Nearly 40 percent of 18 to 34 year olds live with mom and dad in California. Most are working but just do not earn enough to rent let alone buy a home.
A record number of young people are living at home with mom and dad in California even in the midst of a very low unemployment rate and record in the stock market. Millennials in particular are carrying large levels of debt and many are still struggling to get out into a rental, let alone purchasing a home. There is a housing apocalypse for young Americans and in California, many Millennials are simply waiting until their baby boomer parents kick the bucket so they can own a piece of the California Dream. But Taco Tuesday baby boomers are not going away and many are angry that their offspring are unable to buy a home like they did when housing wasn’t consumed by house horny buyers and prices were actually affordable. The numbers are startling because when we brought attention to the issue a few years ago the number was at 2.3 million young adults living at home. Today it is now up to 3.6 million – if we combined these people it would be the third largest city in the U.S.
Young and living at home
There was this “fake news†narrative that many young Americans would be the second wind that would keep the housing market going strong. That never materialized. What did happen is that you had investors, foreign money, and wealthier older households buying the slim inventory available in the market. In California where rent prices are high and housing prices on crap shacks are insane, many are simply living at home.
And yes, this time it is different when it comes to young people living at home:
Source: Â Cal Matters, Census.gov
Back in 1980 20 percent of young Californians lived at home. It was actually lower than the national number of 22 percent at that time. Even in 2005 the state and national figures were similar. But fast forward to today and you have nearly 40 percent of young Californians living at home versus 34 percent nationwide. Make no mistake though, this is a national trend.
Staying at home and working
The notion that younger Americans are lazy is absurd. You see this being posted on ALL CAPS rants on Facebook where people have a basic clue of the technology powering our new world. Those that largely understand it and code it are the young we talk about.
And most are working:
Most Millennials are working but they simply do not earn enough to pay for sky high rent or to purchase their first starter crap shack. And here is the rub: the median earned income for an older Millennial living at home in California is roughly $21,000 for those with actual earnings.
Of course a lot of this has to do with how many are not marrying:
Many Taco Tuesday baby boomers followed a very prescribed path:
-Get a job
-Get married
-Pump out a few kids
-Slave away on a 30-year mortgage
Yet many of those kids are now those Millennials that are not getting married even though they have jobs (although most pay very little and are transitory positions). There is a major housing crisis for young Californians but many are simply living at home with mom and dad. At least tacos are very affordable!
Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information
Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.
Subscribe to feed
225 Responses to “Nearly 40 percent of 18 to 34 year olds live with mom and dad in California. Most are working but just do not earn enough to rent let alone buy a home.”
California is a sinking ship. The cost of living is so high and residents are taxed to the teeth.
California is one of the largest economies in the world, is still a hotbed of corporate activity, and has an expanding population. Hardly a sinking ship. Yes, real estate is a problem, but this is endemic to the major population centers throughout the country. So when the real estate bubble inevitably pops, the whole nation (and probably world) will suffer, not just California.
CA has 0.0001% population where all the money go and the rest are slaves to the banks for at least 30 years. I know; everyone wants to live the life of a slave. It is so glamorous…!!!!
“and has an expanding population”
Of mostly low skilled poor people looking for the best free shit in the nation……
Largest economy my ass. The state can’t even afford to allocate money for its crumbling infrastructures (dams, roads etc.) Just recently, it passed a bill for added tax in gasoline and vehicle registration fees. No money for Social Programs either (Prop H tax, measure H tax). California just became a sanctuary state too. Good luck paying for those illegals. Did I also forget the Calpers pension problems?
California has a per capita GDP of 61k, which is slightly above the average of 55k in the US.
But it is skewed by a small percentage of companies which generate extremely high amounts of economic output. The average person isn’t more productive than average and in fact may be less so. California has the highest poverty rate, the worst roads, and close to the worst schools in the US. Hardly excellence.
It’s. more than just a handful of big companies. There are outfits like Lockheed, Apple, Disney, IBM, etc but there are also a LOT of small businesses. The GDP is there. And productivity. The tax code just lets them off the hook when it comes to sharing it.
CA is unfairly under represented in the electorate. We are generating most of the wealth so we should have more of a say in who occupies 1600 Pennsylvania ave.
Despite California having $965 billion unfunded actuarial public pension debt, or about $92,748 per household, Gov. Jerry “Moonbeam” Brown’s revised budget proposed an increase of $15 million to pay for the legal defenses of illegal aliens facing deportation. The one-time cash infusion would boost the state government’s financial help to those in the country illegally to $33 million. So Brown and his Democrat cronies are buying the illegal alien vote with taxpayer money to keep their corrupt political party in office?
http://www.breitbart.com/california/2017/05/14/illegal-aliens-california-budget-jerry-brown/
#fakepresident and family are real estate developers. They are NEVER going to close the door to foreign investment – especially Russian or Chinese.
http://www.cnn.com/2017/03/08/politics/congress-eb5-investor-reform-trump/
#maga is a bold faced lie and a slap in the face of America’s middle class.
Gibbler, the EB5 was implemented by Obama years ago – another #fakepresident. During Obama reign the discrepancy between rich and poor increased like never before. During Obama reign, the middle class was annihilated. Don’t take my word for it, look at statistics – facts are facts.
If it makes you “feel” good (I know the liberals like that word “feel” and go by feelings), I don’t have any hopes of improvement under Trump. He will continue the same line of globalism started by Clinton and continued by Bush and Obama.
LMFAO cry more, you leftist baby. Maybe we can get a developer to build a safe space for you and your fellow snowflakes to hide in for the next 7.5 years.
Gibbler, I Completely agree with you (and Flyover). We should have elected Bernie who was our best hope. After Trump crashes and burns for his supporters, a Bernie clone will be elected.
Only a delusional leftist tool would support an old commie Jewish putz like Bernie who has never had a real job in his life and has sponged off of taxpayers his entire life.
http://www.investors.com/politics/editorials/bernie-sanders-the-bum-who-wants-your-money/
Yes, Bernie was a late bloomer but he hasn’t become incredibly wealthy by stealing your taxpayer money. It’s hard not to see that. Unlike Trump, he has good ideas that will return us to the good old days of the 50’s-early 80’s.
http://robertreich.org/post/129306966350
In my opinion, Bernie is the next FDR. If we had bread lines and Hooverville shantytowns in 2008 filled with people wanting jobs instead of Food Stamps and Government Supported housing, he would have been elected by a landslide. Just like FDR. When Trump crashes and burns on his promises, a Bernie/FDR candidate will be elected.
tell me about it RL, I know all about of sinking ships, but this time I will be the first in the lifeboat, even ahead of Francesco Schettino.
If NAR or other house-pumping organizations start advocating a party of three or multifamily mortgage requirements then we really are out of excuses for propping up homes any further in my opinion. The eb5 program must be in high gear again to try to change the landscape of home ownership and how it should be defined.
The cost of living is certainly high, but taxes mostly aren’t (unless you’re in the 1%).
Income taxes are highly progressive in CA, so while millionaires pay a lot, middle class folks not so much. For example a couple making $80K/yr will pay a bit less than 3% CA income tax.
Property taxes at 1.25% are much lower than many other states, though this benefit is initially neutralized by the high cost of housing. After a few years of inflation, though, the effect of Prop 13 means that CA property taxes are often much lower than those in other states.
Sales taxes are admittedly high in CA – 8th highest in the country – and this does hit lower income residents harder than the rest of us.
Still overall compared to most other states I’ve considered I pay significantly LESS tax in CA than I would elsewhere. Unless you’re very rich or very poor CA taxes aren’t particularly high.
You forgot about the gas tax, which is currently being raised. And the gas tax raises the price of all goods — stuff that has to be delivered to stores, restaurants, hospitals, etc.
They’re also raising the car registration fees.
And there are so many additional fees and surcharges. Ever saw your phone bill? A penny for this, a half penny for that, ten cents for something else.
These fee and surcharges are everywhere, not just on your phone bill.
And real estate doesn’t just incur property taxes. There are parcel taxes, transfer taxes upon sale, state capital gains taxes (technically part of your income tax, as California taxes capital gains like regular income).
Tons of taxes, fees, surcharges, coming from all directions.
Son of a landlord – you left out the waste resource fee. In LA the DWP collects 40+ dollars a month for the city.
People complain that they’re overtaxed; then they complain about failing infrastructure. Of course both are the fault of government. Which means it’s the fault of the populace. If we really wanted to create a stable housing market tax land at a rate that discourages speculation. Reinvest those funds in infrastructure build out.
Markin, they already tax gasoline more than anywhere else in the nation and every time they raise the rates the politicians promise to fix the roads. Then they take the money from CA citizens to spend them on illegals to buy votes with the taxpayers money.
It is misuse of funds not lack of taxation. That is what the taxpayers complain about. The infrastructure is collapsing and governor Moonbeam makes CA a sanctuary state so he and his buddies have cheap gardeners supported by the taxpayers who struggle to buy a house and raise a family.
Unlike you, those from Sacramento understand very well what the taxpayers complain about.
Probably true, Texas is not a cheap tax state for the average Joe Blow since it has high property taxes. Arizona which lots of folks here do not like is lower in taxes than Ca or Texas for most people. By, the way Peoria Arizona has medium income of 250,000 but the folks here complain about minimum wage jobs. Actually, for Arizona’s population size its outperforming Texas. Texas has 28 million but the median income is only 55,000 per year while Arizona is 51,000 per year and only has two urban areas versus 6 for Texas.
Detroit was a sinking ship back in the mid 1960s and it took 50 years to sink and CA is in a lot better shape now than Detroit was back then. So if it is a sinking ship, we’ll all be long dead before it does.
No problem. House prices will increase 10%/year, year after year with no end in sight. This time is different! After 20 years they will plateau for 2 years and then they will continue increasing 20% year. The FED will have our backs – they exist to make each one of us wealthy. My crystal ball told me so. I hope I beat JT to it…:-)
Now go ahead and start bidding at least 10% above listing price if the shack is close to the beach! All these millennials will beat you to the bidding if you don’t hurry. All these baby boomers need to retire and they depend on this bidding process from the millennials. For those too dense, SARC. OFF
fucking priceless.
I may be a bit early but that’s the post of the year right there.
Those who don’t buy now will be priced out forever and will live in tent cities and Honda’s.
10% My good man. Try 30% for a former crack house in Oakland.
yes flyover i like that….where’s Jim Taylor?????
