L.A. and O.C. least affordable rental markets: Rental market is at odds with weak employment growth and weak income figures.
It should come as no surprise that the L.A. and O.C. housing markets are the least affordable in the entire nation. That is right, even more unaffordable than San Francisco or New York. Why? Because even though New York and San Francisco have higher rental costs, people make more money. Should be common sense but it should be apparent that people in SoCal like stretching their budgets. It might be the Hollywood allure of “acting†rich instead of actually being wealthy. Fake it till you make it. Hence the broke older homeowners with their boomerang adult-children coming to live back home. Rents are paid by net income. There is no extra mortgage leverage that you can squeeze out of a rental payment. You either make the monthly payment or you don’t. And seeing this data simply confirms that many in SoCal would rather act the role of being rich instead of taking steps to being wealthy.
The least affordable rental market
Keep in mind that the majority of those living in L.A. (the biggest county in the state) are under renting households. The trend has only magnified over the last decade given the boom and bust nature of housing. This is why it isn’t surprising that the volume of new buyers in recent years has come from many outside of the area including local, domestic, and foreign investors. That trend has slowed down but in reality, the economics for those in the area are not as hot and this new analysis from Zillow simply confirms this continuing serfdom trend for native Californians:
“(LA Times) Housing prices here are high, though not as high as in the Bay Area, and comparable to New York, Washington and Boston. Those places score better on affordability measures, though, because people there tend to earn more than the average Southland resident. Median household income in the San Francisco area in the second quarter was $76,239, according to Zillow; in the L.A.-O.C. area it was $59,424.
“Los Angeles has a lower median household income than comparable cities such as New York or San Francisco but only a small difference in median rents,” the UCLA report said.
Even for professionals with good incomes, buying a house in Southern California is a heavy lift, as Natalie Lohrenz sees every day.â€
Of course this comes from the economics of the area. And if you look at actual job growth across the state, you’ll find that L.A. and O.C. are way at the bottom (only beating out Bakersfield):
Source: USC Lusk Center for Real Estate
What has happened at least in the last few years is that more disposable income is being consumed by housing payments here in the Southland. This obviously has bigger ramification for the region in terms of business growth and where people spend their money. Yet it also helps to underscore the massive number of people in leased cars or those up to debt to their eyeballs, including those squeezing into buying homes.
Ideally what you would be seeing is solid underlying economic growth combined with growth in housing. Yet what you find is a market where people are simply spending more and given the high number of Wall Street investors, more of this money is simply flowing out of the state.
In the end, this is the result for California:
Conversely, renting households have grown. That is the overall trend nationwide and definitely is the case here in California. It shouldn’t be a shock that the L.A. and O.C. rental markets are the least affordable in the nation. It simply reflects an “all hat and no cattle†way of living. Nothing wrong with that. If you want to spend every penny you make squeezing into a house or renting a place that is beyond your means, go for it. I know of people living in fantastic homes near the beach with hefty leases. They are happy doing so. You also have people willing to take on mega mortgages to buy a home. Nothing wrong with that either. But don’t let the status symbols fool you. We have 2.3 million grown adults living with their older parents because for many, they can’t even afford a rental given this unaffordable market. Buying a home is even further beyond their reach. This is why sales volume is incredibly pathetic in the state.
I think many older homeowners are living in what amounts to be a granite countertop, hardwood floor, recessed lighting, and red door stucco sarcophagus. Certainly not living high on the hog since a home with massive equity is not throwing off an income stream until you sell. But many are staying put and eating Friskies and Purina Dog Chow to supplement their Taco Tuesday meal plan. The vast majority are trying to keep up by going deep into debt. Even when some of these households have their act together, they will find their kids going into deep debt to pay for college. So go for it if you want to stretch your budget! #YoLoRealEstate. Go out and buy that $700,000 crap shack since it is clear from this data that people in SoCal love living beyond their means. Of course we all know what happens when those pesky recessions rear their ugly heads, but then again the last bust is ancient history.
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139 Responses to “L.A. and O.C. least affordable rental markets: Rental market is at odds with weak employment growth and weak income figures.”
Serendipity with the “red door stucco sarcophagus” comment Doctor. JUST NOW, minutes before reading this article, I had a conversation with myu neighbor here in Ropwland Heights abuout his finances. His SSecurity isn’t getting it done and he’s dealing with health issues and not enough income. Now he’s retired law enforcement so his retirement income streams are likely better than most and he bought his house decades ago. The entirety of the SoCal Housing Market is an illusion. Whether from entertainment and tech workers leveraged to the hilt or retirees who will tank prices if they sell, but can barely afford to hold. I’m young with an 80k down payment and more than happy to wait them out.
My current rental is 2K a month for a 4/3 2000SqFt fixer that ain’t been fixed. I’m benefiting from one of our recent immigrants who bought peak in 2006 for 600K with 300k of his own $ (probably family borrowed) and had to relocate to Texas for employment. He doesn’t want to sell and take his losses and Bubble 2.0 likely has him hopeful. I don’t know what the next crash will do to him but if he won’t sell to me at a realistic rice of $350K (Place need A LOT of work) post bust I’m sure I’ll have many other options.
The Housing Perma Bulls don’t get that the world wide financial system is 3 times as over leveraged as 2007! When the correction comes I don’t think the world will stop, but much like 2008 deflation HAS to take hold. There is simply no other way out of this. Bubble 1.0 fleeced the sheeple. Bubble 2.0 is going to rape the specuvestors. I don’t see anyway the FED can inflate a third bubble for at least a decade as there are no greater fools that actually have capital. The math is the math is the math.
Haven’t you heard the good news? It’s just plateaus from here on out. A guy with a crystal ball told me so.
Hello, What?
Nope. whole other peoples…
LA #12 most innovative city on the planet:
http://www.innovation-cities.com/innovation-cities-top-100-index-2012-city-rankings/7235
DFresh, you ought to work for Buzzfeed, I’m sure they could use your services for the discovery of trifling top n lists. Interestingly there are–gasp–cold weather inland non-mediterranean climate, can’t ski/surf/sit in traffic on the same day, non-monied Chinese destinations on your list above number 12. And again, L.A. doesn’t make the top ten but hey it’s with the likes of Paris and London! Since Boston is at the top of the list, I guess it’s with the likes of Paris and London. Boston has some great attributes and I’d certainly not mind living there but one is not as likely to hear some doucher there espousing how Boston is on the level of London and Paris and then pointing to this list as supporting evidence.
In actual news that matters, this just in, L.A.’s long-declining violent crime total on pace to rise this year. I know you can find a way to spin and deflect this in the classic reality glossed-over self promoting L.A. style. Maybe we’re holding it wrong.
http://www.latimes.com/local/crime/la-me-crime-stats-20141004-story.html
Monetize the debt?
you’re kidding right? The debt has already been monetized about 20 times over!
Nice Post!
Housing To Tank Hard in 2014!!
Housing Tanked Hard in 2014! 😛
Not happening, told ya already 🙂
No one in this conversation really cares about your bullshit metric. Once prices stop going up the Ponzi has tanked. Any middle class or entry stucco shack is selling for at least 5% less than last year’s price, and that’s IF you can sell it. Your Sophmoric definition of a tank that is Ailey based on trailing indicators might fly in the CNBC forums, but not here. And of UR trolling, you’re doing a pedestrian job at best…
@guy from seattle — we are tanking and you’re playing the violin. Your presenting false information based on an unsupported position. Where’s the collateral material to support your argument that we’re not tanking right now?
