The Gentrifiers: Searching for deals in Compton. What does it take to gentrify a market in Southern California?
In the last few months I’ve noticed a few more emails coming through regarding transitional areas and the value that is blindly being missed out. A few of the emails in all seriousness pointed out that a Starbucks and new shopping center have sprung out of the ground like a palm tree and hence, a six-figure price appreciation is now worth it. Forget about the lower incomes in these markets or the quality of schools or the fact that families are packing in tightly like sardines just to make rents. Somehow, the fog of gentrification is taking hold of every market equally. Yet the only people I see even remotely thinking about buying in these markets are investors and that is to rent out. There are deals to be found for those willing to take on the vanguard of gentrification. One such area is Compton. Every week I get updates on properties that are priced at non-L.A. levels. Let us take a look at what we can find in the market today. We might even find something that is up your alley.
Compton
While some people complain and moan that they can’t find their dream home in Newport Beach, there are plenty of properties on the market right now in Compton. You get a massive bang for your buck in this area. We hear this argument about justifying high prices (the same arguments made in 2005 and 2006): close to Downtown, weather, part of L.A. County, and central to Taco Tuesday baby boomer delights. Compton fits the bill on all fronts.
Yet when value is pointed out, we begin to realize that housing is priced at the margins. At any given time, only a few homes are up for grabs. In boom and bust California, a tiny recession can tip the scales one way. In the same light, a boom like the one we are in can go the other way. Yet momentum is fickle in this market. Inventory seems to be picking up as some are looking to cash in their crap shack lotto ticket.
Let us take a look at our first home:
1707 W 155th St, Compton, CA 90220
3 beds, 1 bath 810 square feet
This place needs a tiny bit of work. Nothing a weekend of HGTV watching can’t cure. In Detroit, this place would fetch $500 like the 1970s sales price:
The current list price is $170,000. A bargain for central L.A. County. Be a true hipster and take that plunge into a gentrification dream. Let us look at another property:
1110 N Tamarind Ave, Compton, CA 90222
1 bed, 1 bath, 660 square feet
The ad gets to the point:
“Great starter or investor home in the city of Compton.â€
We are also encouraged to build up and flip or to increase cash flow. This isn’t a Rich Dad Poor Dad seminar, this is L.A. real estate. What I love is that someone bought this place in January of this year and is trying to make money with what seems to be just raw momentum of the market:
This highlights the ridiculousness of SoCal. The place was listed for $228,888 back in September of 2013. There was some upping and lowering of prices all the way until February of 2014. It eventually sold for $130,000 in January of this year. Here are shots of this place:
Garbage can photography is back! The place is now listed at $225,000. As far as the pictures and the ad go, it is hard to tell if any work has been done to justify the $95,000 price increase. But apparently, there are enough lemmings buyers out there willing to dive in.
I know there are some aspiring gentrification mavericks out there. After all, everything gentrifies after some period of time.  Is Compton primed for some hipster gentrification?
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86 Responses to “The Gentrifiers: Searching for deals in Compton. What does it take to gentrify a market in Southern California?”
This is essentially what you get when free markets are not allowed and sheep are forced to make irrational decisions in order to justify their well beings. Hoping your employer will be around for the next decade so you can just make it by is really just about survival now. With the rate this is going buying power is likely going well beyond what an individual could sustain here and may just give up or find more roommates to fight the irrational inflation that is coming in the firm of rent and other living costs. On the other hand this could also be a signal of a top is brewing.
All imo
And all it will take is one good and massive earthquake. Then most of the L.A. (and O.C.) Basin will become the next Detroit.
It will be nice to have the orange groves and berry fields back eventually.
Just a thought.
VicB3
Hey Doc. I think you are stretching here a bit by making drawing a link between Compton and gentrification. Gentrification IS happening in areas that are close proximity to the entertainment industry, downtown LA and Silicon Beach.
For example; near downtown LA and Hollywood there are parts of Atwater Village, Eagle Rock, Highland Park, Boyle Heights, east Hollywood that are gentrifying.
For example; near Silicon Beach, Playa Vista, Venice you are seeing the fading barrio areas of Culver City, Palms, Mar Vista, Venice with lots of young hipsters moving in.
But SouthCentral, Compton, I dont think gentrification is in the cards in our lifetime. Even West Adams has a long way to go.