Wife and I, in OC, combine for 175k/yr but still cannot afford a middle class home without going into serious debt for the remainder of our lives. Have an 18yr-old and a 16yr-old. Can’t imagine how the hell they’ll ever buy homes. Local colleges are the only option due to cost. No reason to go into debt by over 50k/yr each for college.
They’ll be at home for a long time. The Fed is killing our nation by inflating housing costs.
California’s issues are mostly local IMHO:
1) under production of housing, by the order of about one million
2) very strong demand due to desirability
Federal issues include interest rates as you said and also Eb5 visas.
Don’t forget or unrealistic property tax laws. The only way to own a nice house here is to inherit or make a very high income, talking like 250 plus. In theory the trade up market is supposed to be the middle class path. But hardly any existing starter homes are for sale…. most likely because people who stuck it out with starter homes bought in the bubble are just barely at or above their initial purchase price and thus probably still don’t have enought equity or income to trade up. So they stay put….
I have seen some people my still get trade up in the past few years but I suspect it is a losing proposition and we just don’t hear about all the people trapped with their loan modifications while the banks try to pretend they shouldn’t be finalizing more forclosures on people who fucked up and bought a home during the bubble.
It’s a terrible mess still. Probably 50% bad housing policy on californias part 40% bad lending and bank policy and 10% feds applying the one size fits all low interest rate solution to help banks push up prices on their underwater mortgages with low interest. Cali was uniquely equipped to fuck itself in this enviornment.
Gee, you could have brought a house in the early 2000’s before it became so high. By the way, OC increase only 4 percent in a year. Seattle increase 8 percent. I bet OC is only 5 highest housing market in 2 yeas, since Seattle, Denver and others are increasing in pricing much faster. Also, if one goes to Trula, OC houses 900,000 and above rarely see price increases its more like 600,000 and lower. Plus if you looked at most OC cities most houses are selling way below the 750,000 where they say housing is. Also, if you looked at south County there are lots of 32 year olds with 2 bedroom condos.
I’ll do you one better, Dean. My wife and I make over 200K in LA. No kids. But no chance of buying a home. Can’t afford the downpayment. But to be honest, I don’t want to lose 30% of my investment after 5 years anyway.
Put my kids through private high school, have enough for a down payment and no debt. Still not willing to throw away my saving into a shit hole.
Rooting for a housing collapse. Bring it on!
@Entity,
I think you need to share a few more details in your case. Unless you have a substantial amount of debt or a massive spending problem, chances are you can easily afford a home in a decent part of socal.
As I have said many times, it takes years (sometimes over a decade) to amass a socal downpayment and then you need to sign up for a 30 year note. Many people simply don’t want to be inconvenienced for that long. In the end, this is what separates the contenders from the pretenders when it comes to socal RE.
OK, I’ll throw my hat in the ring. Married with two kids, 35 years old, make about $200K, wife staying at home to give herself an extended vacation to raise said kids. I have $150K saved up for a down payment. 800 FICO score. I can’t buy a house despite multiple offers well above asking price because I am always outbid by people offering tend of thousands more, often all cash. Bid once on a foreclosed drug house above appraised value and lost by $60K.
@lord
A “decent part” of southern California is all in the eyes of the beholder. Everywhere I look I see blight.
Sorry to pour more fuel on your fire, Dean. The FED did not inflate only the housing bubble. They inflated the student loan bubble, medical cost bubble, auto loans bubble, credit card debt bubble, commercial RE bubble, …..all this because that is the only thing the FED knows. The FED doesn’t know how to produce any wealth; they steal wealth via inflation. The only product they sell are bubbles. The sad thing is that most people don’t know that we ceased to work for money in 1971. We just work for currency, which is just a medium of exchange but not a store of value (like money).
Thats right Dean.
Killing our nation? You can’t buy RE because of a little thing called ‘Supply and Demand’…no one is ‘entitled’ to own a home. Especially in one of the most popular areas in the WORLD. I just got back from Europe and EVERYONE I met got a look of longing when I said I lived in a certain beach city in LA…they don’t do that when you say you are from a flyover state. It is what it is…
So, GroovyMom, should I sell myself and my family in servitude for 30 years in order to see “that look” on my friends faces from Europe???!!!!….
I rather live in flyover country with a nice house and investments paid in full, I don’t care what the market is doing, collect checks every month left and right, travel every year all over the world, including Europe (with wife and children), spend winters on a tropical island and I will let the slaves from SoCal to enjoy the glamorous life of a debt slave and enrich the bankers and politicians.
the pretentiousness of the posters here has gotten so over the top it’s gotten boring……and I still can’t figure out or understand what the fuck the “i make about $200K” crowd is fucking doing here?
I found this site because i’m a loser making $100K with no hope of ever buying a home……….why some of you are here with your multiple properties and beach lifestyle makes no sense…..just trying to feel good about yourselves? throwing salt in an open wound of the rest of us? Or HAHAHAHA you suck look at me and my success?
all of the above?
@Interesting, IMHO, it is a housing BUBBLE blog to educate people on how at this time it is not wise to buy a house no matter how much you make. Nobody likes to lose 6 figures in a bad investment. However IMHO, no matter how much you make, if you hold the house for at least 10 years, you will be OK. Just don’t panic and sell if the entire world crashes around you and your neighbor’s house is being sold at half of what you bought your house for. Very similar to what happened in 2008.
Remember hearing about the 10,000 boomers per day retiring and flooding the market with homes? Actually they have been extending their work to pay bills and even if they retire; they wont sell and move to Arizona, They will stay in SoCal and hand off their home to their children.
So, where is the inventory going to come from, other than a job-loss recession????
http://www.calculatedriskblog.com/2017/05/three-years-ago-housing-doom-and-gloom.html
Valid point. Do not see the demand slowing down until there is a major recession. Prices will not cool off until the demand starts to wane.
Maybe something simple….such as high prices? High prices usually and eventually choke off demand. For some, the ROI doesn’t make financial sense (see Sam Zell). For many, keeping up with high mortgage payments is unsustainable as unexpected expenses mount up. Could be the end of the credit cycle, where high prices makes lending risky for banks.
Maybe you should find out from San Francisco?
I agree that a Boomer exodus from SoCal is unlikely. Boomers love SoCal more than anyone.
I do think a job-loss recession is an acute risk. 3/4 of the job growth in LAC since the turn of the century has come from the education and health sectors. Closer to a 100% since the onset of the recession. These are both bubble-icious industries vulnerable to any pullback on a huge raft of direct and indirect state/federal subsidies.
Houses get sold as the offspring fight over what to do with the house and they just sell and split the proceeds. That leaves each offspring some fraction of the proceeds (if any, some of the “gains” may have gone to funding their educations/lifestyles) to fund their own purchases so they won’t be able to live a lifestyle approaching their parents. Their parents enjoyed fat pensions, social security and much better health care while the kids struggle to fund a 401k to cover all those needs.
The whole damn bubble is just another cluster on top of the slew of others to contend with.
Junior, the Bloomer parents have taken out home equity loans, so there will not be much equity left when they die. That is how the Boomers live, they borrow and leave Junior holding the debt. Look at the government debt, the Boomers do not want to take a cut in their standard of living and they do not want their taxes to go up, so the government borrows so the Boomers can maintain their standard of living as they party on. It will be their children who have to pay the bills of the party.
Few Boomers want to move away from their friends and conveniences. Most of them that move, run out of money.
Look at Burbank. The prices are ridiculous due to low inventory(it is also a nice town compared to L.A.)because the Boomers don’t want to move no matter how high the prices go.
Roger Rabbit(aka “white rabbit”),
I’ve seen it first hand, foaming at the mouth to cash in and then low an behold……mom had a reverse mortgage and you got 30 days so sell that house or else…..which is easy in today’s market but……..
Thanks for bringing this up. I go to Home Depot or to an upscale restaurant and the guy serving me must be at least 65. I’m like “WTF, just sell your damn crap shack to me for $800K and go buy a condo in Phoenix for Christ’s sake”. Modern medicine will allow these boomers to hold on to their inflated housing investments for decades, well past age 100 or even 150. We might have another 70 years of this remaining.
LOSERS
I am a millennial who lives at home and works full-time. Rent where I live (Denver) is very expensive. Saving for a home is not easy when prices rise 10% every year and rent is close to 50% of one’s take-home pay after taxes and benefits. I would be saving 70% less than I do right now if I lived in a studio apartment in a decent, safe area. Living at home now means that I will have plenty of savings to buy when it makes sense for me to be able to put a solid down payment on something worth having. I have already saved a lot, and I am really proud of that. I am also grateful to my parents who are allowing me to live this way in the short term so that I can have a long term benefit down the road. Owning anything along the Front Range is probably a pipe dream at best since prices here continue to go nowhere but up.
The median price of a home in Denver is now about $487.000. In my circle of friends, the only ones who have been able to buy in this market are the ones who have had significant help from parents by way of down payment assistance or some kind of family inheritance. And yes, a small number have been able to afford it on their own because they have high paying jobs (and no kids.) But that is the exception, in my experience…not the rule.
But when people turn their noses up at me for living at home, I have to laugh a little bit, because they’re the same people who have gladly accepted financial help from their parents to buy a home in the form of a $80,000 check for a down payment. Whether parents give their kids money to buy a home outright, or let their kids live at home to save money to afford a house on their own, it takes some form of family assistance to be able to save money in the current housing market.
Kudos on living smart, Natalie, but it’s still very possible to own real estate w/o family assistance if you are willing to relocate.
Coming right out of college, I lived and worked in OC, LA and Long Beach from 2007-2015, always renting and scrimping and saving every penny I could on meager (for SoCal at least) entry level wages.
While there was no way I could afford anything in LA/OC, I ended up being able to leverage my work experience with some big name employers into a better paying gig in the IE, where (at least at the time) there were some decent values to be had. Ended up getting an old, half-ugly unupdated 3/2 house (with a back house) in a good neighborhood for $280k, putting down $85k as the downpayment without any help from mom and dad.
Now with ~$200k in equity, I’m getting ready to sell and relocate next summer to a place where I can buy a comparable house in cash.
Obviously not everyone is willing to uproot multiple times, but if owning real estate is a big goal, that willingness makes it very possible.
The Millennial Falcon, you are on the right track. It takes time, hard work and frugality for a long time. Eventually you end up in a sweet spot like I did. Patience, timing and moving go a long way.