Does a triple dip qualify as a tank? “Home prices headed for a triple dipâ€
https://homes.yahoo.com/news/home-prices-headed-triple-dip-124200714.html
“After 3 Years, London House-Price Boom Endingâ€
http://www.moneyandmarkets.com/news/its-over-after-3-years-londons-manic-house-price-boom-is-ending-66969#.VDaPFdMtCUk
Housing is tanking, how about 25%…. https://www.redfin.com/CA/Thousand-Oaks/1632-Hauser-Cir-91362/home/4665281
RE:conejo
The funny thing is they have it pending at the 619K asking (though who knows if that’s what they got) yet eappraisal has it at 549K. They’re usually closer to reality than Zillow, though there estimates have gotten wacky in the last year as well. The Redfin ad says: “Sellers want this SOLD now! Hugh price Reduction!!” Looks like those sellers are smart and not trying to fight reality. If this pending goes sold they’ll be glad they didn’t.
Seems like calm little moments before the storm…
More calm little moments – the increasing numbers of anxious real estate agents’ flyers showing up on my doorstep bringing the good news that this time is now a good time to buy one of the overpriced crapshacks in my neighborhood.
I just looked at that Thousand Oaks listing, who wouldn’t pay top dollar for that amazing seafoam green carpet! Greedy asswipes riding the price wave down, enjoy the ride!
I am fortunate enough to BE rich, not just faking it. Lots of hard work for many years paid off. But I see many people faking it- Driving an S class Mercedes(leased, not owned), renting a condo in Newport Beach, because they like the lifestyle.
Taking fancy vacations that they can’t really afford, but put on plastic. One couple that I know well wears the latest clothes (designer only, of course), go to Europe every year, and drive newer cars including a Porsche. When one of them lost a job, they could not make the rent! Income over 100 K, and NO savings.
But they certainly LOOK prosperous.
@Randy, how much money does a person have to have to be considered rich these days?
The “Golden Sarcophagus” crowd over on the various early retirement forums debate this question endlessly. Short answer is that if you have twice as much money as whoever is posting then you’re rich – if you have half as much then you’re a pitiful wretch doomed to struggle. This view seems to hold at net worths ranging from a few $100K to $10M+.
Rich in the heart of Los Angeles, I.e the best neighborhoods with good schools and safety? I would say an unleveraged net worth of 7 million+ with a good salary of $1.5m+ a year. Very well off? A salary of $700-1.5M, $2.5-7M net worth. Well off: at least a salary of $350K, with $1-2.5M net worth. Anything less is “doing OK” in l.a, if you compare the standard of living to cheap parts of the country, on a $100K/yr salary.
Question….Good question, we have what I would say a very comfortable life that said rich, for many who coudn’t attain the so called rich satus all I can truly say, if you are happy with your circumstances, happy most of the week, and most important healthy, you are rich and better off then folks with money, who are miserable people for the most part we find in our circle.
@ apolitical scientist: The “Golden Sarcophagus†crowd over on the various early retirement forums debate this question endlessly. Short answer is that if you have twice as much money as whoever is posting then you’re rich – if you have half as much then you’re a pitiful wretch doomed to struggle. This view seems to hold at net worths ranging from a few $100K to $10M+.
_____
Interesting glimpse and good idea to research into such a forum.
Two short comedy sketches into what I see a lot of:
“Considerably richer than you.”
1) [1 minute 27 secs] http://www.youtube.com/watch?v=hcxs-CH4kG0
2) [1 minute 45 secs] http://www.youtube.com/watch?v=JNa-KLhUfU4
There are too many “Considerably richer than you” people out there.
Did anyone see “The Company Men” movie with Ben Affleck (2010) – his world so cushy dream, big money income, Porsche (leased), golf clubs and holidays and feeling good and invincible… THEN sudden shock of company people closing their office. Can’t let go of his ‘success’ in following weeks… money suddenly tight.
[Wife] You’re getting the Porsche detailed?
[Ben Affleck’s Character] “I need the Porsche to look… successful.”
I was gonna say $5 Million is “rich”. You need to have enough where your money makes money for you.
“Nothing feels better than money in the bank”,….. not even granite counter tops. 🙂
Didn’t you know that money in the bank is being devalued by inflation? There’s nothing better than putting money in proven long term wealth producing assets…
Many choose to live FAKE RICH than REAL POOR.
Rising rents are real, but a temporary phenomenon. Right now, SoCal is a big fad. it always has been, and as long as that stays true, people are going to continue to pile in here. And they ain’t building fast enough, so that means increased demand.
However, as wages here are not rising, and people continue to double bunk, that will eventually put downward pressure on rents. So could a black swan event, rents were stagnant during 2007 to 2009. I was a renter, I know. And regardless of the market condition, CA real estate is a hot commodity that people will always want to build on. Even during the recession the sharks came in and scooped up everything they could from the bottom feeders, at deep discounts. They will build and make a profit.
The market may be out of whack right now, and expensive, but not forever.
A bigger problem I foresee is Obamacares effects, and the general problem of lack of employer loyalty. Without pensions, or big incentives to hold on long term, why stay? This brain drain costs companies money in the long run. Costing companies money means they don’t perform as well, thus leading to lower pay and or relocation.
This could be a decade of giant pulling forward demand, leading to stagflation. Or it could be a massive peak, although considering the USA is the best place for investment, I hardly think the party will end any time soon. In fact if the dollar rises, and other currencies continue to fall, we will be in for massive investment coming toward us. America always finds a way. But in general lower home prices would be healthier for consumer spending.
“A bigger problem I foresee is Obamacares effects, and the general problem of lack of employer loyalty. Without pensions, or big incentives to hold on long term, why stay?”
With all due respect, this is crapola. I am no fan of Obamacare (nèe Romneycare) but any increase job mobility would be a big and positive feature of the law, helping to end job-lock and removing a major obstacle to people starting their own small businesses.
I will be”loyal” to my employer to the extent they compensate me and I expect they will be no more loyal to me than to the extent I produce for them. The idea that I need to rely on them to decide what health plan I may buy is galling. Why are we the only developed country where employers are required to source and pay for their workers’ healthcare? It’s backward and it puts American business at a disadvantage.
Also, pensions? Are you from the past?
I think you have this confused given the backdrop of stagnant wages.
So why were employees of previous generations staying for 20 years, getting gold watches, and collecting their employer managed pensions? Employees aren’t loyal to businesses because businesses aren’t loyal to employees. Younger employees are loyal only to themselves because they watched their parents, aunts, uncles, and neighbors be laid off unceremoniously. They also watched the company claim bankruptcy and yank grandma’s pension. They also see businesses have record cash on hand while getting passed over for raises or forced to work as temps. This is the culture of cut throat capitalism that businesses created.
Companies losing employees because employees aren’t compensated well enough is a business model CHOICE. If they feel losing their trained employees is a better deal than increasing compensation? That is their choice. If their competitors seize on this to destroy them? That is their fault. It is the free market. Those same companies can’t cry because they can’t stay competitive. Their business models are broken.
It seems everyone is pro free market capitalism until it starts to point out that the worker is getting the raw deal.
@ The Realist – “In fact if the dollar rises, and other currencies continue to fall, we will be in for massive investment coming toward us.”
