What does $600,000 buy you in Southern California real estate? A look at Pasadena, Arcadia, and Torrance. Some boomers cashing in their housing lottery ticket.
We have an astute audience that reaches beyond the confines of the 405 and 10 freeways. I know it is hard for some readers to see beyond PCH but it is true, the U.S. is an expansive and far reaching country. It is hard for some readers to grasp the endless boom and bust cycles of Southern California real estate. So today, we’ll take a trip to three fairly popular cities and see what we can get with a $600,000 to $650,000 budget. I’d be interested to see what those outside of the area and those within it have to say about these properties and their current prices. What you will find is that inventory is growing and house horny buyers are itching to dive into housing even if it means taking on ARMs once again. Those that bought a few years ago will now find it difficult if not impossible to purchase today. Has the economy so radically changed to justify 20 to 30 percent price increases within one year? This market is still being driven by hot money although it is starting to cool off. Visually seeing what we can get for $600,000 to $650,000 in Pasadena, Arcadia, and Torrance might give you a good idea of what the current market is like. For those outside of the area, welcome to SoCal housing!
A trip into three L.A. County cities
It is important to note before diving into these examples that most traditional buyers are not entering the housing market with big down payments. In fact, here in SoCal, we have ARM usage doubling in the last year as households try to stretch their budgets to the maximum potential. It would be useful to note that the 30-year fixed rate mortgage is still hovering near all-time historical lows. The ideal scenario is always bandied about with a 20 percent down payment as if many people have $120,000 laying around to throw into a pre-World War II property.
The facts simply do not show that to be true. You have cash investors buying properties as investments. You have other markets being driven by foreign investment. In the middle of all of this you have traditional buyers stretching their budgets to cram into properties. It is an odd mix that is fully unsustainable. I’ve seen a few booms and busts and this goes back to the 1980s so why are we to expect any different outcome this time especially given the current market outlook?
Let us first look at a property in Pasadena.
1024 N Sierra Bonita Ave, Pasadena, CA 91104
3 beds, 2 baths listed at 1,200 square feet
Year built:Â Â Â Â Â Â Â Â Â Â Â 1924
List price:Â Â Â Â Â Â Â Â Â Â Â Â $635,000
A nice property albeit rather small for $635,000. The last sale on this home took place in 2004 for $489,000. It has had some work done in the interior but again, this place was built in 1924 (before the Great Depression). What is interesting is looking at the tax data. In 2004 the place was assessed for tax purposes at $226,183. When it sold, it was then reassessed for $504,981 in 2005. Taxes slowly went up peaking in 2009 at $535,887. Then in 2010, it looks like it was reassessed at $489,000 and remained there until 2013, where it was upped once again to $529,000. If this sells at $635,000 we will have a much higher tax assessment. Of course the government loves nothing more than higher home prices to collect more taxes. You can see how tricky things can get especially with that jump in 2004 from $226,183 to $504,981. Did the joy of living in this house with all public access suddenly get twice as good in one year? Probably not but the tax bill did.
Our next home is in Arcadia.
5520 N Santa Anita Ave, Arcadia, CA 91006
3 beds, 2 baths listed at 1,232 square feet
Year built:Â Â Â Â Â Â Â Â Â Â Â 1965
List price:Â Â Â Â Â Â Â Â Â Â Â Â $650,000
This home is slightly newer than the other home being built in 1965. I love that the ad says this place is a “must see home for people that love their privacy.†Of course all other homes are for suckers that hate privacy and want their life an open exhibition to the public. California housing affordability sucks. It has gotten dramatically worse in the last year. Some of these homes are the golden tickets being offloaded by baby boomers onto a market were housing fever is still raging on. This home last sold in 2004 for $400,000. No surprise that we see an assessment jumping from $259,760 to $416,160 from 2004 to 2005.
Let us finally look at our last example on our $600,000 house hunting trip in Torrance.
2378 W 233rd St, Torrance, CA 90501
3 beds, 2 baths listed at 1,296 square feet
Year built:Â Â Â Â Â Â Â Â Â Â Â 1959
List price: Â Â Â Â Â Â Â Â Â Â Â $619,900
This home was built in 1959 and the last sale occurred in 1986 for $100,000. I love how the ad mentions the following:
“Large Private Backyard With Rv Access! Plenty of Room For Your Boat, Jet Ski’s Or Rv. Move In Condition! Welcome Home!â€
Caption every word because you are spending $619,900 here. What is the current tax assessment? $158,524. So good luck to the new buyer that will be paying nearly 4 times the amount in taxes as the current owners here.
I assure you that folks with serious cash are not spending their weekends trying to outbid each other here. That is simply the truth. Do you see a couple made up of a lawyer and accountant buying these places? The people I do see buying these properties are house horny buyers simply trying to chase the aspiration of getting a hold of SoCal real estate and justifying that $600,000 and $700,000 is somehow affordable. The Torrance property is likely to be an offloading from a boomer.
It is interesting that when I post articles like this one with actual examples, people try to refute it by saying “well look at the history here, it is clearly going up therefore buying is an easy decision.†But when I respond that they should buy this place and let me know when they close escrow since it is such a no brainer they usually want someone else to take the dive. If you found a great stock that you just “knew†would go up, you would be silly not to buy. The same should be the case with real estate. The problem of course is that at these prices, it is not an easy decision. In fact, it looks like a mini-bubble with a different flavor. With these properties, even with a $120,000 down payment you are looking at a monthly carrying cost of $2,800 to $3,000 for 30 years. Most of those in the industry usually fail to look at the opportunity cost lost by the down payment after 30 years in alternative investments and the net difference between renting and buying. Then again, that is usually how we end up with baby boomers with inadequate retirement accounts living in these million dollar tickets while eating canned tuna to stay afloat. Just because the momentum is up, doesn’t mean it is a good time to buy. You can ask the 7,000,000+ U.S. homeowners that recently faced foreclosure if the “housing always goes up†argument is enough to make housing a great investment no matter the underlying price.
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161 Responses to “What does $600,000 buy you in Southern California real estate? A look at Pasadena, Arcadia, and Torrance. Some boomers cashing in their housing lottery ticket.”
First!
I call shotgun!!!
OT, but an interesting article in Bloomberg about bubbleproofing the housing market:
http://www.businessweek.com/articles/2014-05-22/redesign-30-year-mortgage-prevent-next-financial-crisis#p1
I got a better idea!
How about we have a process where debtors can walk away from their debt if the collateral is not worth the outstanding debt. We could call it “foreclosure”.
How about when someone has so much debt that they can no longer make the payments, they would go to court and have the creditors line up take all the assets and clear the debts. We could call it “bankruptcy”.
I believe with these two new concepts the creditors would be a little more mindful of how much debt they hand out because they would then hold the risk of the loan.
Of course there is the problem of lenders selling the debt. How about have a rule where they have to hold a certain percentage of the sold debt and that they would be the first inline to lose if the debt goes bad…
These are just crazy ideas off the top of my head but they might work…
What? Ideas and reality are two entirely different notions. Choose to live in the present with the rules in place as they are and not fantasize about what could be or would be better. Realistic views helps you make better decisions when you look at things as for what they are…not what you hope them to be.
“Ideas and reality are two entirely different notions.”
I think brings me the to the if you argue with r______s, even if you win, you are still r_____ed moment…
Wow! I need to read before post…
I think brings me the to the if you argue with r______s, even if you win, you are still r_____ed moment…
I think this brings me to a “if you argue with r______s, even if you win, you are still r_____ed moment…”
What? Arms were most definitely one of the big reasons the last housing crash was so bad. I did confuse part of your post with an earlier era but I stand by my post that aRMs were a major contributing factor of the crash.
Explain how. Interest rates did not change significantly. i think you are confusing teaser rate loans. I know plenty of people that chose an ARM and still have them and are very happy. I think you are confused,,,
The seems like a bizarre solution. Firstly, how are you going to enforce lenders to share the responsibility? Secondly, and more importantly if there were no bubbles there wouldn’t be the need for this. The best and only solutions is the allow prices fully to correct. If lenders know there is not bail out, moral hazard disappears.
“Secondly, and more importantly if there were no bubbles there wouldn’t be the need for this.”