Side note: I went to a council meeting last year in a run down neighborhood in LA and the councilman announced that a Target store would be the anchor tenant in a new mall and people in the audience laughed… the councilman said: ‘don’t laugh… if Target signs their lease, Starbucks, Nike and Old Navy will also sign leases in the same area’…. so a Starbucks alone of course doesnt mean anything but they are often followed by major hip retailers.
I think he was jesting….he doesn’t actually expect Compton to gentrify.
What do you mean? Over the last couple of years, there have been a significant number of people posting here who claim “all” of SoCal is global prime real estate. “All” of SoCal would include Compton, South Gate, Bell, Lynwood, Inglewood, San Bernandino, South Los Angeles, East Los Angeles, Paramount, North Long Beach, Sun City, etc.
I do not see the uber wealthy international oligarchs buying into any of those areas.
ernst, I think it has been much more surreptitious than that. Outside of possibly one or two trolls, nobody has directly claimed that all of SoCal is prime, indeed some promoters have gone lengths to point out a divide in an attempt to backstop their position that so-called prime is a never-lose proposition. What we have been witnessing are subtle inferences that all of SoCal is to be had on the basis of the same intrinsic factors that they claim make the so-called prime areas a sure bet. Once this notion has been floated around a bit, then comes around the idea that gentrification is simply about being priced-out.
What do areas such as Compton have to offer beyond a lower price point and the pain of trying to wait out the neighborhood to change over? It’s sorta kinda closer to the beach than Cudahy? That’s the problem with buying in a ghetto area, even if it does eventually turn, there are real costs in the form of living in a degraded environment in the meantime. I don’t know what Compton has to make up for that sort of a trade-off.
“Gentrification IS happening in areas that are close proximity to the entertainment industry, downtown LA and Silicon Beach.”
Like Oxnard, the new Newport by the beach?
Well, they might start with a grocery store, never mind Target.
No bars on the windows. A good sign…..
maybe the copper has already been stripped….
… because they were stolen.
with current evaluation in so cal, you can’t buy right now and be cash positive ..
under these circumstances, I think most of the investors are gone and only people needing houses are buying to live in not to rent out in general…
Yes, forget Woodland Hills, I’ve decided to not get a 700k crap shack. I’m movin’ on up to Compton! I finally get to realize the Cali dream 🙂
I just hope that my Ferrari, which I worked my ass off for a year to save up and pay cash for, will be OK parked on the street outside my house. Should be OK, right? As long as I’m near a Starbucks?
Earlier this year I talked to Bloomberg Financial about the Truth of Housing demand 2015 and the So Cal story..
PITI inflation rate for housing in So Cal is dreadful, you can see why the homeless rate jumped in LA the last 2 years
Dare to Care group for Southern California has asked me to talk about the massive housing inflation story in L.A. and in So Cal
Bloomberg Interview from Feb 2015
http://loganmohtashami.com/2015/02/23/bloomberg-financial-interview-housing-2015-the-truth-about-demand/
It’s nice of the Doc to let your posts through…but man, get rid of that giant blurry image on your site. First thing a visitor should see is some content.
Agreed. I’ve clicked on those links a couple of times, and never actually go any further once I’m on the page.
You’re very correct, thank you
Here’s an Encino flip that turned out well: https://www.redfin.com/CA/Encino/17131-Clemons-Dr-91436/home/4947451
Sold in September 2014 for $788,000.
Flipped in May 2015 at $1,425,000.
Yes, it was remodeled. But is any remodeling worth a nearly 81% increase in value in only 8 months?
That’s a very tastefully done remodel and a nice mid-century home design to begin with. But an 81% increase? No way. That kind of mark up just being greedy.
Man o man have things changed in a few short 30 years. I lived in Sherman Oaks during grad school and the house I lived in with 3 roomates – it was classic mid 60’s house – bad shag carpet etc. but a great view – have not been back since graduating in ’84 – so….me thinks given the redfin post above that home must be at least 1.5 mil now. Who woulda thunk? I know why I move away from Cali – it is impossible to live there for joe six packs like me.
Those homes should be $100k for a reason. I am fairly certain most working professionals will continue to rent in a nicer area, rather than take their chances in Compton. Perhaps some slum lord may be crazy enough to give these properties a go. Me, I would run from that area.