_____
Europe has just had a rough week on the stock markets. Some of our defensive stocks have plunged, now down 50% down on 52 weeks (I am in dry powder… shares nor houses are money, they have a value which is subject to change, and it only becomes money when you trade back to money).
US taper rattling European markets in my view. Politicians soon to meet about fears of a global slowdown. I accept US dollar hardens, but surely US interests will be looking at snapping up opportunities overseas/Europe at distressed prices. I am wondering if we will see a notible drop in European holidaymakers to California in time soon to come as well. As and when Europe prime real estate crashes (eg London).
Wild times ahead. The people who caused all this problem back in 2004,2005 , the climax being 2006, who went to jail? Those who want their money back on their house sorry out of luck, for those who want a great deal but can’t afford it, for those who think they have it all fiqured out, I say good luck in the free for all in the midldle of the ring, the last person standing, won’t be much left anyway, we all lost in the housing crisis, thanks Feds, Banks, builders , Re Agents, loan officers, etc. hope you all sleep well.
>> “Re Agents, loan officers, etc. hope you all sleep well.” (as noted in the post above)
Ironically, it will be the R.E. Agents/Brokers, Loan Officers, Escrow companies that will trigger the FALL IN R.E. Prices. These guys are all middle men and they MUST PAY THEIR BILLS ….. So what will they say ????
” Sorry Mr. R.E. SELLER, the ‘top dollar’ days are over, your p.o.s. house will not sell at last quarters average prices …. MARK IT DOWN … OR IT WON’ T SELL ….Tough luck”
What are the middle-men thinking ??:
” Damn-it I gotta pay my bills too and I gotta sell a house real fast or I’m screwed
and the Seller can just F.OFF. — I NEED TO SELL SOMETHING .. NOW !!!!
DROP YOU DAMN PRICE NOW ….. ”
~~~~~~~~~~~~~~
**AND THAT IS EXACTLY HOW THIS PRICING ABERRATION WILL CORRECT ITSELF.**
~~~~~~~~~~~~~~
Why rent when apparently housing is still 3% undervalue according to them…better get in on the maniac now…
http://finance.yahoo.com/news/what-slowdown–home-prices-are-undervalued-by-3-122221942.html
Those are national #s, not Socal
Bullshit like this from Trulia, Zillow, etc is a sure sign of a market top! The normal lie of saying things have moderated and will remain healthy wasn’t enough to bring in the sheeple, so they create some undervalue fantasy to make one last play for the proles.
ZerO….Trulia and Zillow should be banned, and this from the ultimate capitalist me, these folks at best should be sued for gross misinformation.
According to Yahoo Finance (MSM, ABC, Fox, MSNBC, CNN, etc) stocks are good buys too, regular folk “missing out” the “opportunity”. I stopped reading / watching the propaganda news long time a go, I don’t wonder why CNN lays off 1600 employees (10% of the work force). I think some people finally start to wake up…
CNBC is courting Jay Leno… I think they already have quite the comedic lineup on that network! Then again, not everyone considers Jay Leno to be funny.
Seattle, where exactly do you get your news from? You claim to not watch “propaganda news” yet ALL your comments here are sourced directly from Fox and MSM.
I agree with NihilistZ and Jim T – your trollitude is at best pedestrian. The bar has been set high by the likes of @What?, so if you’re trying to troll this blog, you really need to step up your game.
And if you’re actually attempting to add insight to this conversation, perhaps it’s time to step back and think about the advice that many more seasoned intellectuals than yourself have been trying to impart your way for weeks.
We’ve tried to help. But you, Mr Seattle, are a lackluster sheeple.
And I look forward to scooping up more properties in your neighborhood when SHTF.
The commenters here been trying to educate you how to do so yourself.
I hope you’re ready!
@Seattle$$$Investor & @NihilistZerO, you still don’t get it, do you? @What? gets it and this why you call him a troll. I get it and this is why I am a troll now. Please tell me what I have said wrong on this forum… ever…
You try to bring the fundamentals and rationalism to the conversation. But what if I tell you that the economy is irrational, what if I tell you that most of the steeple make their decisions based not on fundamentals, but on the BS propaganda coming from the blue screens. I am not watching MSM and Fox, I have nothing with republicans or democrats. I am a libertarian/fiscal conservative. The both parties are corrupt, the all news outlets are corrupt. Where do I get my news from? People like Peter Schiff, Cobalt report, Zero Hedge and all the other alternative media news. Now… if we are done calling the “guy” a troll, lets get back to where we were.
Now, let me give you something, the truth… And the truth is that the markets are rigged. Whether you like it or not, whether you agree with it or not, whether you admit it or not, it doesn’t matter. The housing market is rigged, the bond market is rigged, the precious metals market is rigged (via derivatives), the stock market is rigged, the whole economy is rigged. Now, why the economy didn’t collapse yet, why do we still keep going, we are we still in so called recovery. The numbers are rigged, the employment, the GDP, the inflation, etc. The reason that cased the 2000 crash and then 2008 and the next crash ( I predict 2016…) is still here. The issues were not addressed, we keep kicking the can down the road. We keep solving the problems using the same methods that caused the problems in the first place. We keep re-inflating the same bubbles over and over again. Now, why I think the housing will not tank in 2014? The reason is the same as why it has been going up for the last three years? Did people become richer? Did the employment improve? NO!!! unless you believe the BS propaganda. The housing will collapse, no question about it, but the same will be the economy. Not because the housing is the major part of the economy, but because the same reasons that would cause it to collapse (interest rates, the FED taper, etc) will cause all the other bubbles to burst (stocks, bonds, etc). And as long as the FED keeps printing you will see no collapse. At some point they won’t be able to print anymore because the dollar will collapse then, which is even worse. Remember, the FED can easily “untaper” if it see the danger of the recession. The same with the interest rates, they can always go to negative. And don’t expect the prices to drop 30% without tanking the entire system. It the prices tank 30% (or 40% or even 50%) the same will everything else. Like I said, it doesn’t matter if the housing becomes once again affordable if you don’t have a job to buy it (or get a mortgage)
@SeattleDude
I’m calling you a troll because you DO seem to understand some of our deeper problems. Yet just like Peter Schiff and a lot of the guys on ZH, while correct about the overall problem are COMPLETELY wrong about the outcomes. Schiff has been DEAD wrong on stocks for seven years costing his clients TONS of money. The guys on ZH who think the FED omnipotent ignore the UNIVERSAL deflationary tank that follows EVERY FED inflationary boom. Market rigging can only do so much, see the former USSR. Full of people and natural resources and suffered a complete economic implosion that destroyed both their currency AND asset values at the same time!
Knowing what you seem to know you sound like an idiot saying the FED can taper and untaper rates up, down, in, out willy nilly without SERIOUS macroeconomic consequences. They are going to let the next round of deflation unfold and yes I agree with you the price tank is probably a year and a half out. Now if you trully believe that tank won’t be 30% or more your delusional. And yes this can be done without grinding the economy to a halt. In fact this will likely unleash a period of relative stable prices and financial calm. See the mid 90’s recession that 90% of the populace would prefer to the “recovery” we have now. I agree with you on quite a few points which makes the illogicality of your other thesis all the more baffling…
Interest rates are dropping fast. This will cause another big jump in housing prices. Early this year, everyone said rates would rise sharply which would cause a price drop. Instead, rates dropped sharply, and prices will jump again. Won’t be long until rates get so low another housing buying panic will occur.