Somebody was either not paying attention in their econ class when the professor stated that there is no such thing as bubbles according to the neo classicals… Be careful… Janette is watching and she is taking notes…
strike the “either”. Sorry Janette…
Yes! I hate that monthly “opportunity cost” bill.
You act as if an ARM is a toxic loan. In reality the majority of loans for property over history were ARMs and still are in many countries. The 30 year fixed rate mortgage is a government invention that really would cost more if not for all the government subsidies.
As far as CA being a boom bust state, I’ll believe it when I see a real bust and I don’t mean like that pansy BS hiccup we saw in 2007/2008…
Yes, your are right about loans that the bank could raise rates whenever the opportunity arose – never mind the borrower’s ability to pay. In those days only the very rich could buy property and the rest rented. After the Great Depression flattened our country we had a wise president and policy makers who tried to make buying a home possible for the those with limited funds. One of the results was the creation of the largest middle class in history and the world. People could get mortgages that were guaranteed to stay the same for 30 years that allowed stability for moderate income families. It all resulted in an American of real opportunity. It was the greatest time of our history. It is all gone now thanks to careless government and laws. Now the only ones with security are amazingly enough those will billions. You don’t want to go back to the pre-depression economy. Oh oops, we already have and it stinks being rules by corporations and the uber rich.
“One of the results was the creation of the largest middle class in history and the world.”
Wow! And I thought that it was because we were a net energy exporter, that most of Europe and Asia’s industrial military complex was destroyed while ours was chomping at the bit to produce and the Brettonwoods agreement where it was decided that the US dollar would be the world reserve currency was to blame for the rise of the middle class from 1945 to 1970. My bad.
The real reason folks lost their homes/farms had more to do with a credit freeze where banks were desperately calling in their loans to cover their losses. It had absolutely nothing to do with rates because the banks were not interested in extending credit. The real change that happened was the federal backstop for banks.
I am not convinced that ARM’s are the problem. ARM stands for adjustable rate mortgage which simply states that the borrower pays a lower interest with the understanding that the borrower is taking on the interest rate risk as opposed to the lender. ARM does not mean NIJA loan, it does not mean teaser rate loans. Generally these rates are based on the 10 year treasury. ZIRP and QE-Infinity is the medicine that will kill us in the long run…
What? Are you joking when you say that the banks freezing credit was the reason for housing bust. You don’t think ARMs had anything to do with the housing crash?
Did you completely forget that housing was at all time highs and regular people were given “ARM” loans because housing was going up at such a fast pace without any thought what would happen if housing crashed? They were given these loans freely and easily, without being properly vetted. When housing crashed and the loans adjusted up, they could not afford the payment, they could not refinance because the value had tanked and they were underwater. They could not sell for what they bought it at, they could not refinance, they had not other choice but to walk away. Housing would have not crashed if adjustable loans were not given to anyone who wanted them. The housing crash would have looked entirely different if proper loan standards were in place back then but they weren’t so we have to deal with the reality of the situation.
What about all the people that had taken out money from their good loans/homes only to to get sucked in the madness of easy money. This was not do to banks freezing credit. People with solid loans were drawn in to the madness of easy money. They refinanced out of their 30 year fixed and traded to adjustable loans while taking huge swathes of equity out because housing was rising hand over fist. Housing crashed, loans adjusted above what they could pay, they could not refinance, they could not sell for what they owe, they entered the foreclosure cycle after trading good loans for bad loans that sucked all the equity out and left them dry. ARMs worked while housing was going up but once housing crashed they became toxic.
You can say people were stupid to take out loans they could not afford ect. Who cares? It is what happened and now we have to deal with it.
“What? Are you joking when you say that the banks freezing credit was the reason for housing bust.”
You really need to work on your reading comprehension. We were talking about the 1929 market crash and the depression that followed…
“You don’t think ARMs had anything to do with the housing crash?”
Absolutely not. I believe teaser rate, interest only, NINJA, collateralized debt obligation, synthetic collateralized debt obligation, group think, artificially manipulated interest rates, deregulation of banking, systematic removal of risk from decision making, blah, blah, blah where more of the culprit.
Oh yea, I forgot the no money down, negative amortization, Helloc’s, etc., etc., etc.
Yes the real problem was not a housing crisis rather a credit crisis. I thought we all knew this. Is this really in question?
What? You are crazy! You have not seen a bust in California?! I’m am now getting the fact that you are just on this blog to stir the pot on each post. Are you a paid shill or do you just do it for free because you’re a little cray-cray?
“Are you a paid shill or do you just do it for free…”
Shills get paid??? How come no one told me????
What? California is most definitely is a boom and bust state. It will probably not bust to a level that you can afford but that is not to say a bust is only legitimate if it hits your level of acceptance/affordability.
I have not see a housing bust in a very long time. That last hiccup does not qualify as a bust in any sense of the word. That is like saying when the Dow loses 100 points on it way to an all time high is a bust/crash. So Cal housing will go up forever!!! This time really is different!!!
I have not SEEN a housing crash…
I really need to pick up my game on spelling and grammar since we all know that Janette is watching…
You cannot separate out the two. The housing crisis may have been fueled by easy credit, but they fed off each other. What provided the liquidity for continuing the lending when RE was already over-heating, was securitization or collateralization. Lending and Wall Street were two wires that should never have crossed. But these exact conditions aren’t the pre-requisites for creating housing bubbles. Bubbles are created by animal spirit that creates a feverish “greed” mindset, convincing its victims that prices will continue to rise. In a sense it becomes self-fulfilling, but is characterized by irrational behavior. So behavior cause bubbles.
“You cannot separate out the two.”
Okay, what are we talking about again???
What said, “The real reason folks lost their homes/farms had more to do with a credit freeze where banks were desperately calling in their loans to cover their losses. It had absolutely nothing to do with rates because the banks were not interested in extending credit. The real change that happened was the federal backstop for banks.”
That is part of the story, but not all of it. The credit crunch came about as a result of the housing bubble reaching unsustainable home prices. Banks are dependent on each other for liquidity in the form of short term loans. When none of them knew who was holding what, or who was exposed to what, they stopped lending to each other. The credit crisis did not happen in isolation and coincidentally with the housing bubble. It happened in tandem with the housing bubble. Mortgage lending became very competitive. Packaging loans as bonds was a creative way of funding the lending process and managing or offloading risk in a housing market already careening out of control. I agree that much of what caused the recession was the credit freeze, but bubbles got their name from being full of air, which implies prices appreciate based on “nothing”. The credit crunch and the housing bubble fed off each other; they didn’t happen in isolation of each other. You are left with a chicken and egg dilemma, but it’s clear the horse is before the cart.
Piketty meet Christie, Christie meet Piketty, you both seem to be on the same wavelength…
I was referring to the 1929 depression and why folks lost their homes and FARMS (farms should have been a clue but some just can’t keep up). Read the post again from the top.
Remember Janet is watch and we need to be at the top of our game…
I still believe that we had a credit crisis not a housing crisis. Housing just happened to be the asset that was on the other side of the balance sheet…
Piketty
May 26, 2014 at 11:37 am
What said, “The real reason folks lost their homes/farms had more to do with a credit freeze where banks were desperately calling in their loans to cover their losses. It had absolutely nothing to do with rates because the banks were not interested in extending credit. The real change that happened was the federal backstop for banks.â€
___________
I was reading about someone’s Uncle who did very well foreclosing on farms in the Great Depression, and selling them at lower prices to better positioned buyers. Also of course, farm incomes fell, which hurt farmers who had debt and required a certain income to remain afloat, and service the debts they took out.
I don’t think there’s been any crash – just some softening in non-prime areas from silly high values. Then just a bubble upon bubble, and protection for the Vested Interests, and more house price inflation in any of the semi-to-prime locations. It’s been a credit-bubble and one the VI don’t want popped (yet).
_____
James Dale Davidson (1993): In the 1930s, the price of finished foods fell much less than the prices of meats and other farm products. Bread, for example, fell 20% from an average of 8.8 cents a loaf in 1929 to a low of 7 cents in 1932. The price of flour, by contrast, fell 37% – about equal to the average fall in wholesale food prices in general. Products from the farm, meanwhile, like butter, milk, eggs, meats, fruits and vegetables, tumbled almost 60%. Officially, the government calculated that the price of eating at home fell by 37%. Nonetheless, the percentage of personal income spending going for food held steady at around 27%.