More power to you for being able to stomach living with your parents – and for them being able to live with their adult child. Not everyone can stand that kind of situation for various reasons even when “embarrassment” is taken out of the equation. It would put a cramp on most people’s ability to have friends and dates over. I have a friend dealing with this right now – divorced, living at home but starting to date again. Her brother also moved back home with his fiance. Getting her finances in order to move out in the next 6 months (she pays them rent to help pay her way).
I could barely handle living with my family the first time around… Spouse’s father had “disowned” some of his siblings at one point and threatened to kill one – so that would be a no-go situation too.
Good for you Natalie. It seems you have figured out what works for you. It also is all about perspective. We moved to Denver from San Jose CA where we were renting a old “average” house for $3,500. To buy it would have been $1.2M. That would have never happened as I am a CPA and I did the math. I am sure we could have saved and qualified but it would have been so stupid. That said, the straw that broke the camels back was when they tried to raise our rent twice in 6 months after we signed a year lease and we were model renters. We had been working in the Bay for over 10 years and had two kids there before we figured it out. We bought a condo in 2007 for 505k and short sold it for 345k in 2012 and now it is almost 700k. It stinks but oh well its life. We owned our own business and had strong professional careers and were taxed to death (business and personal) and couldn’t get ahead. We complained for a long time about our situation and our parents generation and were frustrated by our friends and family members being handed money left and right to get into the market. We never wanted to take hand outs as they always come with strings so we looked at our situation and decided to leave over two years ago. We have been living just as frugally as we did in the bay and now have 20% for a house. It is exciting and not something we could have ever done in CA. We are so greatful for our opportunities and new lifestyle here and finally see a more financially secure future for our kids. Sometimes you need to find the good in what you have and if you can’t then go somewhere else. It takes a really long time but you have to build everything including your career and your saving account. It’s not easy anymore, but it’s not impossible. Sometimes waiting makes it all the more better. At 35 we are finally settled but it was a journey. People would say we are stupid to buy anything right now but we feel comfortable and it is more about a place for our family that we can be for a long time than an investment. At least now after all this time we can securely do both. It just took a lot of planning and patience.
public employee labor union pension costs force taxes and fees to be raised very high.
public employee labor unions costs have made it nearly impossible to live in America .
each American owes $380,000 dollars of this labor union salary & pension debt
http://www.truthinaccounting.org
Taxpayer,
I can understand some justification to a certain extent in regard to need of unions in the private sector. However, unions in any level of government is just LEGALIZED theft from the taxpayers who produce wealth in this nation. It is a gang of thieves who use the force of the government for stealing.
Unions in any form of government should be completely banned with an amendment to the constitution. The government is not in the business to produce profit and have a conflict of interest with the workers. There are plenty of laws to protect the rights of government workers.
I’m a teacher with a Credemtial, a Master’s Degree, and 18 years of classroom experience. What should I be paid? What is my value to society? Should I be able to afford rent or a mortgage? Why does my union have to negotiate for smaller class sizes when kids are being packed 40 to a classroom? I give up higher pay so that students can have humane conditions that give them a better chance at learning. If the billionaires have their way on Tuesdays election, teachers will lose their medical benefits. And schools will be handed over to charters. Less pay for teachers means less qualified people going into the field. Win win.
Typo: Tuesday’s
Roughly 10% of Americans are in labor unions. It’s irrelevant.
Back when America had strong labor unions, this country built the greatest middle class the world has ever seen. Starting with Reagan in the 80’s, labor started getting crushed.
The cause of obscene income inequality is the FIRE sector, (finance, insurance, real estate), not government. If anything, we need a stronger government that will fight back against FIRE sector control and that of other private monopolies.
To blame labor unions for any of society’s ills today is ignorant at best. Read some Michael Hudson and get educated.
@Wilbur58,
Correlation is not causation. Learn the difference. The thick middle class was not caused by unions, it was caused by the strongest economy in the world which was not ravaged by WAR. Companies were able to practice monopoly prices because they did not have competition. The world economy was devastated by war.
These days we have globalism, which I don’t agree with. That is the cause of shrinking of union participation. If you ship all industries overseas, what are you going to unionize except the government workers? The workers which are not part of the government are getting crushed by the workers in government with heavy taxation on top of not being able to find decent jobs. Do you propose all workers to work for the government? The government does not produce wealth, it consumes wealth. There is a place for SMALL government.
The government, as share of the economy is way bigger than ever has been in the history of US. If you add Obamacare on top of that it is of monstrous proportions. The problem when the government grows so big is that it’s choking completely the private sector with taxes and regulations. Any company hoping to survive, leaves the country. On top of that, the government is the cause of FIRE industry growing so big. They are hand in hand. Wasn’t the government who provided the bailouts? Isn’t the government guaranteeing all the student loans so the banks enjoy risk free profits? Isn’t the same with FANY MAE and FREDYMAC? What is the result of all this BIG government interference in the private sector? MASSIVE price DISTORTIONS and STAGLATION.
Are the students and the new college graduates better off when they look for a house to buy because of all this BIG government interference???!!!…
Walmart labor unions. Why not?
@Flyover
Wrong. Unions are the only defense against corporatism. Zerohedge should have taught you that.
Reading comprehension: F
SoCalRulez,
I think it is you getting an F in reading comprehension. I was talking about government employee unions. That was the subject. You did not understand not even the subject of the discussion, forget about the content. Sorry I wrote over your head. Maybe if you read my post many times, you will get at least the subject of the discussion.
You can not have corporatism without the state involvement. They go hand in hand. Take for example the worst corporation in terms of effect on middle class – the FED – a private corporation/cartel. It was created by legislation from the government with the blessing from the government. It has a revolving door between the FED and the Treasury. JFK, a liberal, introduced a proposal in Congress to suspend the business license of this cartel. He was killed shortly after. I know it was a pure coincidence otherwise I will labeled a “conspiracy theorist”. Nobody ever dared to do that since then. Poor Ron Paul tries hard to open the eyes of the sheeple, but since they don’t have 2 functioning cells to think, he is always talking over their head. If he would talk to the second grade level, the audience would understand him. That is the reason Trump won and he lost.
Trump was an entertainer all his life and he understood the audience.
I remain at my position that there is no need for government employee unions.
You’re not smarter than anyone else so quit stating that so and so is talking over some poster’s head. You have some valid opinions and other are completely off base in most people’s minds. Public sector unions are important to many of us and there was a great fight to get these institutions in place. My opinion is that the military-congressional-industrial complex has bankrupted this country and is the primary reason there are unfunded pensions (although I agree with you that Obama & the Fed with their disastrous rate fiasco has exacerbated the problem). There is so much graft and fraud in this “industry” that “private” contractors and “speculators” are becoming obscenely rich from the treasury at taxpayer expense. These are the “criminals” not some poor working stiff trying to create a stable life for themselves by belonging to a union.
Although it may feel like the government keeps growing, relative to GDP it appears to be rather flat. Tax revenue as a percent of GDP:
https://en.wikipedia.org/wiki/Hauser%27s_law#/media/File:U.S._Federal_Tax_Receipts_as_a_Percentage_of_GDP_1945%E2%80%932015.jpg
So, what are everyone’s opinion on lack of inventory right now?
Just did a search in the city I am interested in; and there were only 8 houses that fit my criteria (up to 850k!)
Boomers no longer retiring
Boomers not moving outta state and selling
Lack of building
Traditional move up buyers cannot afford the move up at current price levels
All of the above?
Definitely all of those things. I’d add that investors are buying inventory that was traditionally bought by working class families. I’d be interested to see the ratio of residential properties owned per home owner. Corporations would count as 1 person. The rise of airbnb and investor friendly laws, online auctions, zillow/redfin, foreign investment are contributing factors to the low inventory. In the area i live, any new housing built is high end, the people who move into those high end places are not from the area. So they can build all they want but it does nothing for the lack of inventory, at least locally.
Standing ovation for this username.
I distinctly remember an inventory drought 12 years ago, forgot if it was 2005 or 2006. Everyone is a greed bag in the last few quarters of the high.
Latter part of 2003/early 2004 inventory was very low in San Diego County, and that was the peak in price per sq. ft. Going off memory it was something like 3-4K for sale, but within just over a year it was 3-5x that. So yeah, darkest before dawn. You’ll see the cash crunch in other things first, like people trying to sell cars, boats, etc. all over the place. Might be good to track craigslist for those numbers. High end weakens first, which we’re already seeing around the country (hotspots like Manhattan, Miami, SF and Honolulu) with increased inventory and lowering of asking prices.
“Boomers no longer retiring
Boomers not moving outta state and selling
Lack of building
Traditional move up buyers cannot afford the move up at current price levels”
I think the 2nd and 4th are the big ones. Boomers really like SoCal. If they’re already here they are unlikely to move.
And move-up buyers have become move-out buyers. Selling and staying is a lateral move
value-wise at best right now and nobody wants to cash-out and rent.
Add to that a smaller pool of distressed homeowners in the wake of tightened lending standards in the immediate post-recession and a relatively positive job market and there’s nothing pushing people to sell other than pessimism.
Why should Boomers leave the state? If their house is paid off then their living expenses are negligible. If you’ve held onto your house for 30 years then Prop 13 makes it silly to move somewhere else with worse weather, no social network, and probably higher total expenses.
Friends bought a nice property in a nice city 2.5yrs ago for 770k (standard sale). Comps today are at 900-950k.
Insanity.
When you have to be a heart surgeon to afford a house. The peak is set.
A new trend. Single women are striking up conversations with men at Home Depot. Their strategy is to marry someone who already owns a home. One of their first questions is where do you live. Interesting times.
I love it. Next thing you know, owning a house will make your jump shot as accurate as Steph Curry’s, your pitch as unhittable as Kershaw’s, and your running as unstoppable as Zeke Elliott’s. All that on top of making me rich! I insist on buying a spot in your investment classes!
no troll traction…….not your best work, by a long shot
Life in California is good… when you keep your Nevada citizenship and pay no state taxes 😉
Feels good man
“Nevada citizenship”? That’s no escape clause.
If you live part of the year in California, then California taxes your Nevada income, pro rated to your time spent in California:
https://www.ftb.ca.gov/individuals/faq/ivr/209.shtml
California taxes all income you received while a California resident [i.e., in state and out of state income], and the income you received from California sources while you were a nonresident. The requirement to file depends on the amount of income you received from any source while you were a California resident and California source when you were not a resident of California.
No sh*t, Sherlock. Do you understand that people don’t always abide by all laws?
Plenty of people find ways to skate on income tax, and A LOT of them do it in Cali.