Right on the money jt. As of today (Oct. 8, 2014), 30 year fixed conforming loans with 0 points are 4.04%. Yes, you read that correctly. Will we see 30 year money with a 3 handle soon? Predicting rates is a fool’s game. Everybody was calling for higher rates in 2009, 2010, 2011, 2012, 2013, 2014…
As I have preached before, the Fed will outlast everybody here. You can take that to the bank!
Sales are still falling. This is bigger than rates. You gotta get off the crack pipe. Stop with the misinformation campaign that the Fed holds all the cards.
What has transpired in the last half decade should tell you that the Fed holds ALL the cards. Anybody who has bet against the Fed has got utterly obliterated. To think the Fed will just stop the manipulation tomorrow is foolish. This will continue until it can’t…and that will be a loooooooooong time!
@Yeta. YOU get it.
Also I am not betting against the Fed. My belief is the Fed wants a correction in low-mid-high prime areas, so recapitalized banks can get fresh lending on real estate that tends to be mainly in possession of older owners – with no mortgage or who are equity rich, complacently believing their super high valued homes can’t fall in value.
You can’t be serious. Five years of recent history is supposed to prove that the Fed operates in a vacuum? That’s about as nutty as blert suggesting the BOE scrapes his blog comments for their publications.
Don’t bet against the Fed is a useless platitude designed for those who can’t be bothered to grasp the larger picture of dynamic global trade and political interactions.
I think the FED maybe trying to change psychology on what rates should be in regards to price of the home. Should homes be priced at $200k with 3-4% or $400K with the same rate? Maybe by poking the interest rates up on occasion they maybe trying to force buyers to accept less or wait for prices to come in line with their expectations. Just seems to be the only way to deflate this market slowly or bring realism to the market again.
All In my opinion.
Yeta, I still don’t think you get it. Manipulation via the Fed has been going on for decades. What has taken place the last 5 or 6 years has shown the Fed will pull out ALL the stops to protect their vested interests. With that being said, when the economy hits another rough patch…rest assured the Fed will take drastic action. You will get zero benefits of Fed action being a saver or renter. I don’t agree with what has transpired, I would love a perfect financial world with no manipulation. Looking out after your own self interests should be your number one priority…and that means profiting from Fed policy instead of trying to fight it.
jt….Yes, could be short term panic buying with mortage rates shifting lower.
Low interest rates are here to stay for much longer than you expect… The FED can talk taper talk, but they cannot walk the taper walk…
These will be the same rates where Ben Bernanke is saying he didn’t qualify (was turned down) for a remortgage, recently?
http://www.telegraph.co.uk/finance/economics/11137589/Ben-Bernanke-I-tried-to-remortgage-but-was-turned-down.html
Credit credit everwhere, but not a dollar to borrow.
Watch out for tightening criteria… getting to ever higher quality credit applicants can qualify for best deals. Where you have skin+meat in the equation for the banks to come after, or a solid income/employment. Even then, such people may not want to borrow when they expect better value, or taking cautious positions towards debt.
Today federal open market committee minutes suggested the FED will keep rates lower longer… The stocks rallied on this news. Remember, the FED can talk taper (interest rates, etc) as long as it wans, but can’t actually do that. The FED has printed over 4 Trils $$$ over the last 5 years and kept the interest rates at 0, and we still don’t have any recovery and the economy stinks. What you would expect the FED to do now? Raising interest rates will be the last thing they do and they will do it only if they have to, not because they can. I don’t see the interest rates rising any time soon… the show must go on…
Looks like you spoke too soon as those movements have already been retraced.
See the stocks rebound in a couple of days. Until the the FED actually starts dong something, there will be no crash or tank. Stealth QE anyone?
1. Housing prices are higher on Y-o-Y – check
2. Inventory is still historically low, even with the recent increases – check
3. FED is still printing – check
4. Gold and Silver at their multiyear lows – check
5. The interest rates are still at 0 – check
6. The rents are all time high – check
7. The rental vacancies are low – check
…
I see no tanks as far as I can see, I am sorry, @Jim & @0, this is just the way it is…
Why do you post so much? Seems like you post once for every other time another person posts. What are you so afraid of. If you are so convinced housing is fairly priced why do you even read and post here?
I think deep down you know housing is headed for an epic collapse, but it scares you, so you so you want to convince us to agree with you to make you feel better. Not going to happen.
Housing To Tank Hard in 2014!!
PS. Every metric you just listed are perfect contraian indicators that we are at a market top, so your evidence does not back up your argument.
@Jim, I am not surprised your replies anymore … Do you ever read my comments, or you just don’t get it? I have never said the housing it’s fairly priced. I have never said the prices will not collapse… I have always said we have been in recession for the last 5 years. What I was always saying is that the .GOV and the fed have created the biggest ponzy scheme in the it’s history. The whole economy is in a bubble now. It is not just housing, it is stocks, bonds, and the biggest of all its the dollar bubble. What? I was trying to say is that the same reason that drove the prices to this level will keep them elevated… The housing prices are ridiculous, it’s the fact, but they were ridiculous 2 years ago because the bubble never deflated in the first place. But it did present them from rising. The same reason will prevent them from falling… The ponzy will continue until it won’t, then we will see the collapse. But it won’t be just housing collapse, the whole economy will implode. Housing to tank hard in 2016…
Exactly. The key to successful investing is often reading between the lines.
Throwing around numbers collected from the 24hr news networks is a fool’s errand.
Mr Seattle, are you listening?
Guy from Seattle is not afraid of prices coming down. He is desperate to buy a house and he can’t. What he is afraid of is that interest will slide down and he has to wait longer till the prices readjust so he can buy a house. From my point of view (I already have a paid house) I am like the guy in Seattle – I would like lower prices so I can buy more rentals (I like the cash flow even if it comes with headaches). But I like to buy them with cash – I hate debt.
I agree with all those saying that prices are high. I would like lower prices but given the state of the economy I can’t see higher interest in the foreseeable future regardless of what the media and the FED are saying. I see interest staying low and that decreases my RE purchasing power for cash. I would like to be wrong but I have enough education and experience to believe that I am wrong.
@Flyover to Jim, thank you pal, I can actually see that some people can read…
The reason posters are picking on “Guy Seattle” is because of his interpretation of the current market indicators.
Lots of people agree that housing prices in So Cal (and Seattle) are currently too high relative to incomes. And lots agree that there is bubble-type activity in many of the standard investment vehicles. Some commenters here claim these facts are indisputable and have provided solid historical evidence as such.
Jim and others are pointing out that market indicators to date in 2014 have signaled a change in the upward trajectory of the housing bubble. They have defined this as the “tank” which signals a change in market behavior to come.
Guy Seattle interprets these indicators to mean a “tank” will not happen until 2015 – and now he says 2016.
Perhaps this is a debate over the semantics of what defines a “tank” in the housing market.
If tanking means to “fail completely, especially at great financial cost” I personally think Jim and NihilistZ’s comments are a much more accurate perspective on the current and future housing and financial markets.
With less than 3 months left in 2014, perhaps only time will tell.