During the 1930s, there was a big increase in the per capita consumption of what were known as luxury foods. Consumption of citrus foods jumped as did ice cream and beef.
Fashion: Money spent on clothing, accessories, and jewelry, plunged by more than 50% in the 1930s… spending on personal care items fell by 40 percent in the 1930s. The major move out of the household by women really began in the depression, as participants in the economy. It is for this reason that the sector of the apparel industry that focused upon women’s clothes did better than the one focused upon men’s clothes. As women got out of the house, this increased the market for household appliances that eased cleaning jobs, made it easier to wash clothes, get dinner on the table, and so forth. The number of refrigerators, washing machines, vacuum cleaners, irons, toasters, coffee makers, and radios went way up during the depression. Appliances we now take forgranted as fixtures of the home were introduced into the household during the US depression.
_________
The doctor, and others, speak of the lost opportunity cost of buying a house. Presumably that money could be better invested elsewhere. But where?
Savings account and CD interest rates are a joke, well below that of inflation. And the stock market is a gamble.
These days buying a house is a gamble too.
“speak of the lost opportunity cost of buying a house.”
Don’t you hate that monthly opportunity cost bill? Hey, isn’t a lost cost, a savings? That would mean that you have LESS COSTS if you buy a house!!! Just another reason to buy now or forever be priced out!!!
What? said: Somebody is not paying attention… The great and mighty wizard of FedOz will never let that happen! NEVER!!!
____
Wizard of FedOz. Hehe. Your post below was also classic.
____
What? May 1, 2014 at 2:18 pm
WTF is up with all the math? Have we not all learned by now that math has been proven scientifically false? Math, gravity, physics, etc. have gone the way of alchemy and we have replaced them with new sciences like unicorn fartology, rainbowology, this time is differentology, etc… Come on, you are sounding like my grandpa. “Mathâ€, “percentageâ€, “economyâ€, what quaint concepts… Horse, buggy, buggy whip kinda makes me chuckle…
I am glad someone IS paying attention…
Money in a savings account earning 0%, is better than losing 50% in other markets, when sudden correction comes.
Saving rates are low, because risks out there in the markets is so high.
Added to which policymakers try and encourage people to spend their savings, via very low rates, at ill-advised times, to prolong boom conditions. You’ll need money to mop up a quality home at a near give-away price in the future.
So much malinvestment out there. Cheered on by those who only look a few days ahead, and want their capital gain/yield. I’m not too bothered about the cash buyers paying silly high prices. Too many people think they’re invincible, but I think they’re so complacent, too bold in thinking the system back them constantly, and very prone to a crash. We’ll see who is left standing.
_______________
King Solomon warned, “An inheritance quickly gained at the beginning will not be blessed at the end.†Heirs given money typically have a strong inclination toward spending the money on possessions, pleasures, or other purposes without lasting significance.
—
..says Rogerson, who vividly recalls how his dad’s passions for yachting and flying led to a personal fleet of a dozen boats and small aircraft. Those purchases began to shrink the family pot, but the bottom really fell out, he says, after a massive real-estate project in the mid-80s collapsed.
In the end, Rogerson’s father was forced to sell off the family’s belongings in a liquidation auction—the death knell for an inheritance that might have made him a man of leisure. “We didn’t talk about money or even get together as a family,” says Rogerson of his Boston Brahmin relations. “Now there’s nothing left.”
—
Legacy Lost: The Dwindling Family Inheritance
Posted on March 22, 2013 by Randy Fisher
Ninety percent of family inheritance is often lost within just three generations, according to the Wall Street Journal (Lost Inheritance). By the end of the second generation — to be clear, that’s after your children have passed away — you can expect 70% to be gone.
“Money in a savings account earning 0%, is better than losing 50% in other markets, when sudden correction comes.”
Somebody is not paying attention… The great and mighty wizard of FedOz will never let that happen! NEVER!!!
That’s one reason why billionaires place their wealth in trust funds. It’s partially for tax protection, but partially to protect heirs from their own ineptitude.
Don’t the Kennedy and Rockefeller clans mostly live off their (still vast?) trust funds?
Sumner Redstone, owner of Viacom, reportedly put most of his wealth in a trust fund for his grandkids, thus skipping a generation (for tax purposes, I suppose). His wife apparently insisted on the trust as part of their divorce settlement, to keep the money away from Sumner’s new wife.
Donald Sterling and his wife also reportedly have most of their money in a trust for the kids or grandkids. It’s one of the legal entanglements to overcome before the NBA can force him to sell the L.A. Clippers.
We are at or near the apex of the SoCal real estate bubble, stock market bubble, debt ubble and artificially low interest rate bubble. 2014 looks a lot like 2007 and 1990, and very similar to 2000. These bubbles peaked right before recessions kick in and values were decimated.
Before the bulls scream “this time is different!!!”, “they are not building any more land you know…”, the bulls need to remember that history shows that reversion to the mean always occurs in the aftermath of a bubble. Recessions are bubble poppers. If GDP for Q2 2014 is anything like GDP for Q1 2014 then we are officially in a recession.
“that reversion to the mean always occurs in the aftermath of a bubble.”
Perhaps in true market-based asset classes. What about housing, which is tied to bonds? Since bond rates are natural by-products of policy decisions, what’s to stop policy-makers to “artificially” manipulate rates so that no reversion to the mean occurs (with, say, a generation or two)? The answer is: nothing.
“reversion to the mean always occurs in the aftermath of a bubble”
The prior bear mantra was that in the aftermath of a bubble that prices always SHOOT PAST the mean.
“they are not building any more land you know…â€
I knew I forgot one of the shill lines… Thanks for the reminder! Being a shill is tougher than I thought!!!
@Dfresh: You seem to have an obsession with bifurcation that is borderline closed minded, something you accuse of others “missing” the “global” flood of money. Okay, then how do you explain 30 percent price increases in Compton or say Inglewood? Rich Chinese putting money there? Me thinks you live in a crappy area and want to talk it up as if ghetto areas of Culver City will somehow be the next Paris. You’ve drank your own Kool-Aid. With practically every city in L.A. county going up in the last year something else is going on. And if your argument held any more water, we would see global money pushing sales even higher but sales volume is low. Of course you will keep chanting bifurcation like a baby that just learned to speak its first words.
Of course you will keep chanting bifurcation like a baby that just learned to speak its first words.
# # #
Too creepy! How’d you know? To my parents surprise, though, I wasn’t speaking of future SoCal real estate trends, but that I’d just gone potty.
Sorry, momentarily I forgot that SoCal housing is better explained by local median incomes within the established 3x hh income/price multiple. In other words, SoCal is just like every other housing market in the U.S. outside of the periodic, inexplicable “boom/busts.”
I sometimes wonder if anyone other than blert understands the concept of “opportunity cost”. If I remember my economic theory correctly, this has something to do with the Economic Man comment that went streaming over little robbies head. It is simply the lost utility of the next highest utility choice of the mythical creature Economic Man. So, utility is not necessarily dollars returned from choice A versus choice B. I believe my economics professor used a scenario of having a choice of rescuing your spouse or your child from a burning building where you only have time to save one of them. The one you leave behind is the opportunity cost of your choice and the lost life is not a monitory loss.
The reason I bring this up is because when my fellow RE shills make statements like “it’s all about supply and demand”, little do they understand the assumptions required for this theory to be true. One of these assumptions is that we all behave like Economic Man which we all know is false. Another of my favorites is that all resources need to be equally distributed prior to any transactions. I think we call agree that this is not true. There are many other assumptions that don’t pass the smell test for the “THEORY” of supply and demand to be true…
So keep on trolling brothers!
“I think we call agree that this is not true.”
I think we CAN ALL agree that this is not true.
Janette, I want to apologize to yourself and the all the other world central bankers for my sub par spelling and grammar…
“…and the all the other world…”
…and TO all the other world…
Urgh!!! Even my apologies have grammatical errors!!! I think I am so nervous that Janette is watching that I am making even more mistakes…
Invest in reit with loose stop and get the yield
Has anyone noticed that a surprisingly large number of furnished homes have guitars somewhere in the house? Often hanging on walls, though sometimes on a guitar stand.
I wonder if this is yet another realtor prop, intended to send a subliminal message: This house is great for artists, writers, and musicians! This house is a wellspring of creative inspiration! Buy this house and you WILL succeed in Hollywood!