I understand it’s cool and hip for older generations to shit on younger ones, but here’s some food for thought: I make twice as much as my mom and dad combined, yet I still can’t afford to buy the house we live in*.
* = unless of course you figure that I should spend at least half of my income on monthly mortgage payments for the next 30 years.
Fuck me, right? That’s what I get for being a dumb, lazy millennial. And for being born in the wrong decade.
youngin, wait! Whatever goes up it will go down. In this FIRE economy the RE works like stocks. The whole market is rigged. Just have patience. Timing is everything. I am a boomer and I saw these cycles come and go like the weather. I always bought low and sold high. All you need is patience and don’t go emotional. Buying a house is a business and you can not afford to go by emotions. Any needle can bust this bubble and there can be thousands of needles which can pop it.
Patience Youngin….Patience. In five years you’ll see the mass suicide of the taco Tuesdays. Let them buy more stock, and more tacos. And let them order that third and fourth margarita, salted rims. A generation that consumed our future will now consume itself, eating its tail. They will not go gracefully. Lots of revolvers to heads. They will have left us nothing but grainy old Jazzercise videos.
Death by taco, what a way to go.
At least they died with their legwarmers on.
Speaking of Millennials, I would like to ask a Millennial why tiny-houses are cool and hip but mobile-homes and trailers are not?
Good point. i have wondered this myself.
Tiny homes are hip while trailers are not, because tiny homes can be beautiful and well-built, while trailers & mobile homes are ugly and flimsy. It’s a matter of style and quality. I speak, of course, of tiny homes built on foundations, with decent materials and good architecture. I love the way these little houses make use of space, and have contemplated adopting this lifestyle from time to time. I find myself contemplating a tiny home built of stone, with a little plunge pool, a loft, and everything exquisitely crafted and fitted.
Tiny-house sounds cool. Mobile/trailer sounds ghetto
I would live in a trailer if it was on the beach like in the Rockford Files. Sadly, Jim Rockford would be living in San Bernardino these days, with the same Firebird up on blocks. Or possibly in Apple Valley.
Because living in a trailer park means having neighbors that are extremely poor, with all the inevitable baggage that goes with it (unemployment, domestic violence, drugs, petty crime, unattended screaming kids). There are senior-only parks that are very nice, but those tend to strictly adhere to the minimum age. Those that don’t tend to have a mix of the extremely poor and the old and bitter.
But that is where tiny houses can legally be parked. Unless you have rich parents or fiends with kind zoning you are no better off with the tiny house.
RV’s are VERY popular in the SF peninsula (specifically: San Mateo, Redwood City, Menlo Park, Palo Alto, and Mountain View). I’ve seen A LOT and have spoken to a few people living in them and got the same response every time, they refuse to pay $3k+ to rent an apartment or pay $1M for a 2 bedroom condo.
Exactly the RV is better because you can park in nice places. The tiny houses are immobile on their own so they are relegated to trailer park.
I’m 34, I live in WA state and I live at home with my mom. I pay for my food and utilities, nothing else. The trouble is, the party will be over soon for me. Mom wants to sell the house and move to Lake Tahoe (at 72 years old and divorced I might add) so I will have to move out soon. Room rentals here range from $500 to $1000, when they are available. This is a big chunk of my paycheck (I work at a local boat dealer as a mechanic) which usually runs around $900 every two weeks. Couple that with food and other expenses and I might be able to save/invest $200 or so each month. I’ve been saving up cash and also buying gold and silver bullion when the prices are good, but those days will likely be few and far between after I move out. Thinking about moving to Reno….
As I read these posts, and I see giant error in the thought process of renters. Specifically, some say they will not buy because they don’t want to be a debt slave paying 50%ish of their income on a mortgage for 30 years, so they rent. Better rethink that. When you first take the mortgage, you borrow all you can and initially you are paying 50%ish of your take home income on the payment and other costs. However, 10 years later, your income has risen substantially because of inflation, so the payment is much less than 50%. Twenty years later, and the payment is small relative to take home income. You can not ignore inflation.
Spend 50% on you gross income now on the hopes that your future raises (most likely at least a 50% more) will lower than percentage? Who needs medical care, decent food, raising kids, retirement money, or emergency funds! Sign me up!
Indeed. Having an affordable rental and a nice rainy day fund feels pretty good. The psychic freedom of being able to tell the boss to FOAD if it gets to that vs. being a wage slave and having to get on your knees on demand is priceless. I was not born a slave and have no desire to die as one.
There’s one problem with your theory that inflation will solve the affordability problem in 20 years: Buying now guarantees you will be house poor for at least one decade and you might not even live 20 years. Also there is one thing which never goes up in the modern bubble economy–salaries.
So true. The bet is you live a long time, otherwise you are better off renting and enjoying life. I would say if you live less than 20 years after you buy, you lose the bet.
“10 years later, your income has risen substantially because of inflation”
HAHAHAHAHAHAHAHAHA…..better troll but not much.
I was just chanting with a friend, he hasn’t had a raise in 7 years.
JT, you forgot to mention that the stress level of a slave to the bank is so high that they don’t tend to live like George Soros and Warren Buffet. By the time a debt slave pays off, if ever, they are dead from complications cased by stress (financial stress, job stress, traffic stress, marriage stress). All this stress is caused by poor money decision when they signed their life away to the bank. Only the banker gets to enjoy it; the debt slave will die trying to make the banker and the politician rich.
@ Flyover….Phoenix sucks! Was just there and EVERYONE was from LA! They all wish they could move back to ‘Cali’ (another rant…no one from California calls it Cali…)
Now they have a big soul less house surrounded by hot wind/tumbleweeds and shitty min. wage jobs. And they start crying about the 100 degree temps from end of May through end of October!
Talk about a trade off! Arizona is a state that could not be inhabited today without the invention of artificial cooling!
GroovyMom, I know that for Californians the only flyover country is Phoenix, Las Vegas and TX.
However, US is a big country and it doesn’t have everywhere the Phoenix weather. In regard to Phoenix, I agree with you – it is too hot for my liking. Phoenix is a city, while US is a continent with almost any type of climate you like. You just have to find the sweet spot where you like it from all points of view. I did.
You come across as a snobby bitch. SoCal suits you perfectly.
False. Inflation is not a given. It is not a law. You misunderstand what inflation is and where it comes from. Money is created by people signing on the dotted line and requesting the loan. Since the US economy was offshored beginning when Nixon went to China, the main purpose of our new economy has basically been to create enough debt to export dollars to inflate the rest of the world. Interest rates have dropped for nearly four decades to make the cost of the debt cheaper so that it can continue to inflate (plus millions upon millions of immigrants flooding in to request the creation of a sufficient amount of debt). The trade deficit we have with other countries they used to bid treasuries up, thus dropping the yield and allowing US consumers to bid up prices and thus create more and more debt. But interest rates are basically scraping the floor now. They can’t go much lower. And part of the Trump mandate is to limit immigration. The drivers of the inflation are all but exhausted. The roaring seven decades of inflation are coming to an end one way or another. The deflation can not be postponed forever.
Inflation is extremely likely considering the federal reserve manipulates the market by controlling interest rates targeting 2% inflation and has a track record of being very successful in doing so.
“…10 years later, your income has risen substantially because of inflation…”
I would be very careful about making such a statement.
For many, the *last* 10 years as been an era of net-net *zero* wage growth.
For others, the *last* 10 years has been an era of *deflation* typically due to a job change. (forced or otherwise). Also, for many, corporations have been very clever devising methods to effectively cut your aggregate pay by cutting benefits.
The days when a professional could job hop all over town and expect and salary bump is for many is now pretty well nothing more than a wet dream. Global wage arbitrage has pretty much put a damper on those 80’s, 90’s style wage bumps.
Anyone who thinks the *next* 10 years is going to be different probably also thinks that they are going to get daily visits from Santa Claus.
You can’t ignore inflation. But somehow your ignoring wage growth in 10 years, external pressure to housing demand (speculative or money sheltering) and if the price can be sustained by locals in that zip code. Question that 10 years ago + now and the issues are clear as day, pull back happens.
Renting is a beautiful thing. I get to live on the beach and sit on a butt load of cash, i don’t care if i loose my job. The landlord is my b!tch. Renegotiate my lease during a recession, landlord expects it. Banks aren’t that friendly, i’ll pay for that house cash my friend. Like buying any asset is timing, study your purchase. Don’t go in blindly or by hopes or by emotion.
Spot on
I live in the bay area and my 31 year old brother in law lives with my wife and I cause we currently have an extra room. he works full time, makes decent money, and the dude cant save a dollar to save his life, he has bought 5 cars in last 9 years, upgrades his cell phone every six months, basically just throws money away, etc. I’ve already hinted to him numerous times that he needs to save money cause we plan to have another kid within next two years, when that kid arrives he’s out. Guy is not taking me serious, so he’s in for a serious pimp slap in the near future.
The more important question is, is your wife on board with your future plans? From personal experience, sisters tend to be protective of their baby siblings.
nailed it, Prince of Heck
lol….actually yes. She has spoken to him also and let him know the situation. Kid comes he’s out, time to hit the real world. My wife and I even have a bet…..I say he cries when the day comes when he has to leave and she says he wont.
She doesnt recognize he’s an extremely immature man for a 31 year old man and he’s in for rude awakening. He’s gonna cry.
Interestingly, there was an article (WSJ?) within the past few days on Millennials jumping into the housing market, which read very very interestingly (and very much like NAR marketing) – it was basically noting that a few of that generation have now jumped in from an all time low in first time buying, but spinning this as a sign of increasing demand to come, and noting that builders are starting to build crap shacks out in the boonies again and sell them to young people but “this time it’s different.” I’m sure driving two hours each way in from Manteca (SF) or Riverside (LA) to work will be the new hotness. 😐
Dude, I keep hearing this every year….this is the year when millennials will go out and buy….just to find out that they break a record each year….each year more millennials stay at home or move back. Wont change until we get this nice crash.
They stay at home because they love their parents. I wish I can stay with my parents too.
No one is putting a gun to your head to live in Los Angeles or California. I know the weather is nice here but if you can’t make it here, move to another State. There are plenty of affordable nice places to live and get a middle class job. Mooching off your parents for years to come is not fair to them.
If you recall parenting has encouraged failure, example a last place trophy. Few millennials have the personal drive to figure this out.
Legal immigrants millennials on a work visa seem to have this drive. Unfortunately we Americans sap them through sponsorship with below average pay. But i’m just speaking of who has the drive here. My suspicion is parenting values american vs 1st gen immigrants.