Just think, for $2m – you can buy almost an entire block in Compton, knock it all down and build your own compound. I’d scrape up some cash, put on some body armor and start knocking on doors for potential sellers.
change is inevitable and as the boomers die off – this generation is willing to live and build up new neighborhoods.
why is that bad?
Are you worried you may be wrong and that the demand is greatewr than your negative theory?
Welcome to the jungle baby!
I lived in a “not-so-great” part of LA for a short while. I will say “Never again”. Helicopters all night, shootings, graffiti, cars broken into, hit & runs almost daily, homeless/mentally ill people, junkies, etc. I also thought like others that the area would gentrify and Trader Joe’s would move in. Never happened. Most residents are entrenched while receiving welfare and Sec. 8 and those that do own can’t afford to sell their homes and live elsewhere. So nothing ever changes. Weekends are the worst. The natives get restless on Friday & Sat. nights and the streets are filled with people loitering and causing chaos. We ended up selling that property to some hipsters for a nice profit. I assume they are still waiting for a Trader Joe’s.
obviously, don’t buy this crap; location is still everything
people have noted we went from subprime housing to subprime auto
therefore we may be 2-3 years from subprime auto taking the economy down another leg
but subprime auto =/= subprime home
overarcing logic, imo: wall st crashed housing just before builders stopped sfh construction (like crashing a stock before it runs up)
wall st will crash autos just before driverless cars really begin their push (pull as much $ now as you can before it goes away for good)
but i don’t see how that takes down home prices. we might get another ‘lehman’ moment out of subprime auto backed sec, but it’s anyone’s guess how the gov’t will respond this time
so what’s coming that is gonna take housing down?
will something ever come that takes housing in hk/london/paris/ny down?
Wow this collappse will be EPIC of Prorportions.
Housing To TANK HARD IN 2015!
debt bubble to burst in sept 2015
Keep the dream alive Jim.
Haven’t you been saying the same thing for the past 2 years? Your like a broken record repeating itself.
Jim, your ego is all tied up in this. This has become your identity. Not good.You have been wrong for the past three years, but “keep it up”. At some point you’ll undoubtedly be right. Probably 2022.
Housing is not the place to be when the new monetary system takes hold. What worked in the past will not work in the future. But good luck to you.
Look in a country of over 300 million and many more million people over seas wanted to live here, you are bound to find blind as a bat folks who actually by these places. Just like it takes a genius to buy NY (?) the most over priced “emperor has no clothes” place.
What brilliant CEO and his wife thought of buying 28 million dollar apt they are called and the views of man made brick buildings, neon lights, throw in lousy weather and no place to park and there you have it, idiots who buys Compton at over $200k, and a idiot rich guy idiot who buys a apt with nothing going for it but it is NYC (?) for $28 million.
I tend to think if I had a choice the 200k Compton buyer at least has parking, great weather, both places require guns stay handy?
if i was a billionaire i would buy a penthouse apt in manhattan for 40 million
The 200k Compton buyer also lives on an active earthquake fault line and is totally dependent on having fresh water and food brought in from hundreds of miles away.
Drizzly June gloom last week and next week it’s going to be hot so crank up the A/C, not really great weather.
Crap shacks sitting on top of limited solid gold Southern Calfornia dirt sure seem to smell good to some people! Here’s a crap shack reality update on some of the good doctor’s previous posts:
From the 5/4/15 post on Compton crap:
*523 N. Wilmington
Asking $199K on 3/29/15
Pending Sale as of 6/11/15
*2230 E. Piru Street
Asking $169K on 3/22/15
Set for court probate hearing on 9/8/15. You can now own the crap if you bid above $197,900!
Somebody sure wants this Compton crap and it could be buyers who are gentrifying. Or it could still be investors/speculators.
And for some more reality and a question: What’s the source that tells whether a property once sold is owner-occupied or renter-occupied?
From 3/31/15 post on Pasadena crap:
*844 N. Catalina
Asking $465K on 3/19/15
Sold $510K on 5/2/15
From 4/17/15 post on Paramount crap:
*15515 Delcombre
Asking $379K, on 3/9/15
Sold $389K on 4/28/15
And those sold homes that you list were probably not sold to anyone thinking of gentrification… they were sold to multi-generational families who fit well with the ethnic makeup of those neighborhoods… I guarantee it….
Seems that DHB is on to something. People buying that crap over ask seems to point to something being amiss in this market.