Also the glass containers filled with citrus fruit.
Many of kitchen granite tops hold glass containers of citrus fruit. Limes are especially popular. Sometimes oranges and lemons are mixed in, but always, limes predominate.
How many people in real life have glass containers, filled with limes, in their kitchens?
All these realtor props are so commonplace — the guitars, the children’s names spelled out on bedroom walls, the glass containers of limes, I’ve even seen several telescopes in some bedrooms.
These realtors are so obviously selling not just a house, but a California Dream, promising a great, creative career, and a rich family life, if you buy this or that house.
It’s the imagery of “Tequila Sunrise.”
You know what the limes are for…
Stringed instruments (cello & guitar in particular ) are taken as acoustic wombs.
This is exemplified by “Shining Road” (Cranes)
https://www.youtube.com/watch?v=VZnSik1HpWw
The infantile imagery of block letters is supposed to pull you back to pleasant memories of your mother’s pre-school teach-ins.
The term “house horny” then appears to be most apt.
“This house is great for artists, writers, and musicians! This house is a wellspring of creative inspiration! Buy this house and you WILL succeed in Hollywood!”
Ha, 99% of the musicians in this town live below the poverty line. What do you call a musician who doesn’t live with his girlfriend? Homeless.
I know of an Estate Agent (Realtor) who has their photographer take a guitar to strategically place in a room when doing the listing photos. I think it’s to project easy Boho relaxed life if you bought the house at a stupid high price. Don’t worry about the debt, you can play guitar and chill.
Red doors are also popular. I read a list of house-selling tips on Truila. One tip actually said to paint your front door red, that even a drab house suddenly looks brighter with a red door.
And sure enough, as I troll through Redfin, I see an awful lot of houses with red doors.
Why waste the paint when the house is going to go into a bidding war before it even hits the listings.
All standard professional house staging fare to reel in the hipster suckers.
650k for a house is a distant memory here on the SF Peninsula (with a few exceptions – perhaps East Palo Alto). Even with the great number of high paying jobs here I’m guessing houses are even less affordable.
Here we go again with someone from the Bay area who thinks that area is superior. I have news for you. Anything decent within a 10 minute drive to the beach location is well into the seven figures. Furthermore, SoCal has something the Bay area lacks … girls. I have seen that situation up there. Who would ever want to live in an area with no girls and a boring tech industry. That is one of the worst places in the country.
“who would want to live in area without girls”, jt are you a comic or something? Up here in The City, we do just fine with other guys. jt, you are so funny.
They don’t call it the Gay Bay for nothing, liver lips!
good school districts have recovered from the lows. can’t say the same for the ghettos and barrios which is about 90% of la county
I have stated this case for years on this site only to be crucified for being negative. If you don’t drink the kool-aid then you just can’t be one of us.
Everyone knows the SoCal housing market is chaos. But SoCal seems to have an endless supply of the next greater fool to pay more. So as crazy as it may be if you want to live here and own a home that’s the game you have to play.
I have lived here 10 years and nothing has changes. And many of the people I thought were crazy to pay 1m for a dump home in 2006 have recently should their crap shack for a 400k profit!
I am not a realtor. But after watching this party for 10 years I realize I don’t understand anything more today than I did 10 years ago, and no one really knows what the next 10 years holds.
Sean…We lived many years in So Cal. when we left I told my wife we are leaving behind a state in total chaos, we have nothing left to sell here nobody is going to pay $600k or more for these shacks. I guess I was very wrong, because that was 20 yrs. ago and prices in CA. continue to amaze even the most astute investors.
Peaks and Valleys of Ca. real estate is not for the faint of heart, that is for sure.
“But after watching this party for 10 years I realize I don’t understand anything more today than I did 10 years ago, and no one really knows what the next 10 years holds.”
The only words of wisdom that will EVER be uttered on this site by troll/shills and bears alike…
When I first came to California in 1972 real estate was cheap. We all rejoiced our growing equity as prices went up. It was the main topic of conversation around the neighborhood and at parties. I look back with disgusts. It was the celebration of greed and we all joined in. I am see more clearly now and wish for the days of stable neighborhoods and fairly stable prices. Malibu was a great relaxed place of cool surfers, equestrians and former cowboy movie actors (of course the super rich movie folks were there too but much less than now). It was great. Now it is a beautiful place ruined by big hunks of environment ruining concrete houses and vicious homeowners who ‘report’ on their neighbors who cherish a bit of freedom. Full of avaricious RE salespeople and wannabes. Such a shame.
These are entry level homes. Considering the competition, you’ll get less value for your money at this price point, than at say $1.25MM. Sad, but true.
It’s time for young buyers to buckle down and start saving 30-40% of their incomes if they ever want to be home owners.
So, is that 30% to 40% before or after taxes, student loan, food, fuel, rent, Obama care (mandatory heath insurance), car insurance, renters insurance (some landlords require it these days), car payment, shoes, clothes, phone, high speed internet, electricity, natural gas, water, garbage, auto repairs, dental care, miscellaneous cleaning supplies, toilette paper, shampoo, tooth paste, deodorant, soap, makeup (if there is a female in the household), tooth brushes, etc. etc. etc…
Of course the above assumes no kids, pets, friends, family, birthdays, holidays, travel, eating out, vacations, donations, hair cuts, hair coloring, etc., etc., etc…
Do you not understand what “Buckle down ” means? It is amazing what people can afford when they buckle down, but most don’t know it because they’ve owned every version of the iPhone that has been released.
Sakman,
It means, “tackle a task with determination.” What an iphone fetish has to do with whether or not the “task” of house humping a 3/1 stucco crap shack in the 90501 of Torrance is worth $620k of “determination” is lost on me. But, I blame my bifucrastrationitis nonetheless.
Stagnant to falling salaries/incomes (aka Revenue) – Rising Rent Fuel and Food (aka Expense) = NO MONEY!!!
Sorry to get all mathy on you…
Housing To Tank Hard in 2014!!!!
Define “Tank” with a capitol “T”.
What do these people do in LA that they can afford these little houses? I live in Houston Texas and I have a 2800 sqft home with 4 bedrooms, a game room, formal living and dining, 2.5 baths and a nice yard for only 180,000.00. I also laugh at the idiots that by a studio apartment with 500 sqft for a million dollars in Manhattan. SUCKERS!!!
Mike… the Manhattan thing is a total wonderment, I see these places, no parking,no yard, watching traffic go by day and night, and they want to pay 10 million dollars for the privilege of owning these grossly overpriced properties. Crazy money also must mean crazy folks, it makes them do nutty things.
A Manhattan studio isn’t THAT expensive. I’ve a friend in the East 20s. His studio co-op is estimated at around $325,000. That’s $866 a sq foot.
Comes with 24/7 doormen.
Granted, I wouldn’t want to live in a small box. But he loves Manhattan, and it is in a nice neighborhood. Walking distance to all sorts of things.
And NY really is a city that never sleeps. Every sort of store open at all hours — diners, groceries, bars. Unlike California, NY bars are not required to close at 2 a.m. Mass transit is also a 24/7 affair. Always something to do in the Big Apple.
Yeah, but you live in Houston.
A Houston versus Manhattan comparison underscores the futility of making such “side-by-side” comparisons. Your typical Manhattanite would consider your 2,800 square feet 1,800 too many and your other amenities as disposable.
Mike Seivers, you are also paying a MUCH higher property tax rate for your home reassessed every year, plus you have to live in Houston. NO THANKS!
I drive by that Torrance house every day on the way home. It has sat for a month now, with multiple open houses. Neighborhood is OK, not great, on a fairly busy street. Decent amount of burglaries lately in that part of Torrance. That is a prime example of a ‘starter’ home that will have trouble selling at upper-middle class price. No wealthy people want to live there, either as renters or buyers. I would never consider leveraging my family $600K to squeeze into that shack, I’m fine renting my nicer home for $2K instead.
I live in Redondo and my office is off 240th.. I’m shocked anything south of Crenshaw would go for 600k. There is not one redeeming factor that comes with living there to justify it (unless I’m missing something?).
Don’t know, any family with a 6 figure down payment or with a $200K income would be far better off paying slightly more to buy farther west in South Torrance.