I once left CA. Came back. “It’s LA, nobody leaves.” – Kramer, Seinfeld.
Moving away is overrated. Your wages go down too. So you have more square feet in a place you don’t want to be. A lot of people are hardwired to live in most places, like Las Vegas or Phoenix and be perfectly happy with their new construction boxes, not caring that the AC compressor is humping away at 3am (a hidden mortgage payment) to keep the stale dry air moderately warm inside the house, not really cool. And who is migrating to those neighborhoods in the desert? Interestingly enough people who were priced out of places like Compton and El Monte. And those people will work their magic to make their new desert neighborhoods much like their old ones, with lots of tagging on those new stuccoed cinderblock walls. And of course the smash and grabs from neighborhood vehicles. And all that with boiling hot windy weather, when it’s not cold and windy.
The bottom line is, the marine layer is priceless. Other places are for losers and quitters.
JR Wirth, generalizing much??!!!
The Phoenix weather is not the same from Pacific to Atlantic and from north to south. What about living on acreage, all green, creek going through property, birds singing, zero noise (except birds), pure clean air (not marine, but mountain air), low humidity and nice 4 seasons???!!!!…All neighbors millionaires, absolutely zero tags (graffiti), no burglaries even if you leave the door unlocked, leave car outside with doors unlocked and key inside, no traffic, wineries everywhere with tourists sampling, 4 major hospitals and 3 universities within 10 miles radius ….should I continue or you get the picture? Then, because the cost of living is low, I can spend winters on a tropical island and breath that “marine layer”…..what can be better than that?!!!….
CA is over rated because of Hollywood and brainwashed youth who has to be told where to live and what is the definition “hyp” and “cool” and what will bring them “happiness” (whatever definition they want to give to that). I know that there are millions of zombies for which “happiness” is living the “rat race”, live in a very crowded/congested area, be a debt slave with no freedom….to each whatever brings them “happiness”.
I know that many young people don’t have too many good choices, but it depends on what goal they work on. Living a life of poverty will never give them good choices. They have to work towards freedom if they like freedom. If they like the life of an indentured servant in order to breath the “marine layer”, good for them…to each its own…most of the time they will breath the smog from being parked on the freeway.
Flyover, those small towns sound like a nice place to move to, if you’re married. But if you’re single, there’s not much to do, is there? Socializing is mainly within families and established cliques.
A single newcomer, especially middle-aged, would have a hard time building a new social network. Thus, older singles are rooted (trapped) to the big cities we currently live in. It’s where our social networks are.
SOL, you have a valid point. You have to have at least a friend or relative. Then you are introduced to a larger and larger circle. If you are a social bug, you can find smaller towns very friendly and sociable, where everyone is more relaxed and have time to develop meaningful friendships. If you are a hermit, I guess it is irrelevant if you live in a smaller or larger city. I am somewhere in the middle, but my wife is a social bug. For her, there are not enough hours in a day for all the socializing, and she is like that everywhere. I used to live in SoCal and Seattle after that. In terms of socializing, I did not find any difference. Also, I don’t think it matters in terms of age or marital status. I have 4 children, and none of them would move anywhere; they like it here. One is married and 3 not yet (too young).
Maybe I’m generalizing, but I suspect most places where all your neighbors are millionaires are pretty nice to live in.
Apolitical,
That was my point. The difference between SoCal and flyover country is that in SoCal a million dollar house is not impressive and most the neighbors are debt slaves. In flyover country even a 1/2 million dollar house is impressive and in a gated community. The millionaires live off of investments and play golf, while in SoCal they are stuck in traffic, bumper to bumper always stressed out that they might lose the house to the bank.
The difference is in quality of life. Why do you think there are lots of millionaires in Kentucky (out of all places)???!!!! Because they can not afford to live in glamorous SoCal?…No. The difference is in quality of life and freedom – you have breathing room, literally and financially. That is to make my point; I don’t live in Kentucky.
I am in SoCal for last 11 years not by choice but because I have a cushy job.
If I move to other places, I may take a 10 percent pay cut but cost of living would be so low..
Personally, I think . SoCal is so over rated and USA has many more beautiful affordable places to live.
Anyone who is here esp millennials by choice is a damn fool unless they have a high paying jobs, or are loaded/trust fund baby or living with their parents and waiting for their parents to die.
I am still in SoCal because only because of my job. but otherwise SoCal is way over rated..
BTW: I am a first generation immigrant and have lived all over USA.
It sounds like all you know is LA and the desert. To many of us LA is a cultural wasteland. People all over this country are living happy fulfilling lives in places like New England or New York or Colorado or…they’re not quitters of losers. When comparing the cultural advantages of the East coast or more metropolitan west coast cities like SF or Seattle there’s no contest – unless you’re in the movie business. Sounds like all you care about is the weather.
Flyover,
My wife is from Kentucky. You’ve got to be kidding me. So many millionaires in that state?! Bahahahahahaha! It’s one of the POOREST states in the union. It ranks #48 in number of millionaires per thousand residents (CA is #6). Her family is all educated and does OK in relation to the general population. Outside of Louisville and Lexington where you find old money, people are dirt poor, uneducated, and ignorant (typical Trump supporters).
My wife moved out here with me in 2008. Everytime she goes home to visit she realises what a depressing place it is and how ignorant people really are…People ask her if she likes/misses home and her reply is “it’s a good place to be from” (emphasis on “from”).
These places are good to be a kid but no place to make a career and survive in today’s world. There are too few opportunities and you get trapped. She does know how to make moonshine in a bathtub so I give her credit for that.
SoCalGuy,
I did not say that Kentucky is a rich state. I said “Kentucky out of all places” for a reason.
I never lived in Kentucky and don’t plan to move there. I know it is a poor state. What I said, was that there are millionaires in Kentucky and you confirmed that. I did not not say that they are in high percentage or majority. I even specified that I used an extreme case to make my point. You took one word “Kentucky” out of context and run away with it, unrelated to my subject.
Actually, it works both ways. The same factors that are inflating their parents’ net worth (higher stock and housing prices) are also forcing millennials to increasingly live at home or seek any form of financial assistance from the former. Higher housing costs makes new household formation more difficult. Low interest rates forces millennials to invest in risky assets for any sort of return. Meanwhile, millennials face more economic hardships than previous generations did due to technological obsolescence, globalism, and the decline of the American lifestyle.
I would bet the majority (not ALL) of the people living at home are losers! They dropped out of college or picked a useless degree. If they can’t afford rent, then they can’t even afford to pay the property tax on a home.
Forget these losers. They will always rent or move away. They have nothing to do with the housing market.
People buying here are the non-losers. People with goals and dreams – and willing to do what it takes to get there. That means taking extras jobs, picking the right job, or starting a business.
As for the buyers in CA.
Rich foreigners. Do they care about who is living at home and can’t afford a home? NO!
Dual incomes. Do they care about the brother who smokes pot all day and can’t move out? No.
High earners. Do they care about…. you get the idea.
Housing is Supply & Demand.
There is a HUGE demand after 10 years of people not buying. Supply is very low. This leaves one thing – increased prices for those who can afford it.
I know the future. Higher cost of living. Higher life expectancy. Higher car insurance. Higher life insurance. Higher housing.
Housing is Macroeconomics, not Microeconomics. The trend is always UP. In 1800’s people were complaining too. They just didn’t have the internet to record the drama.
If you are waiting for a 50% drop, I think that’s foolish.
I know what I can change in life. I can’t change macroeconomic trends. But I can work harder and earn more money to get what I want in life. So what if I spend 10-20% more? Who cars over 50 years. Do you think the person who purchased that 1MM value home today was thinking 50 years ago…should I spend $10,000 or $12,000? OMG, I can never afford that extra $2000. I’ll wait for the price drop.
Wrong. You can buy an overpriced home or not buy one, it’s all about what you can afford. You don’t buy something you can’t afford. Period. That’s the big problem. People are once again shopping based with rose colored glasses on. By the way, housing was never historically considered an investment vehicle. It was always on the liability side of the ledger until the 80’s. As for kids living with parents that’s the choice of the kid and the parent. As long as immigrants are brought up it’s not uncommon for three generations to be living under one McMansion roof, whether they’re Egyptian, Indian, Chinese, etc. That’s the rule worldwide not the exception. So when they plop into our country you have grandma upstairs in a sari while the kindergartners do homework in the dining room.
So in reality, you need to buy what you can afford. The realtor carnival barker will always say “buy.” If you see a real estate chart that’s gone vertical for five or six years that tells you one of two things, 1) Wow, incomes are shooting up or 2) Wow, the suckers are piling in again. In this day in age, 2017, it’s option 2. I would prefer it to be option 1 but that’s for another era in the distant future…or past.
Sean, extrapolating much???!!!…..
History is not linear. Empires rise and empires fall. Companies rise and companies go bankrupt. Cities rise and fall into decay (see Detroit, Baltimore, etc.). Trees don’t grow to infinity and companies don’t grow to infinity….do you get the picture?
In finances, interest goes to 20% and interest go to 2%, both with different implication on RE. Can the interest increase to infinity???? Can interest go to minus (-100%)????… I think your mind goes in a linear fashion. Real life is more complicated and complex than that. Nobody can predict the future, not even the FED. There is no formula to quantify the outcome of 7 billion decisions and the psychology of the people to determine the outcome. Even in a smaller realm (lets say few thousand decision makers at the top of US or Russia or China), how can you quantify the outcome of those interactions? All can have tremendous effects on US housing.
Terrible advice. Wait until it drops 50% and save a ton of money. If you would have taken an economics class you would know the basics…..the economy is about cycles. There are always downturns. Why throw your money away now if you can buy in the future for 100’s of thousands less? Buying during bubble peak Is the dumbest thing you can possibly do.
There is no doubt things are overpriced. But the reasons are far different that the last bubble. Lending is still sane with the 43% debt to income ratio. But intrest rates and low supply due to no building and lack of resale are killing us. Still you can easily see that ownership and rental prices are in relative sync historically speaking.
It’s possible we are heading for an extend period of price deprication and short term lending rates and mortgage rates rise. It all depends how long banks can game the system to push of prices with low interest. There doesn’t apear to be a mania driven lending crises pushing prices well above rents. As such. Maybe if banks are forced to forclose on numerous existing homes that they have been holding out on then there will be a glut of homes and prices will crash. Maybe that’s our bubble. Who knows how many bad assets they are still sitting on propped up by low supply and interest rates.