1. Small sales volume – check
2. Median income decreasing – check
3. Excess liquidity chasing returns – check
We lived through the biggest fake economy in modern times. TPTB papered over the downside with cheap cash. The bottom never truly fell out of asset prices. Wages are not rising. Trading volumes for assets are quite low masking weakness. Rich Chinese, South Americans and Europeans can’t find ways to make money in their own countries and are buying inflated assets here, but we take that as a good sign. How does this not blow up?
A bad market is when wages are stagnant or decreasing while home prices increasing. Without shady lending practices or a stimulus, this means more Americans will not be in the housing market. Everything else is just dressing.
The current market is upheld by investors, foreign buying, or unaffordable loans. The Feds is squeezing the remaining water from the rag and then will have no choice but to raise rates. That is, if they care for Americans to own. We’re quickly becoming a serfdom country and one that big corporation profits from our hard earned money through production and now with rent money.
It’s like you’re willfully ignoring the info that continues to be posted. Is that trolling?
https://ycharts.com/indicators/us_existing_home_inventory
When renters can’t afford high rents, they double and triple up. When enough renters double and triple up, they create vacancies in the housing market. If they create enough vacancies in the housing marke, rents will drop.
Markets, like nature, abhor a vacuum.
“Median household income in the San Francisco area in the second quarter was $76,239, according to Zillow; in the L.A.-O.C. area it was $59,424.”
Note: just counting the Los Angles-Long Beach-Glendale region, (i.e. excluding affluent Orange County where median household income is about $72K), median household income in the L.A. metro area is about $53K, so renting in L.A. is much worse than the article implies.
As you have stated flat-out that LA is not an elite global city…you have absolutely ZERO credibility on this board about LA real estate.
I say it IS different here. I have 3rd party substantiation.
You say it is NOT different here. You have opinions of you and your visiting friends.
That’s the difference. And that’s whatever else that’s cloaked in your “rationale” falls flat.
A) Top 10 Must Influential Global Cities (2014 Forbes):
w.forbes.com/pictures/edgl45ghmd/no-10-tie-los-angeles/
B) The 2010 Global Cities Index, a collaboration between Foreign Policy, management consulting firm A.T. Kearney, and The Chicago Council on Global Affairs, reveals a snapshot of this pivotal moment. In 2010, five of the world’s 10 most global cities are in Asia and the Pacific: Tokyo, Hong Kong, Singapore, Sydney, and Seoul. Three — New York, Chicago, and Los Angeles — are American cities.
C) http://www.forbes.com/sites/stephenharner/2014/10/09/the-mori-foundations-global-power-city-index-2104-ranks-london-1-new-york-2-tokyo-4/
So, your foggy Boomer brain falls back on irrelevant hh median income argument (as a primary indicator for affordability) for LA.
Median incomes blah blah blah blah blah.
I’ve given reason after reason why “median HH income” is a crap indicator for affordability in SoCal (Prop 13 lottery winners staying put; regional SFR build-out; global 1% looking to park cash in elite, safe, global cities like LA; unabating global urbanization trend; Thousands of cash and carry immigrant businesses; Boomers renting our bedrooms; SoCal global brand; LA kinship with the new economic powerhouses in Asia, etc.
Tell me, EB, what conspiracy is making a county of 10,000,000 “overpay” (based on your magical “median income”) for rent or mortgage?
What, is SoCal that awesome (I clearly believe it is)?
But, to you to your friends who come to visit you, “most” of LA is a swamp-dump.
OK, explain the economic principles at work that would FORCE people to OVERPAY to live in a SWAMP-DUMP, but in areas here your family and friends live (presumably), where it’s so GREAT, they don’t overpay.
“global 1% looking to park cash in elite, safe, global cities like LA”
1. It is not elite (over 95% of it)
2. It is not safe (over 95% of it)
If you are talking about few enclaves of gated communities along the coast, then I agree with you – it is elite and it is safe. If you are talking about LA metro area in general, it is definitely a dump looking like a third world country with poverty to the max – nothing elite about it and no safety. Sorry to tell you that I care less what a magazine says. Magazines can not change the reality.
I know LA metro area very, very well. I lived there and I studied there. No magazine can tell me that LA is different than what I saw with my own eyes. If LA metro area at large is elite, that means that the rest of US is heaven.
You also said also that median HH income it is not important for LA. Again, if you are talking for the top 5% of LA (the elite gated communities along the coast) I agree with you – income means nothing.
If you are talking about the other 95% LA area at large, then median HH income is everything.
I don’t like when people paint with a wide brush the whole SoCal area one way or another. It is a very segmented market where in some income doesn’t mean anything and in some it means everything. To deny that it means you are blind.
earnst, I’m willing to bet that DFresh is either a SoCal native that truly wants to believe the hubris that his/her hometown is the bees knees or a transplant desperately clinging to the belief that the move here was worth whatever was left behind. I can understand how either point of view becomes formed but this subjective platitude of global elite city is simply trite distraction from debating details that matter.
Ernst, see Dfresh’s succinct reply to why median incomes are bad indicators regarding affordability in socal. Hasn’t it been stated here multiple times that the majority of households in LA are renters. You don’t need an advanced degree to realize that the hh median income of renters is way below that of owners here. Many of these long time owners couldn’t afford to buy their own place at present prices. So that leaves TODAY’S buyers…their median hh income is way above the 59K per year number listed. Buying an expensive socal home is the last thing a 59K per year family is thinking about…they are likely fretting about their next rent or car payment.
This is a city of haves and have nots and the divided grows everyday. Everybody’s priority should be to join the haves camp. It will take plenty of hard work and sacrifice, but it will be well worth it in the end.
After 20 years I am leaving the shithole known as Los Angeles. I’m selling my crapshack purchased in 2012 for almost double what I paid and buying a couple acres in rural San Diego with mountain views and a house over double the size and 60+ years newer with the profit. See ya suckers!
I’m right behind you Hunan. Well played sir.
“I’m selling my crapshack purchased in 2012 for almost double what I paid and buying a couple acres in rural San Diego with mountain views and a house over double the size and 60+ years newer with the profit. See ya suckers!”
Obviously somebody values your crap shack in the city more than they would the country-side.
Live and let live, baby.
And there are people picking through our thrown out garbage whom value the food scraps we leave behind.
The writing is on the wall. It’s time to cash in the lottery ticket. Feds will raise interest rates in 2015 and mortgage rates will follow suit. Once rates head towards 5% the party will be over. Home prices will stall and/or go down as interest rates rise. Right now interest rates are the lowest they have been in years but will not remain that way. Pay now or pay later, either way you lose.
Dream on…!!!!!…
Not only the interest will not be increased in 2015 but QE5 is a very strong possibility.
Just wait and see!….If you don’t believe me, you’ll see with your own eyes. Just because you hear people on MSM saying interest increase it doesn’t make it so. The FED is saying that sometimes to create some demand now; however, there will be no rate increase in 2015.
right on Jim!!!
It’s all interesting. Funny how people actually feel better when they us only the real estate they need. I saw a friend drop off his house and his life style improved. No $3500 a month mortgage, no $250 utility bill, no $600 a month tax bill, no $300 maintenance bill. Now he is free, oh ya investing – america is not where the heady growth is. So he plunged his money into south eat asia and came back with enough to buy his house outright, but funny thing is when you see it and understand it you realize that you can’t go back to being stupid with your money – and housing is just one way of being stupid with your money.