I’m sure someone will eventually bite, but it is sure taking awhile. Personally I’m on the verge of giving up on this nonsense and transferring out of state. Torrance is now for the Boomers and the wealthy foreigners. Everyone else struggles.
We have two nice condos for sale in our building for 700k~, 100 yards to the harbor, over 1200sq ft.
I hate not having a private garage–and HOA fees–but one would have to be insane to jump on something like this (and leverage their lives).
Glad you mentioned the burglaries. There has been an enormous uptick in burglaries all across the South Bay in the past 12 months. Folks I know in a few different neighborhoods report that they’ve never seen it this bad in the multiple decades they’ve been in their area. That’s anecdotal, but the crime stats back this up empirically.
In my search for more information on the issue, I’ve come across local news reports from various parts of the country that are also reporting a similar problem.
I can’t help but wonder if this is a coal mine canary.
I sold my mother’s house in Manhattan Beach in 2012. Before I left my car was broken into in my driveway. Never had had that happen in all the time I’d lived there nor had ever even considered it.
I don’t know if it’s a coal in the canary in terms of indicating these areas are overpriced, because compared to Torrance, which is very dumpy in many places — went to high school there — Manhattan Beach is not overpriced. But it does show we are heading towards the end of L.A. as a wonderland where the haves and have-nots happily rub shoulders and there is no jealousy or resentment… The fact that MB rests not so comfortably next to what are essentially ghettoes is certainly going to be a factor in the coming years, I would say.
Burglaries up across the country is a surprise. It’s less of a surprise in California, since Jerry Brown has been releasing prisoners early due to over-crowding.
“the end of L.A. as a wonderland where the haves and have-nots happily rub shoulders and there is no jealousy or resentment…”
Yes I do miss all the love that was going around during the 1992 Rodney King riots…
Who could forget the Chicano Riots of 1970 lots of peace and oneness…
If you are old enough, I was just a baby at the time, the Watts Riots of 1965. My mother was a school teacher in Watts in 1965 and she often spoke of the love and harmony of these times too…
Zoot Suit Riots of 1943 I was not around but there is a PBS documentary that speaks of all the shoulder rubbing…
I think these events happen every 20 years or so on average so we are definitely overdue for another love fest…
Waiting for the next pop. Should be any year now.
Interesting article…..
http://www.newyorker.com/talk/financial/2014/05/26/140526ta_talk_surowiecki
“Almost by chance, the city has found itself at the heart of one of the biggest trends of the past two decades—the rise of a truly global market in real estate.”
The exact trend that has been met by en exasperating “woosh” over the heads of DHB (until very recently) and most bears on this site.
That was a very interesting link. However, it’s overall message was that if you live in an area that attracts foreign money you’re screwed, and the situation is not likely to change. No one wants to hear that, even if it’s true.
The suggestion that cities makes money off this trend by charging more for parking was ridiculous. That’s only going to hurt people who live and work in those areas even more.
I agree with the idea that what these cities are going through isn’t exactly a bubble. There’s something unprecedented about the transactions that are occurring. It seems like an under-the-radar way for a country to sell off its land assets to foreign entities. Where does that lead us?
rich koreans have been have flocking to pv and torrance since the 90’s because of the schools. at the torrance costco, it’s not chinese you hear but korean. lately i have been seeing more and more indians (south asians) in the area.
https://www.youtube.com/watch?v=Nc_-l5zpTWE
I don’t mean to point fingers at foreign buyers. My intent is to criticize government policies that are aimed at maintaining the current trend in pricing, regardless of the cost to the country’s citizens.
These homes are OVER-priced by about 30%.
> These homes are OVER-priced by about 30%.
While I agree in general, it all depends on neighborhood. My place is just around the same size as the ones the good doctor profiles this week, but is a bit further out in Eastern Ventura County. Right now based on comps it would sell for about $500K – coincidentally just around 30% less than this week’s examples. Does that mean it’s priced right?
FWIW Though I’m benefiting from this paper appreciation I’d be perfectly happy if prices fell uniformly by another 20-30%.
Since I’m local to Arcadia and Pasadena, I’m going to try to answer the Doctor’s question about what I think of the properties he’s posted. I think the Doctor did a good job at finding some houses that look like something someone would want to inhabit. Not all the inventory looks that way, and there doesn’t ever seem to be any markdown for poor condition.
In fact, one thing I’ve noticed lately is that street address and neighborhood don’t seem to matter that much in terms of pricing. Take the Arcadia property. It appears to be right up against the Temple City property line. Yet the asking price does not appear to reflect that. Areas that are less desirable like Northwestern Pasadena don’t seem to show any markdown either. It’s as if everything is marked up as high as it can be.
Over time, I’ve gotten used to the price appreciation in the San Gabriel Valley. Although I would personally never pay those prices for those houses, I can imagine that someone out there will. They won’t pay it happily, but they will. Or, as someone in the comments suggested, they’ll stretch (perhaps ruinously) to a higher price point to get more. There are plenty of idiots out there. I’m sure we can keep this thing going a bit longer.
Thank you, Researchowl above! Those who follow and post to this blog, which I have over the years, should read this article. It sheds light on what I’ve been trying to figure out about the west side of LA since the last bubble burst in 2007.
If you don’t have the time, then ponder this section from the article:
“The globalization of real estate upends some of our basic assumptions about housing prices. We expect them to reflect local fundamentals—above all, how much people earn. In a truly global market, that may not be the case. If there are enough rich people in China who want property in Vancouver, prices can float out of reach of the people who actually live and work there. So just because prices look out of whack doesn’t necessarily mean there’s a bubble. Instead, wealthy foreigners are rationally overpaying, in order to protect themselves against risk at home. And the possibility of losing a little money if prices subside won’t deter them. Yan says, “If the choice is between losing ten to twenty per cent in Vancouver versus potentially losing a hundred per cent in Beijing or Tehran, then people are still going to be buying in Vancouver.
So, we’re always hearing about how all politics are “local.†How homes should be considered, foremost, by “location, location, location.†And we continually ask ourselves, how can the “local†income support such high prices? Well, it’s not about the “local” income anymore! We already have the top 10 percent of locals able to buy nicer homes, including those just for investment purposes. Then add in the top 10 percent of buyers from around the world that see the US as a safe and desirable haven. Then we wonder why can’t we find a home in, for instance, Culver City (with good schools) for less than $750,000? It’s the global economy! It’s not for the “locals” anymore…and Los Angeles County, even with all of its problems, is attracting lots of “globals.”
Is that why inventory is rising and sales are falling?
All aboard the “foreigners buying everything” bandwagon!
Using absolutes like “everything” reveals a lack of willingness for critical thought.
And you are avoiding the question.
DFresh – does that include “housing will go up forever” and “the Fed will never let the market crash”?
If your question is whether it’s possible to have inventories rise and prices drop in aggregate in the face of a modern, disruptive trend like an expanding global asset market catering to the global 1%…the answer is of course. Mutually exclusive.
Kinda like it’s possible to have unseasonably low local temperatures in the face of global warming. The bifurcated markets we’re seeing, which are independent of median incomes, is the “climate change.”
Bifurcated is becoming a new buzz word in real estate.
Yes, the housing market and climate change are a lot alike. If we believe climate change is happening, we should be for housing going up forever? or vise versa?
Bifurcated is becoming a new buzz word in real estate.
Yes, the housing market and climate change are a lot alike. If we believe climate change is happening, we should be for housing going up forever? or vise versa?
###
Analogies aren’t meant to be “a lot alike,” just enough alike in certain aspects to be illustrative. Global warming is to a globalization of real estate what climate change is to regional price bifurcation…global phenomena causing local extremities.
And, yes, many people don’t believe in man-made climate change; just as there are many on this site who don’t believe that a global real estate market is having a real impact on pricing throughout SoCal.
Finally, yes, new human behavior can reverse anthropomorphic global warming (up to a point until a new, entrenched pattern emerges) just as new policies can reverse policy-oriented growth of the global 1%.
Bifurcated is becoming a new buzz word in real estate.
Yes, the housing market and climate change are a lot alike. If we believe climate change is happening, we should be for housing going up forever? or vise versa?