RangerOne, what creates the low inventory in CA is Prop. 13. It works like in feudal England – some pay very low prop. tax and the serfs have to pay three times as many taxes to compensate for the low taxes on the boomers. The reasons they have to pay so many more taxes are these:
1. If the state collects less taxes from old property owners, then they have to tax more by income tax (non-existing in many other states) and higher sales taxes (some states don’t have any or very low) and many other taxes, fees and surcharges (in a word more taxes).
2. Some people here say that the taxes in CA a high only for the high income earners; the problem is that if you want to live in CA in an area where the bullets are not flying you need a very high income, then you are taxed to death and can never save for the downpayment.
If Prop. 13 would be scraped tomorrow, then the supply of homes for sale would skyrocket – not just condos, but SFH.
Prop. 13 is another distortion created by BIG government who interfere in the markets and picks winners and losers.
When you hear some here saying that taxes in CA a low comparative with other states, that means they are the beneficiaries of Prop. 13. They don’t need a high income to enjoy a better standard of living than a doctor. They bought their home long time ago. With low prop. taxes and low income, they don’t have to pay too many taxes.
Just to avoid confusion, I am not for more taxes, I am for smaller government and less spending. The people in CA instead of caping the prop. taxes, they should have limited the spending in something similar to Prop. 13. I am for small government not big government. If Prop. 13 will be voted out by the renter class in CA (very possible because of fast increase in %), the number of houses for sale will skyrocket and the prices will plummet. How many taco boomers will afford the new property taxes on a fixed income???!!!…. Now they eat Taco; with Prop. 13 removed they will not eat anything. Prop. 13 is a perversion of free markets where the big government picks winners and losers, the millennials and renters in general being the losers.
BTW Flyover,
I am certainly guilty as charged in being a beneficiary of Prop 13. That said, I have said here before and will now repeat: Prop 13 is unfair and I would be delighted to see it repealed. I know many other long time home owners who feel the same. Not every opinion needs to be based on narrow self-interest.
I will admit though that this opinion is not a huge sacrifice for me or for many well heeled boomers. If Prop 13 went away my annual property tax would roughly double – to a bit over 0.1% of my net worth. Apart from the Taco Tuesday narrative popular here, most boomers I know have been reasonably financially responsible and could weather a Prop 13 repeal with little problem.
Sean, basically you are saying that this time is different. Prices can never fall regardless of how high they get because California is paradise on earth. However, if the only thing holding them up is speculation and fear of missing the boat, they can and will collapse at some point in time.
Your argument sounds exactly like what people were saying at all the previous real estate tops such as 1980, 1990. 2006, etc. Buyers have incredibly short-term memories and always expect prices to double every 10 years.
I paid a $22,500 lot premium for my view lot in South Orange Co., CA in 1989. Although the home has appreciated about 2 1/2 times over those 27 1/2 years. Even today, I could not sell my home for $22,500 more than a similar, non-view home across the street. It took over 11 years for me to even break even.
That comes out to a 3 1/3 % increase in value per year, compounded over 27 1/2 years. Does that sound like a quick road to wealth to you? It is almost impossible to make any money in real estate if one buys near a mania top instead of buying near a bottom!
Personally I don’t feel that Millennials are lazy, at least not the majority. But there is this sense of entitlement I get from the ones I interact with. They seem to think that they are entitled to getting everything they want on their terms. Maybe because they see what the Baby Boomers and to a lesser extent the GenXer’s have and think they should have the same if not better. Unfortunately there is a good chance that the Millennials will be the 1st generation destined to live a lesser quality life than their parents and not necessarily by their own doing, but by the general socio economics and global circumstances.
Right on. The millenials are rightly upset about the lower standard of living they must accept. Guess it’s just the way the pendulum swings though. You never know whether things will get better or worse. Whatever perceived sense of entitlement that the millenials have is no different than any generation at that age. The “way things were in the old days” is just wishful thinking.
Millennials definitely have the shoulder chip, but no worse than the boomers when they were that age. The dirty hippie is the poster child for a selfish ingrate who inherited a country that was number one in education, infrastructure, public health, income, etc., and 30-40 years later, can Millennials ever match the catastrophic leadership of the Taco Tuesdays? If so, then we’ll have mass emigration to Somalia within 20 years.
I’ve seen my share of lazy millennials as well as productive ones. In other words, they’re no better or worse than their predecessors were. But you’re right, their generation, and subsequent ones, had to the bad luck of being born at the dawn of the decline of the American middle class.
LA’r you might appreciate this video:
https://www.youtube.com/watch?v=QXWNChoIluo&t=22s
Good to see Jim T not espousing the Tank Hard tag line… welcome to reality… long time, but knew you come around.
Housing To Tank Hard Soon!!
Yay Jim! The stock market is teetering where RE buyers are pulling their enormous piles of cash. The end is near.
$1 U.S. dollar = .25 cents in California dollars
Zillow admits it is under CFPB investigation – LOs and real estate agents beware
http://www.robchrisman.com/2017/05/13/may-13-note-on-coal-jobs-zillow-admits-it-is-under-cfpb-investigation-los-and-real-estate-agents-beware/
About 70% of Chinese millennials own a home…in the U.S. only 35 percent of millennials own a home
https://twitter.com/jmanfreddi/status/862091255274143745
About 70% of Chinese millennials graduate from UC Irvine. Then they buy a house with mom and dad’s liquor store money.
Millennials, stop listening to all the economists. There’s only ONE absolute major reason that the stock market and housing will sustain itself. And this is the reason the economy, while volatile, have been and will be resilient to extreme uncertainty such as Trump, Brexit, Euro-exit, whatever. Here it is, drum roll.. LOW INTEREST RATES. That’s it.
There has been wealth and will always be wealth that is resilient to recession. That wealth has historically been hidden in bonds and CD’s, trillions of dollars. With low interest rates, many of them are forced out of the woods and into stock market and housing to chase yield. Any home above $1M is now a commodity, a savings/retirement repository for the wealthy. Home builders need to scramble to build multiple unit homes for the millennial’s to satisfy demand.
Yep
Why are some townhouses more expensive than some houses, though in the same area? Houses come with land. Townhouses come with shared walls.
Here’s a Pasadena townhouse for $1,245,000: https://www.redfin.com/CA/Pasadena/448-S-Oakland-Ave-91101/unit-2/home/17239259
Another for $939,000: https://www.redfin.com/CA/Pasadena/242-E-Glenarm-St-91106/unit-4/home/8116950
Yes, they’re very nice. And south of the 210. And anyone can LIST any price. But still…
Here’s a house south of the 210, and it’s cheaper than either townhouse, listed at $799,000: https://www.redfin.com/CA/Pasadena/2064-Rose-Villa-St-91107/home/7014124
True, it’s in front of a school. But no shared walls.
And there are dozens of houses north of the 210, in Pasadena and Altadena, selling for under a million.
Can anyone explain why a townhouse, however nice, would be as, or even more, expensive than houses in the same area?
son of landlord, that is like asking why a huge, swank apartment on N Lake Shore Drive in Chicago costs more than a small, fugly, rehabbed house in a “getrified”, formerly lower middle class neighborhood a mile or so west of there. It is a different class of housing.
The townhouses you posted are very high-end, have a lot of space, and in a great neighborhood. They are upper-class housing, really. That development at 448 Oakland is absolutely gorgeous (though I have my quibbles with that green cabinet in that black marble bathroom). If I were to move to CA, I’d love to live in either development and I’d pay $1.2 for that townhouse on Oakland if I had the money, but the single-family house you posted is a sad, outdated little dump in spite of its upgrades and is distinctly lower-middle class housing. It’s the type of house, and lifestyle, I wanted to escape as a kid.
Many people, of whom I”m one, place NO value on having a plot of land and separate walls. The people who drop $1.6 million on apartments like this http://www.realtor.com/realestateandhomes-detail/3400-N-Lake-Shore-Dr-Apt-8EF_Chicago_IL_60657_M80192-06964, value a great location, space and amenity, a high level of service, and elegant architecture a lot more than they value a patch of land. They figure their neighborhoods are their front lawns. And townhouses like the ones you linked are really great, because you do not have the high HOAs that antique apartments do, and you have almost as much autonomy and privacy as you would in a SF house, with none of the work and hassle.
I hate shared walls. Maybe you were lucky, but over the years I’ve heard … barking dogs, music, exercising, babies crying, high heels clacking on hardwood floors, and even my senior citizen neighbor having sex.
And it’s the walls, not the floors. The floors in my building are concrete. I never hear anything above or below. But the walls are thin.
Of course, a lot depends on the neighbors. Right now, I’m experience a quiet spell. Quiet neighbors. But that can revert any time.
Then there’s the problem of flipping and the construction it brings. There was much flipping in my building during the aughts. It seems about four or five months of every year was filled with construction noise. One neighboring unit redid the bathroom twice in a 5-year span. Bought, rehab, flip, resell, rehab, resell …
I dread dropping a pile of money on another condo/townhouse, and only later discovering that the walls are thin — and a noisy neighbor has moved in.
I realize houses can have noisy neighbors too. But the noise is usually softer if you don’t share walls.
As for that “sad” SFH I posted, it’s south of the 210 in Pasadena’s “Cal Tech neighborhood” (same as those townhouses). The house might not impress you, but someday someone might want to buy it for its land value. Tear down the house and build something better.
That’s why owning a plot of land should make (I think) that sad house more valuable than those nice townhouses. You buy a townhouse, you’re stuck with the townhouse, and with whatever decision your neighbors make in regard to managing it. (As you know from your neighbors reconverting your condo building.)
Land ownership buys greater autonomy. Yes, you’re responsible for mowing your own lawn and backyard. Buy you also have the right to install a pool or lawn decorations, without a HOA dictating to you.
Generally a SFH will command a higher price per a sq. ft then a townhome or condo because of the land. The townhomes shown are considerably larger and nicer than the example SFH but still have a significantly lower cost per sq. ft.
That is a good observation. I can think of a few things.
1) A townhouse has a very small yard and the HOA takes care of it. Attractive for people who like “people” to do the manual labor.
2) It may have a community pool, workout room, rec room that is covered under the HOA.
3) It is more of a community and you get to know your neighbors. That is attractive to social people.
4) These townhouses look luxurious and pretentious. It is like living in a 5 star resort on a much lower budget. At least for the moment.
I forgot to add, why do retirees move to retired living communities at 8K per month?
1) For the same reasons above.