LOL. You need to live somewhere. If you can buy a house/condo for not much more than renting, there’s not a whole lot of downside. Furthermore, your mortgage effectively gets cheaper over time due to inflation. Conversely, if you are always a renter, your rents go up and up.
And investing in Southeast Asia? What same person would invest any substantial amount of money that they worked hard to earn in Southeast Asia, regardless of the returns? The answer is no one. Good luck recovering your money if/when things don’t go as planned. The US dollar isn’t ideal, but it’s better than anything else out there.
Example: I recently saw CD rates in a Mongolia bank at 17%. However, if they decide to steal my money, what recourse do I have, realistically? Pretty much none.
Housing activity in the less than desirable areas has collapsed according to homesnap. In the desirable areas, the market is at the low end of healthy, but down from the hot times.
@ Doc: And if you look at actual job growth across the state, you’ll find that L.A. and O.C. are way at the bottom (only beating out Bakersfield):
_____
Southwest Bakersfield was where, earlier this year, that security-video-camera recorded footage of domestic cat leaping into action, charging in at speed to shoulder-barge a vicious dog attacking a small child on his parents’ driveway. The video went global viral.
http://www.youtube.com/watch?v=Y6GQR3Ym5M8
The parents looked like good people, happy their son was relatively ok, and stroking their hero cat, when interviewed by news-stations at their home. I want to see good people with happy families, with a future to look forward to. It’s grown a lot as a City in relatively short time. Air quality reported not to be so good though.
I’m guessing it ‘may’ be one of the areas where it can be very reasonable/make sense, to buy now (as per a previous blog entry). Some fair value there it seems to me on listings. A builder is apparently set to build a lot of new homes, that have been mothballed for years, but predictably, other Vested-Interests do not welcome it.
_____
Wednesday, Oct 08 2014
A large homebuilder active north and south of Kern County has moved into the Bakersfield market with its purchase of nearly 400 unfinished lots it plans to turn into homes for first-time and “move-up” buyers starting next year.
[..]People in Bakersfield’s real estate industry welcomed the promise of construction activity but wondered whether the local market can absorb so many houses at what they considered high prices.
Although Realtor Ronda Newport said she thinks Woodside will do well in Bakersfield, she expressed concern that 400 new homes could “flood the market” and depress prices.
in full: http://www.bakersfieldcalifornian.com/business/real-estate/x782597849/Builder-enters-local-market-with-plans-for-400-new-houses
I wonder if that cat video was staged.
* The dog conveniently bites the boy’s pants, not the boy.
* The mother LEAVES THE BOY within seconds of checking him. Would it be normal to leave the boy, regardless of where she went?
* The boy gets up and walks off like it was nothing.
There are ads playing on the viral video. Wonder how much it earned?
The kid is wearing shorts to my eyes. I don’t think it was staged – although I am as cynical as you on many matters. However many YouTube vids have an advertisement of some sort.
Perhaps this version is better quality, and they also interview the parents, and I think there are still-photos of the child’s wounds, if that offers better proof.
http://www.youtube.com/watch?v=Dw9AwaJaVGU
Well, yes, I see they’re shorts. I assumed the word “pants” can refer to either the long or short variety.
See comment above——–^^^^^^——>The cure for high prices is……high prices.
“Because its different this time”
Builders ate offering free swimming pools TVs or whatever that will sell that new “overpriced” shack.
In January, the federal government, which is reducing its share of the mortgage market to lure back private capital, cut FHA loan sizes in 652 high-cost U.S. counties. In Phoenix, the limit dropped to $271,050 — about $24,000 below the median prices of a new home — from the previous maximum of $346,250. The limit shrunk by 28 percent in the Las Vegas region, and 18 percent in the Sacramento area.
“We were having a nice robust recovery and then that happened,†said Buddy Satterfield, president of the Arizona division for Shea Homes, which has two communities in The Bridges and is opening one in Eastmark. “When you take the FHA limit down to $271,000, you hit us right in our sweet spot.â€
FHA mortgages for new homes in the Phoenix area fell 39 percent in August from a year earlier, while the number of buyers financing existing homes with the government-insured loans gained 12 percent, according to RL Brown Housing Reports, a consulting company based in Scottsdale, Arizona.
HELOCs are back:
http://www.realtytrac.com/content/foreclosure-market-report/realtytrac-us-home-equity-line-of-credit-trend-report-8159
“HELOC originations accounted for 15.4 percent of all loan originations nationwide during the first eight months of 2014, the highest percentage since 2008.”
“Metro areas with the biggest year-over-year increase in HELOC originations were Riverside-San Bernardino in Southern California (87.7% increase), Las Vegas (85.1% increase), Cincinnati (81.0% increase), Sacramento (65.1% increase), and Phoenix (60.1% increase).”
If you look at the charts it doesn’t suggest “HELOCs are back!” so much as “other originations are way down!”
Look at this chart in particular that appears to be a measure of volume (not relative percent): http://www.realtytrac.com/images/reportimages/HELOC_Activity_Historical_Major_Metros.png
There’s some change vs. 2010, but pretty wide variance by market. Dallas/Houston/Philly all slightly down, LA/SF/Detroit all up significantly, Atlanta went from next to nothing to a fairly ‘average’ level. All are still well down from 2006 peaks.
30-year mortgages back below 4%:
http://www.marketwatch.com/story/30-year-mortgages-back-below-4-but-for-how-long-2014-10-10
The author thinks rates will probably go up soon (yeah, right)
Yesterday my family and I decided to postpone our plans to relocate to SoCal from “freeze my balls off in the winter” Illinois. With that being said, I really enjoyed this post Doc, well done!
Rent/Buy what you can afford, your income should be at least 3 times the monthly rent, I suggest 4 if your wanting to ever own or if have car dept. Keep credit cards for emergency purposes only. If banks suggest your income should be 4 times the monthly mortgage payment then make it 5. Always have at least one year’s of mortgage payments in the bank and a cash reserve for catastrophic illness or other financial drains.
Start living your life according to these old school rules and if it takes’s you to another State go with it, you won’t be sitting on the fence like a vulture waiting and hoping all others fail around you. Once this fail your hoping for happens you can then rent out your property and move back to California buy up all the homes you want while maintaining a rental income elsewhere for your retirement. Stop your fighting, haven’t you noticed the UNITED States is in need of strong men, not bickering little boy’s.
“Housing Tanked Hard in 2014!”
Now you can buy in peace and no longer complain about high prices!
Seattle….#3 worries me everyday
The Fed continues to print money unabated?
Remember, the FED doesn’t have a magic wand does it? It cannot just order the rates to stay low, the only way for fed to do that is to flood the banks and money markets with liquidity. If the banks have moar moneys than the can handle, in which case the supply for credit is greater than demand, the rates stay low… The fed doesn’t earn money either, it has to “print” money to give it to the banks. The low rates in turn pressure on the bonds markets and force bond buyers in to moar riskier assets because bonds don’t generate any returns. And remember, when the FED says it stopped buying treasuries, it doesn’t mean it is not buying them. It just means the fed doesn’t buy them directly, but there is always “Belgiums” to pick up the slack. The fed can always give moneys to the European banks to buy treasures, etc. There are bunch of ways to do that. Just remember one thing, if the rates stay low, the FED pours moneys into the system, there is no other way for the FED to keep the rates low. And the longer the FED does it, the more the currency loses its purchasing power which means inflation which means housing (stocks, bonds, etc) to stay high…
What do you mean the Fed does not earn money printing money? I’m curious because tax payers pay interest on every dollar that the federal reserve creates so we do pay, we pay through our income taxes which cover the interest that the federal reserve prints in exchange for the treasury notes backed by our labor, or bloodshed through military actions to keep other countries using our US dollar in order to exchange for petrol dollars. Other countries cannot buy oil without first exchanging to US dollars that’s what keeps the value of the dollar afloat.