###
Analogies aren’t meant to be “a lot alike,” just enough alike in certain aspects to be illustrative. What we’re talking about here is global phenomena being inextricably linked to regional extremities. Global warming —> regional weather extremes; 1% driven global housing market —-> bifurcated (extreme) wealth extremes
And, yes, many people don’t believe in man-made climate change; just as there are many on this site who don’t believe that a global real estate market (USA’s strong court system and rule of law environment + global capitalism + loose cross-border capital investment policies + the rise in the global 1% = global real estate market) is having a real impact on pricing throughout in certain areas SoCal.
What many people don’t get is that, while it’s correct that the 1% aren’t having a direct impact on recently gentrified areas like Culver City, they have an indirect impact on CC prices by virtue of pushing out would-be house horny 10%ers out of, say, Manhattan Beach into Culver City. Spill-over effect.
Finally, yes, new human behavior could theoretically reverse anthropomorphic global warming (up to a point until a new, entrenched pattern emerges) just as new policies could in theory reverse policy-oriented ability of the global 1% from repatriating their gold bars into stucco crap shacks.
All,
I believe a number of posts ago we all agreed that the word was “bifucastrated”. My submission “colonoscopy” did not win and I am being a good sport about it. So in the spirit of good sportsmanship, (and remember Janette is watching) let’s all embrace “bifucastrated”…
“there are many on this site who don’t believe that a global real estate market (USA’s strong court system and rule of law environment + global capitalism + loose cross-border capital investment policies + the rise in the global 1% = global real estate market) is having a real impact on pricing throughout in certain areas SoCal.”
That it is one input of many is not in dispute. What is in dispute is the present degree of the impact and how it may play out in the future. What is not believed by many is that this justifies “buy now or be priced out forever” (or any other RE meme) for the average Joe buying a house to live in.
All I’m getting from this is that we’re closer to coming up with a definition of what we already know has been occurring. So we now can agree on the name for a symptom – global real estate market. Supposedly real estate is no longer local in some areas.
As if this backs up the notion that the future of SoCal RE is a foregone conclusion of get in before being priced out by wealthy foreigners. It reminds us of the “everyone wants to live here” meme. If you’ve a vested interest in this market, you want to believe that and will come up with any sort of way to find a justification.
It occurs to me that to have increasingly larger portions of market participants made up of foreign interests increases exposure to the volatility of global events. For someone who simply wants to buy a home to live in, there becomes more risk involved. For someone who wants to passively skim rents by arbitraging this new volatility, it’s probably a welcome trend.
Next you will be telling us all that the emperor has no clothes. We all know that the thread is so fine that only intelligent people can see it…
As if this backs up the notion that the future of SoCal RE is a foregone conclusion of get in before being priced out by wealthy foreigners. It reminds us of the “everyone wants to live here†meme. If you’ve a vested interest in this market, you want to believe that and will come up with any sort of way to find a justification.
# # #
It’s not just SoCal. It’s Manhattan. It’s London. It’s Tokyo. It’s Berlin. It’s Hong Kong.
“It’s not just SoCal. It’s Manhattan. It’s London. It’s Tokyo. It’s Berlin. It’s Hong Kong.”
And the point is….?
That it is one input of many is not in dispute. What is in dispute is the present degree of the impact and how it may play out in the future. What is not believed by many is that this justifies “buy now or be priced out forever†(or any other RE meme) for the average Joe buying a house to live in.
# # #
If I may, another meme not in dispute is that The Fed is forcing every average Joe looking to buy into LA/OC to become speculator if his/her window of ownership is under 10 years. Investors, hedgies, domestic 1%, gold-plated Red Chinese, can all weather a storm that might momentarily cut Hard into home prices.
But, I don’t see how someone will lose by owning (versus a renting) if they have a 10+ year time horizon based on the global socio-economic trends firmly in place.
Having said that, if you have a distinct rental parity advantage (like many here presently enjoy), and/or are pretty uncertain what the next 10+ years hold for you, why even think about becoming a knowing speculator with the biggest purchase decision of a lifetime?
That “we’ll only lose 10-20%!” is only true to a point. For one, it’s easier to say you don’t mind the possibility of loss when you’re on a winning streak. If prices do actually drop, even 5-10%, it will be interesting if the behavior really matches the rhetoric. I would guess that it does not.
On top of that, this ignores that residential real estate makes for fairly expensive acquisition and disposition (5-10% transaction costs, plus US capital gains if you do net a profit) and comes with pretty steep carrying costs. Certainly I can understand the argument that there’s fear of Beijing seizure, but there are other places to store one’s money if all you’re trying to do is move it out of country and protect against loss.
If the market turns south at all, more people will likely opt for safer investments. It’s certainly true that foreign money helps skew where the break point lies and bends the fundamentals, but they don’t entirely make the fundamentals go away.
2 weeks ago, I posted some information from Bruce Norris, and his predictions that home prices will be stable or increase for the next 18 months. His claim is that so long as the affordability index is higher than 17% there wont be a ‘crash’ in home prices. You can google him if you care to read more about his 30 years as a SFH investor. https://www.youtube.com/watch?v=9xSWhkaYNcI
here is some information from Nadeem Walayat, who predicted the previous US and UK crash. (the audio is weak, but listen to his words).
https://www.youtube.com/watch?v=82ncGGgbhAk&feature=player_embedded
Here are some of Nadeem’s take-aways
The US will not be the next Japan (in terms of falling home prices) and house demand in US will increase due to the influx if immigrants (whereas Japan does not have the strong influx of immigrants). House prices will be stable or rise through 2016 due to the bull market run occurring in the stock market, which is boosting home buying sentiment. Further, as long as US unemployment hovers around 6.5% or lower, this will stabilize home prices. Since housing is leveraged to inflation you should be safe as a homeowner. In other words, at the end of a decade or two you may have some equity, whereas renters will have no equity. As govt’s continue to push QE, other paper assets will be in further risk of collapse.
In his free US / UK housing predictions for 2014-2016, the chapter on US housing is a fascinating read, download it here.
http://www.marketoracle.co.uk/
I can’t believe people are quoting Walayat here with such a firm view it must be what the market holds ahead.
Look at the graph he has projecting future UK house price inflation, on his website and at the beginning of his latest ebook!
GIF image: http://www.marketoracle.co.uk/images/2013/Dec/UK-housing-market-ebook-cover-2013-380.gif
I did some research and found what I believe to be the archived sales data for that exact house. It sold in January 2012 for £450,000 = $757,395 US Dollars (approx current rate of exchange.
Here is the archived sales data/pics. It’s the final pic (18/18) on the archived sales pictures (link below).
http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=34052096&sale=46368605&country=england
In Sheffield (UK) general – as of January 2014, the last data I saw was sold prices DOWN by -7.3% over past year. I wonder if he was the buyer of that house early 2012, and has backed his own views of house price inflation.
Honestly…. “Since housing is leveraged to inflation you should be safe as a homeowner.”
Excluding global investors warping things for now, salary/wage inflation is that’s the only kind of inflation that boosts house prices. Inflation in everything else (food, energy, medical) just takes away from the money people have to spend on housing.
Yes QE abyss, we understand that you just pulled the trigger and are a little concerned about your decision. If it makes you feel any better, I have converted from bear to bull as well so you don’t need to convince me that you made a good decision.
This time is different!!!
Housing will go up forever!!!
Buy now or be priced out forever!!!
Did I forget anything?
“You can google him if you care to read more about his 30 years as a SFH investor.”
While you’re at it, be sure to Google The Norris Group. Bruce would be more than happy to have you as a new customer.
Just remember negative anything always sells. If we had a media outlet channel with nothing but positive up beat stories it most likely would have the poorest of rating’s.
If you had no internet or 24hr news, this housing issue would be all about a slow market and people would wait it out like years ago. Neighbors would talk in the streets and agents would say, don’t worry it always picks up.
The name of the game today is to daily upset the masses in believing the sky is falling because bad news sells. Every generation says the same thing, bread, milk ,eggs are to high and this generation is the worse. 10 years from now when basic houses in America will be 600k, many of today’s worry warts will have said, “I should have bought in 2014 when they were 400k?”
As been stated many times before the powers on the planet think years in advance they have to, they control the financial system.
All G8 countries knew that America’s standard of living couldn’t sustain, the world just wasn’t going to let America have all the playing marbles, thus trade with China and the EU’s crackdown on crazy spending in Greece and Spain to name a few were well planned ahead.