2) Because they can afford it and don’t want to do any more work.
3) Because they want to enjoy the last decades of their lives without having to worry about leaking roofs, mowing the lawn, trimming the bushes, or anything that involves work. They deserve it but their children will likely be left with nothing when they are blowing through 100K per year with nothing left as an investment.
I would prefer my parents buy a townhouse here rather than going into a retirement community because:
1) I am a greedy child
2) I was raised by my parents to be thrifty and not throw money away on exorbitant rent.
Retirement communities are usually a ginormous burn. You are paying thousands a month for something that you can never own and pass on to your children, while subjecting yourself to a thousand nitpicking rules- no pets, no younger roommate, limited pool and club hours, and dozens of other regulations.
Townhouses and condos may not appreciate as quickly as SF houses, but they are great rent-hedges that mostly keep up with inflation if the association is well-run. You usually have a much lower tax load and far less maintenance, because the property tax is essentially a land-use tax.
Unless you are growing food on your lawn, a house lot is nothing more than another maintenance chore, and something to be taxed. Most urbanites- and if you are not farming, you are an urbanite even if you are living in a suburb- have no use whatsoever for their sprawling front lawns, and would be better off in a townhouse, or at least a much smaller house lot with a “pocket” garden.
Where did you get the false idea that purchasing a retirement home means that you are paying thousands a month for something that you can never own and pass on to your children?
Starting at $329,995, Toll Brothers is selling beautiful single family homes in a gated Active Adult community St. Augustine where you own the land. Homes can be inherited by your children. Unlike California and Illinois, Florida has no state income tax and other taxes are generally much lower.
Maybe you should stop drinking the Kool-Aid and consider getting off the Democrat’s corrupt and bankrupt Chicagoland plantation?
Check it out:
https://www.tollbrothers.com/luxury-homes-for-sale/Florida/Coastal-Oaks-at-Nocatee-Legacy-Collection
Where did you get the false idea that purchasing a retirement home means that you are paying thousands a month for something that you can never own and pass on to your children?
Starting at $329,995, Toll Brothers is selling beautiful single family homes in a gated Active Adult community near St. Augustine, Florida where you own the land. Homes can be inherited by your children. Unlike California and Illinois, Florida has no state income tax and other taxes are generally much lower.
Maybe you should stop drinking the Kool-Aid and consider getting off the Democrat’s corrupt and bankrupt Chicagoland plantation?
Check it out:
https://www.tollbrothers.com/luxury-homes-for-sale/Florida/Coastal-Oaks-at-Nocatee-Legacy-Collection
We were referring to Retirement Communities like this where 2 bedroom rent is 7K-8K per month. There is a long wait list at this site.
http://www.assistedliving.com/california/santa-barbara/maravilla-senior-living-community/
Assisted living is different than owning a house or an condo in a retirement community. It’s for those for people with disabilities or for adults who cannot or chose not to live independently.
This is not rocket science. Generally a SFH will have a higher cost per sq. ft . then a condo or townhome to account for the land. This is true in your examples too. But it just so happens that the condos you have chosen are considerably larger and nicer than the SFH shown, hence they are more expensive.
Many people prefer condos over SFH due to the many amenities, increased security, and lack of maintenance. Condos are especially appealing to older people and those who live a very busy lifestyle and travel a lot. I have lived in both and I definitely prefer the privacy of a SFH, but to each his own.
The price of townhouses are staggering…used to be the ‘alternative’ to buying a SFR.
Saw one in Playa Vista yesterday for $3.6m!! It was nice, but on 3 tall levels with no yard of course and views of your neighbors balcony!! Wow.
Staggering, because California “townhouses” aren’t really townhouses. They’re “townhouse style” (i.e., multi-level) condos.
True townhouses (as in the northeast) are SFHs with shared walls. You own the land, and can tear down your townhouse any time. And no HOA.
Maybe you’ve seen photos of New York City townhouses. Brownstones (as the style of many NYC townhouses are called) all lined in a row. Then you’ll see some modern townhouses sandwiched between the brownstones, breaking up the monotony. Someone apparently tore down his brownstone townhouse and built a different style in its place.
Sometimes you’ll see a row of brownstones, with an empty lot between them. The owner tore down his brownstone, and has yet to build in its place.
California “townhouses” are really just condos. You don’t own the land, much less have the right to tear down your individual unit. They’re not what New Yorkers would call a townhouse.
1996-2015: Almost all real income growth on CA tax returns (AGI per return) was in top 20% of filers. Bottom 60%: real income
https://twitter.com/LAOEconTax/status/863432090578071552
When you buy and how much one pays for a home really matters. I purchased my present home in Orange Co., CA near the end of 1989 for about $300,000. Not only was I buying at a real estate mania top but I also knew that the home was overpriced compared to other homes at that time. However, my wife liked the home so I bought it anyways. My point is that it took 11 years for me to break even and even now the home is only worth about $750,000. In other words, it took 27 1/2 years for the house to appreciate 2 1/2 times. Amazingly, that amounts to less than a 3 1/2 % increase in price per year for 27 1/2 years. And this amazing slow appreciation occurred in one of the hottest real estate markets in the world!
If you purchased your home with 10% down, then your yearly return is slightly better than 10%. 300K was big money in the late 80s. In the early 90s, that amount would get you a home in a decent area of Newport Beach that now goes for 2M.
I think there are both inflationary and deflationary forces at work in our economy. This is why we aren’t seeing 70’s style wage inflation. And why the price of gold is stagnant. Getting into a house at the start of a wage inflation spiral is like winning a lottery ticket. Buying a house before a deflationary bust is like betting the farm on a losing horse.
Interesting comment.
And the gas tax. Are you guys serious? Moon Beem had a lot of nerve pushing that through. What Sacramento needs to do is keep the existing gas tax being used for what it was originally procured for. Roads etc. this new round will start getting diverted before the ink is dry. The same song and dance will happen again in 5 years.
Kill Prop 13. Time for Boomers and all of their fake morals to put their money where their butt is. And all of these giganTic corporations. They will cry please Gerry and threaten to leave. But they won’t. California by itself is a great way to lure and retain top talent.
It can only lure talent if they can afford to live here. If by “top talent” you mean someone with a salary of over 200k, then yes I agree with you. But you can’t run a business with just those individuals. If housing prices do not improve corps will follow the way of Nestle and Toyota and leave CA.
Things such as the gas tax is one more reason housing near the major job centers is so expensive. Those poor souls who sit on the 91 Freeway for 3+ hours per day will bear the brunt of this tax. That extra 12 cents per gallon will add up over time. Keep voting for these fools…especially you poor folk!
California is by itself is a great way to lure and retain top talent? Maybe in the last century it was. After decades of corrupt lawless Democrats running the state into the ground, California has has become a third world cesspool with a rich ruling class, a declining middle class, and a vast underclass. California should secede since it has more in common with corrupt socialist countries like Mexico or Venezuela.
If California seceded this country would go bankrupt in a year.
Only a dimwit from San Francisco would believe that the US would go bankrupt if California seceded. California is mired in debt with California’s pensions underfunded by $1 Trillion or $93k per household. Gov. Jerry Moonbeam Brown even had the audacity to beg President Donald Trump for federal emergency assistance four times in just two months since the new administration took office.
http://www.zerohedge.com/news/2016-12-02/stanford-study-reveals-california-pensions-underfunded-1-trillion-or-93k-household
http://www.breitbart.com/california/2017/03/20/calexit-jerry-brown-asks-trump-aid-4th-time/
I intend to retire outside of CA. Visiting during the winter months which I find to be the best parts of the year here. But the taxation is way out of wack with other very nice parts of the country and only going to get worse. The next CA governor is also likely to be far left quasi socialist with a massive population of needy poor people to support. Not to mention the looming public worker pensions and healthcare bill. Clearly they will be coming for property tax hikes to pay for this looming disaster. I would advise others to look around for an exit strategy over the next 10 years or so. Putting all your money into a high priced CA home now may not look so savvy in 2025-30.
Buz, I left CA long time ago when it looked better and it was more prosperous (at least for the middle class). I still go there in the winter to visit friends and relatives. My children dread that. They come because they have to. They can’t imagine how did I survived there for so many years. They can’t imagine how can those people live there in that horrible traffic and everywhere crammed like sardines. They can’t wait to be back home.
That is the opinion of a youth without realizing fully the financial stress and consequences of living there. It is just their general opinion in terms of quality of life.
I always go there in the Winter not Summer. They never saw the smog in the Summer. On top of that they come back north many times to snow and cold; but they like the snow. For them, snow looks beautiful and clean and they can ski and snowboard.
One time I had them for a longer time in Hawaii. After a week they started to complain about the same weather everyday and they couldn’t wait to go back to snow and winter sports.
In conclusion, different people like different things.
Wow. Bet you made the big mistake of selling your SoCal house decades ago. Ouch.
Your children are outliers. I suspect many young people dream of moving to Los Angeles, which they regard as a glamorous, showbiz oriented, star-studded, entertainment mecca. (Or if not to Los Angeles, then to New York City.)
JT, don’t cry for me. I made far more on my investments than you’ll ever dream from house price appreciation even if you are close to the ocean. I also had a great life in the process, something I would never have dreamed in CA.
I can come to CA and buy an excellent house in a great neighborhood all cash at these bubblicious prices, but it is not a sensible business decision for all the factors I explained for months here. Like I said before – I go by logic not emotions.
SOL, that was my point. Young people in special and people in general are different. There are not 2 alike even in the same family. I don’t doubt what you say that some like SoCal, others like NY and others like the mountains or country life.
The young person in SoCal will never make jealous the guy from NY and the guy from NY will never make jealous the guy from Kentucky. Each one defines beauty, happiness, fun and quality of life in different ways.
True that. California has seen negative outward migration to other states for 22 of the last 25 years. Those with common sense and the means to leave are fleeing California–much to the dismay of many states across the country.
http://www.mercurynews.com/2016/06/20/californias-skyrocketing-housing-costs-taxes-prompt-exodus-of-residents/
“Fifty-seven percent of Americans don’t have enough cash to cover a $500 unexpected expense”
http://www.cbsnews.com/news/most-americans-cant-afford-a-500-emergency-expense/
Housing to skyrocket! Lol
Many of these people will never own a home no matter where they live, they will be destined to be life long renters living paycheck to paycheck. Any raise they get will be swallowed up by rent increases and the need to buy more useless shit. Buying RE today in desirable CA areas really separates the pretenders from the contenders and I do not see this changing ever again.