From the Real Facts Against Urban Myths Dep’t: the Fed does not print money, never has. The US Treasury prints currency and mints coins.
https://en.wikipedia.org/wiki/United_States_Department_of_the_Treasury
When I say print, I mean issuing currency, which is just numbers on the computer screen…
I have noticed that many listed properties are not selling; and often with reduced prices. The party is over.
We read this blog cause we want, pray and hope something happens.
To paraphrase an economist of old”in the long run we’re all dead.” But in the meanwhile, I moved to Pasadena from New York 4 years ago. I was lucky to find a $1,250. house rental, part of a side by side duplex on a well located, attractive street . It was small but had what I wanted : decent living spaces, architectural details, hardwood floors, a working fireplace, a utility room and a garage. However, since then, what I have found is its not the rent that’s eroded my income, it’s the following: unbelievably high sales taxes and state income taxes, horrendously high electric service rates, car registration fees that left me in shock at almost 1,000. to initially register my car ( no it’s not a Mercedes it’s a Subaru), doctors shall we say who have an interesting view of ethics, which left me disabled by medical malpractice, now costing me roughly $700 a month for assistance with those pesky activities of daily living. So this is a long way of saying it’s not so much the rents but the whole constellation of costs which leave the average Angeleno dead broke. The only bright side is that my children are happily employed, are free of law school debt and independent. I don’t think dog food is in my future, but neither is a house purchase, although I do see a few prices beginning to reflect real value, rather than realtor encouraged fantasy. So, a long way of saying we don’t live in a vacuum and SoCal doesn’t just have high rents it has high everything. That in sum proves to be the nut most can’t crack.
I totally agree with your assessment of the high cost of living. When I talk about this kind of stuff to LA or Bay Area people, they treat me like I am crazy. I feel like if they could admit to themselves that cost of living was out of control, it would somehow make them feel poor and bad about themselves so instead they just put their head in the sand.
Yes, electricity and water are insane. But so are car, home and auto insurance. Car registration is another one, but take a look at your utility bills and internet bills. A lot of the fees are local fees passed by voters. One in particular was 10% charge on internet access in LA to preserve the 911 system. The next one is this stupid increase in gas tax promoted by Gov. Brown as a pro-environment tax. People are using cars less, fewer miles drive, young folks not driving, therefore, gas tax revenues are down, which IMO is a good thing. But, the state bureaucracy needs money to live so voters may pass the increase in November as they are being told it’s to help the environment. In the end, it really just makes middle class and poor peoples’ lives harder. Go California!
Yes, thank you, the amount of delusion many people in SoCal have about the “costs” of living here is beyond frustrating. It doesn’t help that we have a nonstop influx of people moving here with unrealistic and grandiose expectations, further adding to the insanity. The icing on the cake is the majority of voters doling out public largesse like candy on Halloween.
You must not have relocated from New York City, or the expenses you describe would seem almost free by comparison.
As a native, my wife and I can actually afford to live very well in our home in CA (or anywhere) for the rest of our lives, and I find it interesting to hear that people think all “Boomers” have financial issues. Most of my friends are set for the duration as well. I don’t deny that there are those of my generation who did not plan well, but, there are many of us who did.
I have friends who are younger who are seriously worried about how they will ever be able to afford to live here in the long term, let alone retire–especially if they want to stay in CA–so it will interesting to see how all of this plays out in years to come.
Did you “plan well” or “just get lucky”? If you’re counting your home appreciation, it may be more of the latter than the former…
It is not luck, just really basic financial planning.
If you saved $100/month of your income in a stock mutual fund over the last 40 years (1974-2014) then you would be a millionaire. If you saved 15% of your income over that period you would have much, much more.
http://www.moneychimp.com/calculator/compound_interest_calculator.htm
http://www.moneychimp.com/features/market_cagr.htm
Jeff, when you were born is just a matter of basic financial planning, geez, get with the program!
We all know that home prices have crashed a few times over the past 50 years. but what about rental rates, do they ever crash? in my 30 years of being a renter before buying home, I cant recall any time when a landlord agreed to reduce my rent…on the contrary, I had landlords try to get me to pay for trash services or plumbers or other things that violated their own rental agreements.
Interesting article from lacurbed
http://la.curbed.com/archives/2014/09/watch_las_housing_bubble_and_burst_from_2001_to_2012.php
“The housing market has “recovered” in Los Angeles only in the sense that the prices of houses are way back up—in some places, above where they were in the pre-recession days—but that process has been spread around unevenly, suggests a very cool new animated map from the Urban Institute. The map looks at new mortgages taken out between 2001 and 2012, broken down according to the ethnicities of recipients, to visualize the real estate boom and the subsequent bubble burst as it happened in the LA area (zoom out for a US-level picture).
Each dot on the map represents 20 mortgages—watch as the dots increasingly clutter up LA until 2007 hits and they start to pretty much disappear. After the bust, there are notably fewer dots representing African American and Hispanic homeowners; in 2012, the share of new mortgages held by Hispanic households was half of what it had been in 2005. The Urban Institute finds that LA is experiencing an “extreme” version of what’s happening elsewhere in the country: “a strong recovery in home prices and mortgage-market activity that is limited to white and Asian homebuyers.”
Something interesting that you won’t read in the MSM is that the whites and Asians fall off the plots around 2005.
http://www.vdare.com/posts/evidence-against-interest-the-minority-role-in-the-housing-bubble
Here in the Phoenix metro area and within the state…Lackluster job market equals Lackluster Housing Market. It’s that simple
Tempe bum….Concur completely, low paying or no job, no spending of money and certainly no house hunting. Like you said, it is that simple.
Don’t worry about the guy from seattle. Folks up here are very delusional about economics. It is and always has been a boom and bust economy, but that is always forgotten during the cycles. Human nature.
Hey… the “good” news for all @JimTankHards, the stocks erase all the gains for 2014. Would we expect the housing to do the same? Or will the FED start untapering the taper?
Your thoughts on that… My prediction is that the FED will have to untaper to keep the ponzy going…
Jeffrey Gundlach deserves some credit for his May 5 call: short the homebuilder stocks.
Read more: http://www.businessinsider.com/gundlachs-short-xhb-call-2014-10#ixzz3FmqWSCsW
“Stealth QE anyone?”
The dollar appreciation against other currencies is in fact a stealth QE – while FED is tapering global capital is flowing to US. So, we lose one form of tapering and get another.
Lord B. was right – FED is always manipulating the markets. We lost free markets in 1913. Those waiting for free markets again will be waiting till the FED is losing their business license. Is that going to be in 2015? 2025? or 2075? I don’t know. All I know is that the current financial system is manipulated by the banking cabal called FED. Because of that we have a central planned economy (aka communism). 1% of the 1% manipulate everything for their own interest.