Cheap labor was always in play, it made perfect sense for the industrial countries, they just had to present it to their citizens that South East Asia and Central America were the culprits, those parts of the world went along with the ruse why not, China went from a 1.3 billon people third rate communist nation to a 1.3 billion world power status and still has a communist doctrine, how did that oil and water mix together, because the West allowed it.
So when you see your neighborhood with so called “those foreigners” don’t be mad at them they couldn’t have come to America to buy for cash if the West didn’t look the other way and ask them in. G8 knew all long American companies weren’t going to pay blue collar $30.00 a hour with benefits in the 21st century anymore ?
“All G8 countries knew that America’s standard of living couldn’t sustain, the world just wasn’t going to let America have all the playing marbles, thus trade with China and the EU’s crackdown on crazy spending in Greece and Spain to name a few were well planned ahead.”
This reminds me of a game I play with Vietnamese guy (actually he is Chinese according to blert because he came over on a boat in 1975 but he gets all bent out of shape when I mention it to him so let’s just humor him and call him Vietnamese) at work where we enter an English phrase in Google translate and translate it to Vietnamese. Then, we translate the Vietnamese translation back to English. The phrase above is usually how the result looks…
Recently the Albertsons supermarket chain ran a Monopoly themed promotional contest. One of the big prizes was a ‘$500,000 Dream Home.’ I found myself wondering, does the prize include the expense of moving to a state where $500K buys something that could be called a Dream Home?
It isn’t your dream to live in Compton?! Hey, not so long ago, Culver City was pretty grisly, so think positive. Open a little coffee shop, get some ambitious young techies with a start-up idea to get a little house out there, come up with some stupid fleeting fad, and maybe they’ll make a movie on HBO about it and Compton will be the next Malibu… You get out of Compton what you put into Compton!
Take out the top 5 or so markets (LA/SF/NYC/Bos), and $500k buys a lot just about anywhere in the country. Even in Chicago or SD I could do pretty well with that kind of cash.
Nothing attracts a crowd like a crowd but doesn’t the crowd usually wind up being wrong?
In nature there aren’t many species that get to settle down, they generally have to keep moving. Perhaps humans aren’t meant to stay in one place forever either. It surprises me that there isn’t a lot more price arbitrage with other regions going on. Just because they will let you borrow more doesn’t mean the plywood box is actually worth more. In a normal monetary environment it would depreciate just like every other consumer good.
Good point, although there is evidence of depreciation throughout the west side of LA and the South Bay. A lot of those homes where the “owner” couldn’t afford to buy back-in to the same area if they sold have deferred maintenance issues.
Let’s also not forget how many houses are still being withheld from liquidation that normally would have been foreclosed by now. How well are those being kept up?
When you take a close look at the common public infrastructure in some of these areas, there the deferred investment shows as well. The costs are building (bubbling) up in more ways than one and most people are still not paying attention. Essentially the response is that everyone wants to live here and foreign money is going to save the day. Get in before being priced out forever and catch a free ride.
Crowds and crowd behavior aren’t always wrong. Urbanization is a logical global trend. It’s smart behavior when you consider conservation of resources, efficiencies, etc. Strong urban centers will continue to attract people, resources and capital from the surrounding areas. Certain people cringe when they hear, “LA is a global alpha city” that will be a net beneficiary of the global urbanization trend. Well, the global “crowd” is proving them wrong.
Check out “Her.” You’ll get a glimpse of LA in 100 years.
Re: the N Santa Anita Ave, Arcadia, CA 91006 house.
Quote from Dr. Housing Bubble article: “It has gotten dramatically worse in the last year. Some of these homes are the golden tickets being offloaded by baby boomers onto a market were housing fever is still raging on. This home last sold in 2004 for $400,000. No surprise that we see an assessment jumping from $259,760 to $416,160 from 2004 to 2005.”
______
The listing photographs I’ve looked at on two realtor websites are date-stamped 2009/01/01. And each of those 2 listings only has photos of the exterior. Someone, perhaps an inheritor, on even a bank in possession, been holding on to sell into the fo-ev-ah HPI? In theory, ever higher zany market values, should bring out more sellers, but too many owners complacent / greedy (imo).
Example: http://www.redfin.com/CA/Arcadia/5520-N-Santa-Anita-Ave-91006/home/8001211
Keep in mind that the Arcadia property is not in Arcadia school district. You will not find a single family home in Arcadia for that price.
The Arcadia property isn’t representative of Arcadia properties in general, because it isn’t in the excellent Arcadia school, which is the major draw to Arcadia. You probably will not be able to find a single family home in Arcadia for 600K.
I’m reminded of the L’Oreal ad slogan, “Because I’m worth it”. Women are being convinced that their gender is predisposed to self-pampering, and money is therefore no object. It is demeaning because it assumes the female sex is not smart enough to make rational choices; that they are giddy, empty-heads, who can get away with it by virtue of their sex. California, and many other places in the US and around the world, seem to have the same predisposition. They are victims of a system of valuation that is heavily influenced by life-style marketing. The credit markets have been very accommodative in exploiting this by virtue of the psychological effect that so-called wealth creation has. The deception is so well concealed that symptoms and causes are able to repeat themselves unabated. Some of our leaders know this, but either see no alternative, or are trapped by short-termism. Others quite possibly don’t see it all. For the masses, it seems the concept of infinity is more palpable.
I have no idea what you are talking about but I bet Janette will be impresesd!
Whoops!!! It’s Janet not Janette!!! Sorry Ms. Yellen! My bad!!!
Dear Doctor Housing Bubble,
I would like to propose a new feature for your blog. We REALLY need an edit function for the comments section. We really need to up our game now that we are under the spotlight of tptb! I am so nervous now that world central bankers are hanging on every word I type that I am making even more mistakes! Please help us!!!
Dear National Association of Realtors,
It has recently come to my attention that persons whom troll housing websites that may espouse anti-housing sentiment which there in could be intended to be of harm to or members there of a for mentioned National Association of Realtors (NAR) are routinely compensated for such actions commensurate with the national labor guidelines with title of shill shall be retroactively made whole. I appreciate your quick recompense on this matter and look forward to a fulfilling relationship hence forth…
Yours truly,
What? (shill in training)
People are so stupid for paying this prices.
James… people were so stupid when they bought my parents Northridge CA. home in 1976 for 100k? today it is worth 1.4m and the doctor who resides there still doesn’t think he was stupid does he.
Remember a great sign I saw years ago… STUPID SELLER WANTS TO MEET STUPID BUYER?
robert wrote: “James… people were so stupid when they bought my parents Northridge CA. home in 1976 for 100k? today it is worth 1.4m and the doctor who resides there still doesn’t think he was stupid does he.
Remember a great sign I saw years ago… STUPID SELLER WANTS TO MEET STUPID BUYER?”
and “10 years from now when basic houses in America will be 600k, many of today’s worry warts will have said, “I should have bought in 2014 when they were 400k?â€
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You’re hilarious, with these fo-ev-ah HPI posts.
I wonder if this house in Studio City qualifies for a genius or greed award: http://www.redfin.com/CA/Studio-City/12417-Laurel-Terrace-Dr-91604/home/5240344
Sold less than a year ago for $675k. Current asking price: $999k.
I know it’s in Studio City, south of the Boulevard, in what realtors call the “Silver Triangle” (there’s at least one other “Silver Triangle” in Venice). But still, a $324k markup in less than a year?
Besides which, check out what’s behind this house — — a commercial alley and parking area. Not the most secluded spot.
After a weekend of friends and relatives getting together, the topic of housing arouse and all agreed, if they had to sell they were willing to to get their price to hell freezes over.
Real Estate agents want quick sales so they always want you to give away the farm, this time around it is different. The folks see everything from nuts to soup has gone up and now if a buyer can’t afford a house then move in with somebody or sleep in the park.
BTW March index shows house prices again increased.
“After a weekend of friends and relatives getting together, the topic of housing arouse and all agreed, if they had to sell they were willing to to get their price to hell freezes over.”
robbie, We really need to pick up our game because Janet is watching. I have been reviewing my comments and correcting my mistakes. Please rephrase so that the world central bankers will know what to do. I think they are just as confused by this statement as I am…
Troll on brother!
BTW are you paid? I just found out that there is such a thing as a paid shill and I would like to get paid for doing what I love!!!