Pretenders from the contenders. What a douchebag.
Your bias is all too apparent. The article doesn’t differentiate between renters and owners. That many owners take out HELOC’s or reverse mortgages reveals quite a lot about their financial situation (can you say living paycheck to paycheck?). Most owners couldn’t even afford their own house in today’s market. The advantage that they have is being born at the right time — when housing costs and the economy weren’t such in dire states.
Those are just the facts, sorry it offended you. Just like anything else in life (getting into a good university, getting a degree in something relevant…lots of hard work, establishing a good career, making good life choices, making sacrifices for future betterment, etc). Those all separate the pretenders from the contenders. You can call it whatever you want.
This is not some secret puzzle where you need a password. Make a plan, stick to it, work hard and you will be rewarded in the end. There are no participation trophies in the real world!
The only thing to be sorry about is your prejudices overriding any form of logic as far as economics as concerned.
total jerk this wannabe Lord
I can’t believe all the whining Millennials here. Thousands of foreigners are coming to the US for the opportunity you were born with. 40% living at home with mommy and daddy. How sweet. Are they wearing their diaper pins? By the way Calif also has 34% of all welrlfare cases in the country. Calif has NEVER seen a tax they don’t like. Again interesting how foreigners flock to Calif and become successful.
Curt, to a certain extent I agree with you. I’m one of those foreigners. However, it took a long time to get where I am. The CA today is not the same as CA in the 80s. Those coming today, will be sorely disappointed to start the wealth climb in the current environment.
It is one thing to start when interest on mortgage is 15% and a totally different start when interest is 3.5%. When the interest goes down, everyone gets rich – natives and foreigners. When the interest goes up, everyone WITH DEBT will get poor – natives and foreigners.
Another thing is globalism. I did not have to deal with that to the same extent the young people today have to deal with. How can they climb the wealth ladder competing with scientists and engineers from China and India with the wages from there and cost of living from SoCal???…..On top of that our government floods the market with scientists and engineers from those countries. It doesn’t mater if they are republicans or democrats, they pursue the same policies. The real danger is not D or R but the globalists.
If the globalists win their final prize (one global central bank with one world currency), the standard of living for 99.99% in US and the West in general will plummet like in the USSR regardless of your profession or business. If you are not part of the 0.0001% from the top you can say goodbye to wealth. Life will be like in former soviet union.
Hillary and Bernie are true globalists – puppets of the globalists. I was hoping against all odds that Trump is not (he did not have a track record and he did not come from that brood of vipers called CFR). I am not sure if he is a globalist or he is just blackmailed but he surely plays to the same music. So, not too much hope in politicians from me.
the only whiny little B* is our clown president. Millennials have to clean up the mess to pay for your social security….be thankful Curti and dont open your mouth too much….we might not feed you.
new HUD Lender List Search web page on HUD.gov.
https://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/lender/lenderlist
OK I actually need some advice here….I got an offer to buy our SM rental house, $2m. All cash, waive inspections, 20 day close. This for a largely unimproved 1500 sq. ft house (kitchen and 1 of the 2 bathrooms redone in the early 90s) on a ok size lot (not ‘developer’ big) The offer was from a LA native, trust fund baby with a wife and small child. My capital gains will be huge (1.6m profit), but I’m looking at a 1031 exchange for other investment property to not pay the taxes. I am negotiating as I don’t want to pay the 5% to the lazy ass realtor who brought the couple. If I get them to pick up the sellers fee, should I do it??? It makes a tidy profit as a rental, but I don’t like the increasing taxes in SM and the general idea that this house will be a money pit as its becoming one already. Not a ‘turn key’ rental property which I would like.
Why sell when you will be able to sell it for at least twice that amount in 10 to 15 years from now? I have never met anyone who said they were glad they sold that beach close shack.
Are you serious? Your asking on Dr Housing Bubble (where everyone is crying about how they can’t afford to buy a house and praying for a housing apocalypse), whether or not you should sell you crap shack for 2 million dollars and pocket 1.6 million?!?!?! Are you for real? Give me a break.
This place has turned into “look at me, look at me, look how rich I am”
I don’t know why or how these people end up at a site like this, I really don’t
IMHO, don’t buy it. However, your money, therefore do what you like with them.
If it for investment purposes, look at return per month after all expenses. Make a cold logical move. I am always shooting for a clean 1% return for month (after expenses) and I get it. Yes, it is hard, but it is not like I have billions of dollars to invest. With hard work, a little guy should be able to find them – there are more opportunities than there are money, especially for a small investor like me. Yes, all my cash flow comes from RE, both residential and commercial. Just be careful – never become a slumlord. Always shoot for Costco demographics for a long list of reasons. That is how you get an actual rich cash flow.
For large investors, with deep pool of money, it is hard to find a 12% return per year after all expenses. For investments, it is the ROI which gives value to a property. For your own house, usually the emotions come into play and that is OK. You can not quantify emotions. For investments, if you want to be successful, eliminate ALL emotions from considerations; very hard to do, but that separates the winners from losers. For investments it is a totally different mindset than buying a house to live in.
@Flyover…I thank you for reminding me that RE should NOT be an emotional play! We bought the house to raise our kids, so I am emotional about it. But I should not be. Good reminder. Thanks!
I assume that SM stands for Santa Monica. In any case, sell, sell, sell the overpriced real estate and buy an investment property somewhere else. There has to be somewhere in California where real estate is less overpriced than in the West LA area. I would try to negotiate the real estate commission so that the realtor takes off 1% and each of the parties involved pays him a 2% commission. That sounds like a fair arrangement to me.
IMHO, if someone offered me $2M for anything I owned, I’d take it and live like royalty anywhere else in the US. You can likely negotiate the seller commission as long as you haven’t signed anything. I had a similar situation an we negotiated 4% when a realtor said they had an interested buyer. As far as taxes, that is not my expertise, As far as I know, the only way for you to avoid taxes is for you to suffer an untimely death and to give the proceeds to your heirs. The house basis is reset to the day of your death, which may be 3M now, and your heirs will benefit from your huge tragic $1M loss for the rest of their lives (along with inheriting $2M). All legal and ta-free as long as you don’t have other wealth that exceeds the $5.3M inheritance limit.
Not to state the obvious, but be careful around your heirs until this deal goes through.
In a heartbeat. How long have you had this rental and how did you acquire it?
Owned the house since 1993. From the RTC (Feds) after a Charles Keating S & L went belly up. It has been a rental for the past 10 years.
Here’s some strategic advice: Never accept anyone’s first offer. If they are offering 2m, they’re probably sitting on 3m+ and have plans to make improvements. Counter higher, same terms (2.2 might be a good start). If they really want the house/land/culture/vibe (whatever mania has overcome them), they’ll make the numbers work. Make them pay the sellers fee–obviously; you’re doing them a favor.
What you do with the proceeds should be up to you and your accountant. Never take financial advice from anonymous posters on a blog.
@ Later On….thank you solid advice. Doing that now. Thank you.
If you sell then you won’t be able to get yourself all wet anymore when telling Europeans you have investment property in Santa Monica.
@Getting Out…true. I did rather like it when the Eurotrash lit up when I told them where I lived.
If I would have an offer at 2 mil., I would sell it in a heart beat.
You want to sell that baby! After the crash it will quickly lose 70% in value.
Houses in Santa Monica are never going to dip 70% in value. Not even close.
If there is a crash, too many buyers will snap it up, long before it dips 70%.
Santa Monica did hold up better than most other areas of Southern California in the 2007-2012 real estate crash. However, homes there were relatively much less overpriced then they are today. Will the greater degree of speculation and greed this time around make the coming crash worse? A drop of 45-50% seems likely to me. That $2,000,000 home could still be selling for $1,000,000 at the bottom. Ask yourself, “Would the above SM home be a bargain if it dropped 25-30%?” Wouldn’t it still be very overpriced?
70% crash is conservative for SM. We are in the biggest bubble the world has ever seen. You have seen nothing yet. 08 was a minor correction. Next one is the biggy.
Soon, people will be living to 100. That will make the housing shortage much worse pushing prices much higher since many more homes will be needed. In the future, many of today’s renters will be homeless.
no way. most people dont make it past 85. No one whats to be on the tubes and get fed the food through the nose. Housing to tank hard
Good article as to why the millennials can not buy homes. For clarity, the author should have defined what “borrowing from the future” means – in our case, “borrowing from the millennials” because they are the future. It is a waste of capital, like when the farmer eats the corn reserved for seed. Enjoy!
http://charleshughsmith.blogspot.com/2017/05/state-of-denial-economy-no-longer-works.html
The recent technological advancements does not portray good for housing: both commercial and real estate..
It may take years for this to come to take shape but anyway with common sense can see with advancement in technology, real estate is looking not so good..
The narrative is this blog is delusional and you are peddling the false song of hope. Hard working Millennials will likely find it more difficult to buy later vs now. As Millennials enter the work force and as their income goes up, their taxable rate will increase…. Boomers will siphon all social security and medicare and the work force of the Millennials are going to pay for it. Granted, generation X will too, but they are too small of a generation to make up for all the entitlements the Boomer are getting. But the Millennials are partially responsible for this too, especially those that want more entitlements for those not in the labor force. What the Millennials don;t see, is that this can-kicked economic mess can not and will not last forever, and when it crashes, the Millennials and their children (if they have any) will pay for the broken dishes.
I’m X gen, caught in the middle. Working very hard to save for a rainy day. I fear for the future of my children and worry that there won’t be any social security or medicare that I have contributed to because of wreckless Boomers and corrupt politicians. It is just insane to me that the least productive are asking for even more entitlements or that CA Gov. Jerry Brown wants to tax hard working Californians even more but has not fixed the pension mess he created when he was governor in the 80’s…. I love CA but do not know if it will be realistic to retire here…. Maybe I will just move to an Indian Reservation within CA. Fuck Taxes! Fuck Government!
Dow down 372 today. Maybe Trump brings on the crash by being such a dumb-shit. The King of Real Estate becomes the King of Crash. Go Donny, go.
Jed, after 8 years of building imbalances in the economic system, the crash would come with or without Donny.
Any free market has ups and downs (corrections). Nobody has figured out how to increase economic activity to infinity, yet – regardless if they have D or R after their name.
I said for months now that it is not a matter “IF” we have a crash, just “WHEN”; and it doesn’t matter who is in WH – Donny, Hillary or Bernie – corrections to insanity function like gravity. Be prepared!
Leave a Reply