Los Angeles Real Estate : Overvaluation (foreclosures, renting, mortgage broker)

[JohnG72]

Originally Posted by Ingenere

paying all cash when you can get a 2.xx% 15 year mortgage? lol

That poster lives in Las Vegas. The cash amount in Vegas isn't anywhere near what it would be in LA.

[jm1982]

Paying all cash for primary does seen a bit crazy .. But I could see it making sense for some .

Dave Ramsey advises this but I think it doesn't make much sense if you are able to make more on the money elsewhere .

For example investing in property out of state you don't have to try hard to get a return over 10 percent in many markets . You might even be able to do it in parts of Ca too .

I don't think the whole buying for cash for flipping is going on much now just because there aren't any deals like there were in 2012 .

Before one could buy cash fix up and sell higher . But at least on the mls this game seems to be over .

It seems like all the articles saying flipping is back are using 2012 purchases ... We can't go back to 2012 prices and buy those properties today .

It just doesn't make sense for an investor to buy a property off the mls right now with cash.

They could buy and hope for appreciaition but there is holding costs .. If they rent they will most likely lose money every month too .

From 2009 to 2012 there was a spread between a wholesale fixer and a fixed up home sold to a retail homeowner . That is no longer the case .

And it doesn't seem likely that a bunch of cheap reos will hit the market again . The hedge funds would most likely buy them in bulk with their billions before they hit market anyways .

[John23]

I've lived in LA for my whole life, I still don't really understand LA real estate.

-Where were all these people in the 70's?? That's the million dollar question. We've always had beaches, nice weather, entertainment. I don't quite get this sudden boom since 2000.

-Also, LA hasn't had a major negative factor that drives away interest. I.e. after the northridge earthquake in 1994, many people left. After the Rodney King riots, many people left. It's been smooth sailing since 1995. It seems like optimism about California has really reached a peak.

Prices can't rise above incomes forever. We saw that in 2005 and 06.

[yby1]

I think the boom is due to a high influx of immigrants from Asia moving here in the last 15 years.

[HyperionGap]

Especially RICH Asians that don't really care what type of ridiculous prices LA homes are selling for.

[Dub D]

Originally Posted by NyWriterdude

The other thing is, the fed set interest rates close to 0. When the fed decides the economy has recovered enough, they will raise interest rates. With cheap financing gone, there goes the new real estate boom.

Definitely agree with this. I'm planning on selling my home soon. I think the market is going to drop next year, not by a lot but this will be the highest year for the next 3-4 years.

[genjy]

Originally Posted by John23

Prices can't rise above incomes forever. We saw that in 2005 and 06.

Different demographics.

Last time, it was about people who couldn't afford the houses they bought.

This time, it is about people who CAN afford the houses they buy.

[Joe Van Fossen]

Originally Posted by genjy

Different demographics.

Last time, it was about people who couldn't afford the houses they bought.

This time, it is about people who CAN afford the houses they buy.

An important distinction. It's not as easy to get a loan these days. And in a market like this, if you're not overly qualified (good-to-excellent credit, 20% down with cash reserves in the bank) you will have a tough time getting an offer through.

While 1/3rd of buyers are cash (investors and owner occupants), the other 2/3rds are still traditional buyers who are qualified. Foreign buyers are also much more savvy than some here give them credit for. I've never met one who wasn't reluctant to pay list price for a home.

[John23]

Originally Posted by genjy

Different demographics.

Last time, it was about people who couldn't afford the houses they bought.

This time, it is about people who CAN afford the houses they buy.

It still seems way overbought. If you look at incomes vs home prices, not everyone is a millionaire.

My parents sold a home in 1993 (my grandmothers house) in west LA for, $230 k? The same house now is, $650 k? I know incomes haven't tripled in that time.

People don't have 3 times as many degrees, or 3 times more education. The cars people drive in these neighborhoods aren't only for rich people. The economics are still out of whack.

Also, property taxes are artifically low, prop 13. What happens when that goes away? How can California continue to be all things to all people, it wants to please everybody. But they don't want to pay the property taxes people in other states pay. I think prop 13 allows a disincentive to sell.

[nmnita]

Originally Posted by John23

It still seems way overbought. If you look at incomes vs home prices, not everyone is a millionaire.

My parents sold a home in 1993 (my grandmothers house) in west LA for, $230 k? The same house now is, $650 k? I know incomes haven't tripled in that time.

People don't have 3 times as many degrees, or 3 times more education. The cars people drive in these neighborhoods aren't only for rich people. The economics are still out of whack.

Also, property taxes are artifically low, prop 13. What happens when that goes away? How can California continue to be all things to all people, it wants to please everybody. But they don't want to pay the property taxes people in other states pay. I think prop 13 allows a disincentive to sell.

I agree with what you are saying. Property in the Los Angeles metro area has always been high compared to other major cities even back in the 1960s, but not like now. sooner or later the bubble will burst, not just in Los Angeles but throughout the state and when it does it will not keep coming back. Interest rates will go up, there are only so many people, regardless of their nationality that will continue to pay these prices and the market will become stagnant. Of course I am not an economist and I really don't have a crystal ball, but if I could come back to earth 50 years from now, I bet I would find some other city or state that had exploded and Los Angeles housing not up to par with other places.