flat for the next 35 years.
If there is a major earthquake (my crystal may fall off the shelf and start working again) , war, nuclear war, bank collapse, recession, Trump impeachment, etc…., it may happen within 3 years if history repeats itself from 2008. The bottom was reached in 2011/2012 the last major crisis happened.
Sorry for the vagueness.
SAN JOSE (KRON) – How high can it go? Are we in a bubble? Is there a crash coming?
We’re talking about the red-hot Bay Area real estate market.
On Friday, KRON4 has some perspective from the South Bay where home prices are rising the fastest.
“I don’t think we’re in a bubble or a peak,” Windemere Real Estate Agent Rick Smith said.
The past president of the Santa Clara County Realtor’s Association Smith just sold a home in San Jose’s Burbank District. It was listed for $899,000 and sold for $1.25 million.
There were multiple offers.
“It’s an average home, three-bedrooms, two baths, 1,100 square feet,” Smith said. “The Burbank area is an up-and-coming area. There’s a lot of things happening nearby San Carlos Street, and it’s close to the Diridon Station where the new Google complex is planned.”
Prices for existing single-family homes in the nine-county Bay Area region are up 11 percent from a year ago to a record $893,000.
In Santa Clara County, which saw a 25 percent jump over last April, the median price is now $1,308,000, according to the real estate data firm CoreLogic.
Alameda is up 11.8 percent while San Mateo County grew 7 percent.
“Microsoft, Google, Facebook, Apple, all of these companies are making substantial investments in land and office buildings across the South Bay and Peninsula, and their message is they’re here and they’re here to stay and they are attracting top-flight people,” Smith said.
Smith says the association’s national research committee sees prices rising 8 percent per year for at least two more years.
He says inventory is up slightly but deals get done fast. The home he just sold was on the market for just nine days.
No matter how you spin it, this red-hot real estate market comes down to supply and demand.
There is a very limited supply and a seemingly insatiable demand.
“Windermere Real Estate agent saidâ€
All you got to know….trash can is the right place for it. This is the biggest bubble in history. It will end in tears for many and for some who wait and buy low it will be a lottery win.
As an avid hiker and mountain biker, I can say that the homeless situation is a lot worse than reported. I can’t tell you how many times I have come across people or groups of people living in the middle of nowhere.
The cause isn’t hard to figure out, there is a limited amount of money available to pay employees and management is taking an insanely large part of the pie. As a management consultant for an international firm, I can literally count on one hand the number of truly exceptional managers I have worked with over the past decade or so. The biggest issue for many is that they have been sheltered from the real world since they were children. For example one former client I met up with and we were just shooting the breeze. I mentioned that my car was in the shop and he handed me $50. I thanked him and didn’t think much about it until later when he handed me a movie giftcard for my birthday and I fell off my chair when I noticed the amount was in the tens of thousands of dollars. He literally doesn’t know what stuff costs.
somehow I smell and utter lie here. Come one, tens of thousands of dollars in a movie card? I know you want to illustrate a case here with fictional account, but come on…
They used to be called hobos or bums. They have always been around. There is just more of them around now. Why? Does it matter? People are uncomfortable with lots of hobos around now in their neighborhoods with their over-inflated housing prices. Government must do something about it? So they pass a tax for government to figure something out. A waste of money. You can’t go to a homeless person and put a gun to their head and force them to live in housing. So now you have NIMBY’s not wanting housing for homeless in their neighborhood as they think it will pull down their house prices. Believe me, not to worry, as hobos are hobos for a reason. They can’t live indoors for some reason.
Leave a Reply