You just have to understand how they operate and why. Their goal is NEVER for the middle class to buy a house in SoCal with average income within 2 miles from the coast. Their goal is always to transfer wealth from middle class to themselves and global domination. The politicians are just puppets for the FED and CFR. Who wins is irrelevant. If you understand this you can stop dreaming with eyes open and start charting a plan which needs constant adjustment based on the manipulations of the FED.
The post above was addressed to Guy from Seattle in regard to stealth QE comment.
Sorry to everyone here shorting the housing market, but mortgage rates are heading South which means housing bubble 2.0 continues on till next year. Better luck in 2015!
http://www.mortgagenewsdaily.com/consumer_rates/396858.aspx
There are many things about the LA market that I can’t understand. I read here of absolutely unbelievable prices, $700K or more for tiny, outdated, shacky little houses that I wouldn’t even live in and that make my $100K Chicago condo seem palatial compared.
But I also see beautiful Los Angeles properties that seem to me to be really good deals for the money, even relative to prices in Midwestern cities. Are areas like Glendale and Los Feliz that bad? Los Feliz looks like a lovely neighborhood to me, and very interesting with a lot of great architecture, yet the prices there seem like bargains- $3M for absolutely beautiful, and quite large, older homes with a lot of architectural interest, including the spectacular Sowden House which is back on the market again, listed at slightly over $4M. Trust me, you will not find a better value in Chicago.
Here’s a Glendale beauty for $705K: http://la.curbed.com/archives/2014/10/1920s_spanish_in_glendale_with_vintage_details_asking_705k.php Please tell me why people are paying $700K for tiny little shanties when stuff like this is available. Is Glendale a bad neighborhood, or too far away from everything, or what?
A gorgeous Los Feliz mansion here, for $3.5M http://la.curbed.com/archives/2014/10/gorgeous_1927_hacienda_in_los_feliz_asking_35_million.php If I had the dough to pay for a $3.5M house, I would buy in Los Feliz… if I could bring myself to part with Chicago. There are a number of other gorgeous houses in this area for sale along with this one.
Vintage stucco homes on a sidehill location would give me pause due to landslide and seismic risk. Before dropping this kind of money it would be wise to hire a licensed engineer to check for foundation or structural inadequacies and not just rely on a routine inspector’s report.
For a $705K house perched on a hill as that one is, I’d surely want an engineers report. However, it’s encouraging that it’s stood there for nearly 90 years without any real problem. That is why I like older homes so much more than stuff that’s newly built, especially with the huge numbers of really shoddily built houses and condo buildings thrown up during the Great Rampage. I just have more trust in something that’s proven it can last for several decades.
Trying to answer your questions about the Glendale home, @Laura. I agree, it does look like a reasonable home at a reasonable price. I do have some questions though.
Under heat and air details it just says “air conditioning.” So what does that mean? Original floor furnace, perhaps? No central air? Pipes are also “partial copper.” Why weren’t these upgrades done? I know most people act like adding or changing AC, pipes and heat is trivial but it depends on the architecture of the home. Another question I have is the cost of fire insurance. Heavy trees on a steep slope in North Glendale sounds like a fire risk area to me.
I don’t think the Glendale area is bad–that area in particular isn’t bad–but the city is somewhat awkwardly located in relation to the rest of Los Angeles. Commuting could be difficult.
Laura as a X Chicagoan please understand you can’t by climate, so if you have a 2 million dollar home in Chicago and you must live there okay, but if you have the means to move to lets say a home in LA for maybe 2.5 million then yes with the climate and home in a nice area then the LA home would be a good buy.
Robert, I just WISH I had a $2M house in Chicago. And, yes, I like Chicago. I love the Los Feliz neighborhood of Los Angeles and love Los Angeles, but I have this thing about water.
Mainly, I like living within 10 blocks of 5% of the world’s fresh water supply, known as Lake Michigan. And even though even wet Chicago can’t afford to be wasteful with water (we are legally entitled to just so much Lake Michigan water and not a drop more), it’s nice to live in a place where I don’t have spasms of guilt over taking a daily tub bath.
You are comparing a $700,000 house with $3.5 mil or $4 mil. That is a big jump in price. The higher up you go in price you eliminate the competition and you get more for your dollar – the value per dollar increases because there are not many who can afford it.
If you can afford 3.5 mil or 4 mil go for those houses. There are definitely better value. Everyone wants to stretch to the max just to get in something and usually that something becomes a shack for $700,000.
Or THIS Los Feliz stunner for $2.3M. I’d buy this just to get the beautiful foyer, and the incredible antique bath with the original fantastic plum-colored tile and high-grade fixtures absolutely intact.
http://la.curbed.com/archives/2014/09/fabulous_1920s_mediterranean_in_los_feliz_asking_23_million.php#more
“Now if you trully believe that tank won’t be 30% or more your delusional.”
Lets assume the prices tank 30%. After they doubled from 2011, that means they will be back to those prices that people on this blog didn’t like. How is that an improvement for the middle class?
Thanks for writing this very informative and insightful blog. I live in Denver, where the rental prices as well as home sale prices are pretty outrageous right now, at least for our standards. I’m kicking myself for not buying something 2 years ago before the insane price hike, but I wasn’t really ready to buy at that time (newly married, figuring out where to live, etc.) and I probably would not have qualified, even though I consider myself a frugal saver and would rather do without new shoes and instead throw cash in a savings account.
Now we would like to buy and have enough saved and can put more than 20% down, especially with the help of family who have been very generous in helping us get started. We’ve been paying a lot in rent these last couple of years but it has given us a chance to save and invest in other things, aggressively pay off more debt, decide where to live long term, etc.
But I am very nervous to buy right now because it seems like we’d be buying at the top; there’s very little inventory and things feel overpriced to me (I realize that is relative but still)…CO seems to be adding more high paying jobs in areas like energy, some finance, tech, etc…and I’m feeling a little discouraged even though we are looking in a starter home price range. It seems like things will take a while to “normalize.”
Hard to predict, but can anyone offer any advice? Keep renting, or try to buy now ans compete in crazy bidding wars?
Thanks in advance. 🙂
Natalie, I suggest waiting a few years to see if you see a steady stream of buyers at this price point. My opinion is the same that houses is way overpriced in certain areas. I live in Los Angeles so it’s definitely another bubble here. I seriously can’t imagine prices can sustain year over year hikes when income remains the same. Good luck
Thanks, John! 🙂
Beginning to see the death cross on flip attempts such as this one now asking $25K less than it was bought for 7.5 months ago – https://www.redfin.com/CA/N-Hollywood/5714-Vantage-Ave-91607/home/5171202#property-history
At least that’s a real house. Not gorgeous, but a good, roomy, relatively modern house with a few amenities… a perfectly nice home. It, too, seems like a blue-eyed bargain relative to the prices I’ve seen on horrible little shacks in L.A., but then, I know nothing about the neighborhood it’s in or how it stands relative to others… how are the schools, the commute times, the surrounding towns, etc?
Wow, this must be an amatuer flipper late to the game. I am seeing more price reductions as investors are out and homes are left to regular middle class family needing a mortgage to finance a home. I say wait a year or two to see what the housing market does. It’s too soon to commit your hard earned paycheck to a what it seems to be a way overpriced market. Prices already at its peak so waiting a few more years and save more money is the way to go. I honestly can’t see a 700k home be 900k in few years. I would like to see what are the actual price homes are selling for, for at least a few years to see what people can really afford before I step in.
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