As for your question, there is no reliable source for the information you seek just like there’s no reliable source for what people are actually paying in rent.
Quick story; I had a friend in the 90’s who bought an charming Craftsman home in a supposedly “gentrifying” ‘hood. High Earning Professional. She put a lot of work/$ into the property; it was beautiful. The neighborhood wasn’t great; I recall many people constantly “milling” around, but they never seemed to go anywhere. Tenants in an apt. building behind her blasted thumping music, “hung out” outside, etc. One night she politely asked if they could please turn down the music as she had to be at work early the next day. They laughed. She called Police. Music was turned down, then some “neighbors” showed up on her porch and threatened her in a very direct way. She went to a hotel that night, put house up for sale within days, took a big loss.
If Buyer decides to buy in certain ‘hoods, Buyer truly needs to have very realistic grasp of the socio-economic environment they will exist in/have to tolerate on a daily basis, not a fantasy wishing/imagining what it “could” be.
This comment hits home for me and makes light of my exact sentiments about buying and location. The condition of the home is not more important than the class level and respectfulness of the people you live in proximity to. It’s not that Compton or other low class areas have shitty constructed houses, or that the schools suck, the neighborhoods are just not taken care of and the residents are uneducated, irrational, violent and crazy. If my neighbors all lived in crap shacks but we’re respectable and educated, everyone looked out for each other, I don’t care the race, that pleasant living environment is acceptable to some extent. It’s what Hunan said earlier about the lowlifes walking around him ex neighborhood that one can never live with a peaceful state of mind that makes the experience poor.
My friends always joke that all you need to do to turn a bad neighborhood around are some gays and Jews. It’s funny because it’s true.
If you followed the gays back in the 90s, you would be a silverlake, los feliz millionaire today.
You’d be a millionaire because you sold to cash out and then bought a replacement somewhere outside of the area or instead rented. Or would it be that you stayed but took out an HE loan in 2006, “invested” the money wisely and cashed out? Must be the second option because people didn’t go on consumption binges with their HELs and HELOCs.
Gays, yes. But Jews? Ummm….
Talked with a demographer once. He said – shocking to me at the time – “Jewish today, Black tomorrow.”
Now, looking at the area around Pico and La Cienega vs. the way it was 30 years ago, I realize that he was right.
So, Gay? Yes, buy. But Jewish? Time to sell.
Just a thought.
VicB3
I live in a relatively nice and newer condo development. The single family neighborhood adjoining the condo development, however, is not all that great. Not a total ghetto by any means, but not anywhere I’d ever choose to live, either. About every two weeks (sometimes every week), I call the police department to respond to loud parties with, shall we say, “ethnic” music blaring.
The neighborhood also has it’s share of barking dogs, some jackasses nearby often rev their rice-rocket motors at 1am and later, and for the months of June and July, illegal fireworks can be constantly heard at various houses throughout the neighborhood.
Relating to WeDontMakeThoseDrinksNoMore’s post, it’s pretty oblivious to think that you would be able go up to a stranger’s party and try to instruct them to turn down their music, or curb their otherwise undesirable activities. First of all, they will never listen. Second, you are putting your safety at risk, as WeDontMakeThoseDrinksNoMore’s friend learned the hard way.
Moral of my post? Don’t live in or near a low/middle-income neighborhood if you can help it. You will be forced to put up with all of the things I mentioned, and likely more. Also, unless you’re Chuck Norris, don’t confront people directly for issues such as loud music- it’s a waste of time and dangerous. Just call the police and let them deal with it.
I’ve had loud music blaring from the other side of my condo’s wall. On two occasions the music was so loud and continuous (and past midnight), that I complained. Once, I went over to them directly. Once I had the building’s doorman call them. Both times, my complaint was ignored. (Both times, they were tenants rather than condo owners.)
The difference is, since I live in Santa Monica, complaining to these neighbors didn’t put me in fear for my life.
Even in wealthy neighborhoods, you have rude, obnoxious neighbors. But at least they’re not dangerous.
The Santa Monica Daily Press once even reported about continuous noise complaints concerning a mega-mansion on La Mesa Drive, the wealthiest street in Santa Monica. (Houses there have been listed from $10 to $35 million.) This one mansion kept having parties, with live bands and uber-rich guests parking their Mercedes and Ferraris all over the streets. The uber-rich neighbors hired an attorney, and their dispute was in the local papers.