What’? Posted….Do I get paid for posting, yeah sure I get paid, all the real estate firms and investors give me a huge salary to sit here to banter back and forth with a 18 year old???
Thanks for the complement little robbie!!!
So how does one apply for a position as RE shill?
If they HAD to sell, they wouldn’t have the option of waiting till they got their price.
It’s only those don’t have to sell who can afford to wait.
Landlord….That is my point! Buy now and research the must sell now homes. Make a deal with these sellers, because the ones who don ‘t have to sell will wait to it’s a buyers markert again.
Robert wrote: “After a weekend of friends and relatives getting together, the topic of housing arouse and all agreed, if they had to sell they were willing to to get their price to hell freezes over.”
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It doesn’t take too many transactions, at lower prices, to bring down values hard.
Values and prices are set at the margin.
Your friends and relatives aren’t the only sellers who can come to market, and some will sell at lower prices to buyers. Investors, deceased/probate sellers, forced sellers.
The majority of owners in any asset, hold all the way down to market bottom, in a bear market. They can’t then claim their investment is worth X-amount, when next door sold for 60% less a few weeks previously. Well they can if they deny market reality. I’ve seen it time and time again in stocks. RBS shares going from $15 to 15c in 2008-09. All those elderly investors who rode the good times, not cashing out at $12, $8, $4, $2…. not prepared to sell their shares for “less than it’s worth.” Other sellers sold at lower prices all the way down, and in turn brought down value for all other holders.
Your statement is utterly moronic (as per usual), roberto. “IF THEY HAD TO SELL…”, they would take what they would get, PERIOD, END OF STORY. Buyers set the market, always have and always will. If these nitwit friends and family of yours “HAD TO SELL” as you yourself stated, they would not be in a position to wait indefinitely. Death, divorce, sudden loss of income/wealth, health issues etc. and other life changing events force people to sell all the time, without the ability to hold out until hell freezes over for their magic selling price.
We have a new mantra to live by. SoCal is a global RE market now, just like some other places in the world, so buy now or be priced out forever.
After a weekend of friends and relatives getting together, all agreed they don’t have to buy anyone else out of their land deed at any price. They are content to settle while others are putting mobility at a higher value.
BTW March index shows house prices again increased so buy now or be priced out forever.
Tired (aka anon) – come on over to the dark side. It is so much easier to be on the winning team then fighting the sea of shills trolling these days!!! We could use someone like you because you have grammar skills which are lacking among us shills. Think about it. We would love to have you!
I stand by my 2014 30% increase in home values and we are half way there!!!
http://www.cnbc.com/id/101705887?__source=yahoo%7Cfinance%7Cheadline%7Cheadline%7Cstory&par=yahoo&doc=101705887%7CHome%20prices%20jump%20in%20March
“Year over year, the index jumped 12.4 percent, S&P/Case-Shiller said, a slightly slower rate than February’s 12.9 percent surge but well above Wall Street’s estimates.”
Ok, that’s a pretty clever bit of trolling. Take an actual fact and imply it means something else entirely – very nicely done.
You should include this in your portfolio when apping for paying shill gigs.
That the nicest thing anyone has ever said to me! Thank you soooo much!!”
The real estate situation in California reminds me of wealthy families who have come on hard times, such as European aristocrats in the modern period. That old mansion with its vineyards and farms was an estate that made money a couple of centuries ago, but now that food costs so little relative to income it is just a drag, and the descendants who want to live in the property have to work like crazy to be able to afford to keep it in the family. The difference in the case of California is that the properties we’re talking about are not beautiful estates with vineyards – they’re modest houses that weren’t even built to last this long.
Tad…CA. Had the huge boon after the war houses went like candy, no zoning, poorly built, bad school and shopping etc. What happen is many stayed in these poorly built homes and then prop 13 all but ensure that they couldn’t afford new home and taxes. CA. Gov’t and LA county ruined the state forever, now only upper to rich can afford it.
Without seeking to suggest the Gov’t (or L.A. county) are saints, Prop 13 was enacted via citizen referendum. That one’s on ‘We the people.’
And, in general, for those old enough to have voted for it, arguably Prop 13 has been pretty good to them, though maybe not so good for Xers and Millenials.
The EU (European Union) is gunning up on the banks. Those stress-tests a few years ago, where each bank passed. Delusion, and the market knew it.
[Separately you’ve got main China banks tightening up seriously lately (the shadow banking system been in a frenzy for years to feed the eager borrowers – but perhaps set to seize up).] As I understand it US regulators kicked forward some of the requirements a bit, but also set to tighten eventually (capital requirements etc). However events globally still likely to impinge.]
MY POINT BEING: bank funding costs – the rate they lend at – could decouple or widen further from the central bank base rates. Perhaps necessitating an asset crash, so they can lend, at lower risk (capital values) and slightly higher rates (margins), to borrowers still in a position to qualify for mortgages.
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Nightmare On Euro Street. 25.05.14. Sunday Times.
From November 4, the ECB will be the eurozone’s lead regulator with powers that override individual central banks. It will have powers to shut down failing lenders and force creditors to absorb losses to help immunize governments from the risk of “too big to fail” bailouts.
…”The market thinks about 30% of Europe’s banks should fail the stres test,” said a senior director at a large European bank. “If only 5% are told the have to raise more capital, the test will look soft and it will be dismissed as a political fudge. If 40% fail, that’s a lot of money to find. And I don’t know where the ECB thinks some of these smaller banks are going to find billions of euros over a weekend.”
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I don’t get the thought of the posters who think housing is going down to a level that most can afford. What is that price point you folks want, $50, $100 , $200 a sq ft .?
One size doesn’t fit all in real estate, many factors determine a homes worth, it can change block to block let alone zip code to zip code.
I can assure you the days that people in Topeka wanted to get CA. pricing on their homes is over, and folks who live in San Jose are never going to let their homes priced like Topeka?
Just a reality check from flyover America. My wife and I bought a 4,200 sq. ft. house on two acres last year for $310,000, which admittedly was slightly below market. We are about one mile outside the corporate limits of a SEC college town of about 20,000. The public school system is good, and there are lots of trendy restaurants.
Over time I think California is going to start leaking a lot of people who would like to live in a big house and go to a good school at a low price. Of course, these people will be giving up a good climate and a lifestyle to which they have become accustomed.
One final note. Has Dr. Housing Bubble addressed the Debt Bomb that is facing California?
http://colrebsez.blogspot.com/2012/08/california-school-district-financing.html
I am strongly considering transferring out of CA and heading back to your state. After living here awhile, the hundreds of available homes around the reservoir on zillow look enticing. Here I would have to pay 50% of my take home pay on a mortgage for a 1950’s shack. I have lived all over while in the military, everywhere has its pros and cons, happiness depends more on friends/family than climate.
Ryan, I take it you have lived in Mississippi and know the pluses and minuses. Do you have children, and are they in the 80th or above percentile of achievement or IQ? If so, the only school choices are Oxford, Madison, or St. Andrews. The latter is private and costs a bundle, but is the best school in the state. Oxford and Madison are quite good.
If you don’t have kids, be aware that there are a lot of cotton towns in Mississippi where really nice houses (including nicely restored antebellum mansions) are going for $35-40 a square foot. There are some property crime problems in these towns, but virtually no violent crime.
I lived in MS for awhile and have visited most of the cities there, but job would be near Brandon. Two kids, so would probably choose between Gluckstadt area or NW Rankin (due to work proximity). I know NW Rankin isn’t as great as Madison schools, but they are still higher rated than most.
From a brief zillow search, it looks to be very much a buyer’s market in both Rankin and Madison county. Values declined the past year, with a ton of price reductions. I could be wrong, but looks like a good time to find a deal.
Are SoCal realtors or buyers considering what might happen to their market when interest rates rise? Go ahead, get a great arm rate. Even a low fixed 30 year rate. But imagine rates climbing to 6% 7% or higher. You’ll still have a great monthly payment. But the downward pressure on prices with higher rates will put you upside down. This is a real estate trap that will soon be sprung. Real wages, again just like before the previous bubble, are not rising. And just how much towering debt will Uncle Sam create before he cries uncle and gives up on QE? Tapering is the threat around the corner. Just before the growing number of for sale signs. Some people never learn.
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