Responder, I agree; wouldn’t have approached the neighbors either. My experience is those drawn to “gentrifying” areas often are artsy, optimists, idealists; they want to fit it w/locals, “cool” w/the “vibe” of the ‘hood, if something gets stolen think “the oppressed person needs that more than I do” (I’ll say it, it’s politically incorrect; often they are GWP=Guilty White People-sorry if it offends) so I believe she wanted to not involve police; be a “Cool Neighbor”. It resulted in physical threats; agreed, poor choice.
On the flip side, my daughter lives in a very diverse working/middle class ‘hood in AZ. Almost every neighbor is respectful, gets along well, maintains their yard, quiet, can a pin drop at night. Every situation is different, I suppose. Or maybe sometimes pure luck.
This noise situation also happens in good neighborhoods. Loud music! Loud cars. Barking dogs! You just can’t stop people from a**holes. Often the ones with money are worse, cause they think their money insulates them. There’s only one answer to the problems of horrible neighbors and that is to buy ACREAGE. Lots of acreage. That’s the only reason to become wealthy, in my opinion, to buy enough land – so as to not have any idiot neighbors close by, disturbing the peace.
I totally agree that there can be noise problems in nice areas as well. It’s just that noise is much more prevalent in low- and middle-income areas, at least in my experience. Sometimes when walking around in the peninsula area of Newport Beach (the nicer area, toward the wedge), I’m surprised at how many yapping dogs there are. You can easily spend $5M-$10M+ on a house there and still be tortured by yapping dogs.
Responder, young women seem to be the biggest fans of yap dogs. They’re the latest accessory. Especially little white dogs.
For a while, I had a thirtysomething neighbor who own three of them. They were quiet when she was at home, but whenever she left them alone, they barked incessantly for her return.
Yap dogs’ high-pitched barks are very effective in piercing thin walls.
@son of a landlord: Agreed. They’re pretty awful.
That is exactly why I choose to rent
I chose to rent for 4 years in a luxury ocean front penthouse in Long Beach and despite paying 4000 bucks+ per month, I still had to deal with loud neighbors, barking dogs, pot smoking neighbors who share vents with my bathrooms, low flying helicopters, loud people on the beach all day and night… Nosy people and a couple car breaking in the ‘secured parking garage’. Renting sucks, I will never do it again.
Seems that went over your head, Howard. Jim is obviously pointing to the fact that if you’re renting and the situation turns sour, it’s often much easier and cheaper to simply leave. What really sucks is being priced in upside down on a mortgage and the situation begins to suck due to others’ actions.
live in an area with retired white people and or asians with kids and you will be in the best neighborhood
Like Westminster? Hell no. Seriously, the only way to get away from people is by owning an island and restricting everyone from coming within 10 miles. There is no perfect place as long as other humans have access.
Federal Reserve causing another housing bubble with near zero interest rates.
Have you just been rescued from a deserted island?
Nice House / Bad Neighborhood.
Done it twice in my life, once in 73, then again in 94.
Lost money both times, but the hell that I went through living there and trying to unload the house was not worth it.
Better to rent in a good area than to own in a bad one.
What seems nice during the day can turn into a freak show at night.
Bingo – Rent in a nicer area. Housing is about lifestyle. Not an investment. Once I got that through my head I am happy to pay less in rent to live in a good area, then to have a morgage I can’t afford to live in a ghetto.
A few months ago I had a visitor from out of town and we were driving through a not-so-great LA neighborhood adjacent to Culver City. My passenger from out of town was looking at the run down homes with broken down cars in the driveway, and people BBQ’ing in their front yards and commented on what a ghetto it was. I told him that these homes average worth was 400-500K easy. He started at me in disbelief and asked me why don’t the residents sell and move away? I thought about it and told him that most of them can’t afford to sell. Many homes in lower income neighborhoods are housing multiple generations. Where would everybody go? Buying another home at today’s prices is out of the question, most people could not afford to get a new mortgage, renting in LA would eat up any profits from the home sale real quick, and prop 13 keeps them in a affordable living situation. Moving out of state would be the best bet. My passenger smiled, looked at me and said “Just don’t tell them about Arizona.” Which happened to be where he was from. I smiled back and said “This is what you have top look forward to now that AZ enacted a law similar to Prop 13.”
You can’t be talking about the Black Neighborhoods South and East of Culver City because those names are some of the finest places to live in LA. Regardless of what measure you want to use. Secondly, how do you learn so much about a neighborhood by just “driving through”….you seem to make a lot of assumptions.
Went to six open houses in Woodland Hills today. Most were a mob scene. Hordes of people coming and going in all directions. Lots of house horny folks out there.
We went to 5 in Woodland Hills today and boy was it depressing. We looked at a 1965 house that was one house down from the home we lost in a bid because the other buyer bid $4k more than us. They were moving in and I wanted to cry.
We saw a lot of overpriced crap that we would not want for $100K less than what they were asking. Many smelled and had wall to wall old carpeting. It was like going back in time to a place you never want to revisit.
The last place was the worst:
https://www.redfin.com/CA/Woodland-Hills/5050-Calderon-Rd-91364/home/3565008
It’s a perfect house for a double suicide.
Yes, total crap shack. Need to be featured in “Homes Of Genius”. Not.
First exterior shot looks like the storefront of a professional office plaza while the inside fixtures are off the set of the Bob Newhart show. Back deck and patio overlooks a drab scrub brush mound. Most of this mid century modern hoopla is about emphasizing a subjective asthetic to remind people of the warm comforts of Grandma’s house in order to push high priced aging structures because that’s much of the existing housing stock in places such as the SFV. Almost but not quite as ugly as the depressing 60s/70s tenement blocks which dot the westside’s landscape.
Just looked at the house you linked and it is actually a very nice house with very attractive mid-century mod architecture, if that’s what a person likes (I personally don’t). It looks like it’s in intrinsically good condition, and has nice, spacious rooms.
What makes it hateful is the decor, which is HORRIBLE, but which is very transient and will disappear when the current owners move. Prospective buyers have this way of being hung up on stuff like wall colors and drapes and furniture, that have nothing to do with the features of the house itself. All you have to do to make it a great house is first replace those junky cheap “fanlight” front doors that do NOT belong on a MCM house, then redecorate the interior. Look past the current occupants’ tacky belongings and some of the ugly fittings they’ve installed, because that place is not the least bit bad for the price- it would fetch at least this much money almost anywhere in Chicago.
As a matter of fact, I would surprised if it weren’t already under contract.
That house actually has some potential, but that’s the problem. Over $600K to buy it, and then another huge expense to completely renovate it. I just don’t understand how so many people are doing it.
Hmm… That place is pretty nice. A few thousand in upgrades and that is one happening place. Maybe you’re not prepared to buy a house? I wonder because I also see that you lost out on another house by a mere 4k. 4K is what you spend on nice shades for a house.
Maybe you need to just ‘imagineer’ a bit of the potential of a house when you look.
You people have no vision. With 100K I could turn that home into a real stunner, (Furniture would be extra). I am not familiar with RE in Woodland Hills, but I am able to see past the dated decor and this place appears to have good bones, nice layout, and is spacious. 100K and 4-6 months this place would be unrecognizable with a new contemporary design.
Not meaning to sound like a jerk. It just seems, I could be wrong, that you passed or missed out on several places for rather minor reasons.
I know house hunting can be a demoralizing thing – we did it for over a year before we found the place we’re in now. It wasn’t cheap and it certainly wasn’t ‘perfect’ but we’re now upgrading, redoing, etc. In the end, the place will be spectacular, ‘ours’, and much less than if the work had been done before we bought it. (we couldn’t have afforded the place if it were the way it’s going to be when we’re done)
You might be the one with a vision issue because the people buying these places to live in them don’t have 100K to spend on upgrades after the fact. Unless it can be rolled into the loan it ain’t happening when there’s nothing left after the down payment.
Laura,
Trust me on this one, it looks MUCH better in the pictures. It’s not spacious or well laid out. I can look past any decor at this point, so that does’t bother me at all.
GZ makes the perfect point, you pay $640K and then another $160K to make it livable, plus 6 months of constant renovations and you’ve spent $800K and it still has a small kitchen with small bedrooms and NO backyard. You could probably find a nicer place for $800K now.
Eden,
I usually don’t ever go onto message boards because people are jerks, and now I’ve met one.
You have told me twice I may not be ready to buy a house and that could not be farther from the truth. Yes, we lost out on a house for only $4k, but we only just found out after it closed and we could see. They don’t tell you that when they ask for your best and final offer, or did you not know that? We went over asking and were competing with an all cash buyer.
If you think that place is pretty nice, then you belong in it.
I wouldn’t live in Compton if you gave me a house.
If you gave me ALL the houses in Compton, maybe.
Everyone acknowledges the problem with Prop 13. Here’s what you do. You grant every beneficiary of prop 13 a credit worth the actuarial value of prop 13 for that location & the age of the owner. Then you grant the owner the right to stay in the current location at current rate or move and sell the credit or stay and sell the credit but taxes hike. There is no loss to the treasury and in fact the treasury would benefit from cap gains taxes and increased mobilty and real estate finding higher and better use. Of course there is the danger that death bed owners will sell the credit and healthier owners will stay in place and then sell the credit before they die. That’s possible. But the credit will discount that scenario.
It’s good to see that some people are thinking creatively about this but frankly I think they just need to rip the band-aid off. The first thing that goes out the window is the transfer of the previous tax basis to heirs. No phasing, no credits, no means adjustments, it simply needs to go poof in the night. If the heirs cannot afford the taxes, they can sell and cash out.
Next up for elimination is the artificial cap, gone. Any existing property owners can carry forward with state tax credits subject to a phase out schedule and some sort of a graduated means test.
The soon to be reimplemented property tax deferment in perpetuity program can remain to take care of Grandma.
Because as we’re told, life is not “fair” and nobody is entitled to live somewhere they can’t afford. Queue up the blerts and others to explain why the already entrenched should be exempt.
The rationale for protecting the entrenched is that we didn’t ask for our neighborhoods to gentrify.
I bought my Santa Monica condo in 1987. Back then SM was still somewhat scuzzy. The Promenade was three years away. The old 3rd Street Mall was nicely gritty. Cheap pizza places with sticky floors. Lots of used book and CD stores. Thrift clothing stores.
The area around 3rd Street had cheap, vintage diners: Biff’s, Zucky’s, King George.
No pretentious sidewalk cafes. No sports bars. No multiplex theaters. No Old Navy or Pottery Barn or Banana Republic or Gap.
I liked it. Santa Monica wasn’t as scuzzy as in its Prohibition & Depression Era, Raymond Chandler, noir “Bay City” days. But the residue was still there.
Then around 1990 it began to gentrify, beginning with the newly reopened Third Street Promenade. Now it’s infested with cyclists in speedos, and joggers pushing baby strollers, and yuppies and hipsters with yapdogs.
Yes, my Ocean Ave condo’s value has skyrocketed, and I pay little in property taxes. Under $3,000 a year. But I didn’t ask for these yuppies and hipsters and high-end eateries to move in. Why should I pay more just because they changed the neighborhood into something I dislike?
Here’s the problem with that rationale – the only constant is change, therefore it is unreasonable to expect otherwise. This gets at the heart of the problem with Prop 13 and its subordinate measures. Supporters would prefer to cope with changing neighborhood attributes by not sharing in the responsibility of handling their effects, even though the changes affect everyone, and they would have no problem reaping the spoils.
Consider the plight of a property owner in a neighborhood that is currently in a state of decline bemoaning that they didn’t ask for the decline. Would we not expect that things can take a turn for the worse and that it’s an inherent risk to property ownership? As it relates to Prop 13, it might be one thing if property tax adjustments were capped on the downside as well, but they are not.
All of the gain with subsidized risk at the expense of the non-entrenched is not a responsible nor morally acceptable solution and therefore will not last long, especially in an environment where said entrenched are quickly becoming more of a minority. You can take that all the way to the bank in Sacramento.
Compton’s 10+ years out in most of its area as far as being a serious transition neighborhood. If you want current, you’d need to go south of 91. But the prices reflect it… around $300K, but there’s still safety to be had regarding equity barring a general collapse.
Schools are holding this area back right now. There’s only Jordan Hi, home of the (black) Panthers. David Starr would be rolling over in his grave…
I think I found a Unicorn – a crap shack in Westwood:
https://www.redfin.com/CA/Los-Angeles/10821-Wilkins-Ave-90024/home/6803705
$1.36M for a termite ridden teardown that probably hasn’t been updated since WWII. The owners probably died and the kids are hoping that there’s gold at the end of that unicorn’s poop rainbow.
A crapshack, yes.
But not at a crapshack price!
Son of a Landlord says “But I didn’t ask for these yuppies and hipsters and high-end eateries to move in. Why should I pay more just because they changed the neighborhood into something I dislike?”
My sentiments exactly, and the major reason I believe that Prop 13 is a good law. I didn’t buy my modest Chicago condo just to be taxed out of it by inflation and settlement by a wave of well-heeled hippoisie. I bought in order to keep my expenses as level as possible, and to be assured that as long as I pay the price for my place, I would have a place to live. IMO property taxes are the most brutal, and brutally regressive way to tax there is, as they hit poorer owners much harder than the more affluent, and you can’t get out of the way of them by “adjusting” (i.e. hiding) your income as you can with income taxes, which tend to be “progressive”, hitting those who can afford it harder than those who are barely eating.
How can you say you “own” any damn thing when your local government can charge you rent for it even after you have paid the price in full, and escalate that rent almost at will, to any amount?
Prop 13 assures that people pay taxes related to what they paid for the place. Given that seniors have been inflated out of their savings by interest rates kept low, pretty much in tandem with the inflation of house prices, it is only fair to let the fools who will bid the prices up to nose bleed levels, pay the taxes involved.
“I didn’t buy my modest Chicago condo just to be taxed out of it by inflation and settlement by a wave of well-heeled hippoisie. I bought in order to keep my expenses as level as possible, and to be assured that as long as I pay the price for my place, I would have a place to live.”
If the taxes become disproportional to the level of public services provided, sell. That’s real price discovery in action.
“IMO property taxes are the most brutal, and brutally regressive way to tax there is, as they hit poorer owners much harder than the more affluent, and you can’t get out of the way of them by “adjusting†(i.e. hiding) your income as you can with income taxes, which tend to be “progressiveâ€, hitting those who can afford it harder than those who are barely eating.”
That one cannot hide property is a very good reason for the existence of property taxes. Arguments regarding the poor are shallow as the truly poor tend to either not be in the position of paying property taxes, enjoy other forms of direct subsidies which offset the burden, and/or own a smaller taxable size of land relative to non-poor.
Prop 13 distorts the picture for the poor because they end up subsidizing property owners whom tend to not be poor or as poor. The reason is because Prop 13 hasn’t kept Sacramento from overspending because lawmakers simply raised taxes and fees in other areas which have a disproportionate impact on the poor since they don’t enjoy the subsidy.
“How can you say you “own†any damn thing when your local government can charge you rent for it even after you have paid the price in full, and escalate that rent almost at will, to any amount?”
Without getting into a debate on any justifications for taxation, you are getting public services and infrastructure in exchange. Again, if the real burden becomes out of line with expectations, sell. If enough sell action occurs, a proper feedback loop informs the system. Otherwise work within the provided constructs to affect fiscal policy. Disproportionately shifting the financial burden to others is not a reasonable nor sustainable solution.
“Prop 13 assures that people pay taxes related to what they paid for the place.”
You’re right, and that’s the problem. The disconnect here is that the value of the land and its associated benefits change over time and is irrespective of a former price paid.
“Given that seniors have been inflated out of their savings by interest rates kept low, pretty much in tandem with the inflation of house prices, it is only fair to let the fools who will bid the prices up to nose bleed levels, pay the taxes involved.”
The prices wouldn’t be bid up as much if the tax burden was equally applied to all properties. And don’t kid yourself, most of these people are taking out mortgages which equates into new money creation being transferred to sellers. That money then goes into the system and creates the potential for debasing the value of existing money we all use. The relationship between Prop 13 and destructive creative financing schemes, amongst others circa 2005 is no accident.
Madness in san diego.
This house: https://www.redfin.com/CA/San-Diego/9362-Vervain-St-92129/home/4764936?
sold in april-2015 for $530K and back to market with some updates for $730K
wow!
I believe you should live where you can afford. This entire area has been avoided for decades and if you are a working class family you could get into something here that you can afford. The gangbangers and hoods are all moving to Palmdale/Lancaster and San Bernardino. Areas like South Central Alameda will see an will benefit from the USC growth. LA will / is follow(ing) the traditional city model of the well-to-do living in the center while the middle and lower class folk live in along the perimeter. IF Rancho Cucamonga avg. is 380k, then anything within 20 mins from DTLA are closer to 600-700K.
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