Is Los Angeles in a housing bubble? (Compton: apartments, to rent)

[iama30something]

Originally Posted by Voyageuse

It's really tough to time the market. We purchased a house in November 2013, made one mortgage payment and then made an offer on an under-valued property in a better area. The timing was a little screwy, but it was a great opportunity to live in a better neighborhood.

At the time we purchased our current house, our interest rate was 5.125%. We're currently refinancing at 3.625%. If you have the means, specifically 20% down and a fully funded emergency account--'cause emergencies WILL occur (I had FOUR in one week), buy now.

This is what I'm asking.

Yes, I have 20%.

Yes, I'll have about $20k left over for emergencies.

Besides retirement, I'll be pretty much tapped out.

I should also note that I'm looking in Santa Monica / Venice area... a very desirable neighborhood. If anything happens to my job I am fairly certain I'll be able to sell quickly. I know life always throws curveballs, but at least I'm not speculating in "up and coming" areas.

[StreetLegal]

For some professional analysis on the California real estate market take a look at Beacon Economics. An economic consulting group headed by former UCLA professor Christopher Thornberg. Dr. Thornberg called the housing bubble back in the early 2000's.

Prediction is hard especially about the future! That said, I find Beacon's analysis of economic trends to be a pretty good window into what is happening. Thornberg does not see a bubble (yet).

https://beaconecon.com/blog/home_sal..._disappointing

[CA4Now]

Originally Posted by Voyageuse

It's really tough to time the market.

Yes. Southern California home prices rise, sales fall in February - LA Times

[Cinema Cat]

I've been closely following the L.A. real estate market these past few years. Yes, I think L.A. is in a bubble. But I think prices will continue to rise a while longer before they fall.

However, that's just my impression. Nobody really knows.

[Des-Lab]

Buy NOW!!!!! Or be priced out FOREVER!!!! I mean literally right now. As in stop what you are doing, and get out and immediately get yourself a realtor who will be happy to relieve you of your cash...I mean...hook you up with your pad.

[Voyageuse]

Originally Posted by Des-Lab

Buy NOW!!!!! Or be priced out FOREVER!!!! I mean literally right now. As in stop what you are doing, and get out and immediately get yourself a realtor who will be happy to relieve you of your cash...I mean...hook you up with your pad.

^^^This. Good luck!

[PDR2015]

Originally Posted by Cinema Cat

I've been closely following the L.A. real estate market these past few years. Yes, I think L.A. is in a bubble. But I think prices will continue to rise a while longer before they fall.

However, that's just my impression. Nobody really knows.

If not real estate, then where would you put your money... cash? bonds? equities? I guess the question is how one defines a trend to be a bubble, because the same easy liquidity has fueled a rally in almost every asset class out there, not just real estate.

Bubble Definition | Investopedia

DEFINITION OF 'BUBBLE'
1. An economic cycle characterized by rapid expansion followed by a contraction.
2. A surge in equity prices, often more than warranted by the fundamentals and usually in a particular sector, followed by a drastic drop in prices as a massive selloff occurs.
3. A theory that security prices rise above their true value and will continue to do so until prices go into freefall and the bubble bursts.

Nobody will know whether we are witnessing a bubble until after the fact. I would still argue there is relative value for LA real estate compared to other major cities based on factors previously mentioned. Yes, prices can come down a bit as fundamentals catch up to the big price gains made over the past few years; no market can continue to appreciate without popping at some point. However, I think it will take a more serious national/global recession to take us there. Lending standards have been loosened recently but are still more strict than the last period leading up to 2008. The central banks would rather err on the side of more inflation than deflation (one should be hedged for the latter scenario but not bet the ranch on it!) so the question then becomes how does real estate compare to other asset classes in such an environment?

Real estate is generally a good asset in many environments because well... there is limited supply but can also be a productive one unlike gold (great in a hyper inflationary type of chaotic environment where rule of law and ownership starts to become unhinged or for trading).

[CA4Now]

Originally Posted by Cinema Cat

Nobody really knows.

True, even when they say they do know. Remember in early 2012 when all the "experts" said that housing prices were going to continue to decline? Right....

[909er]

There are discerning arguments on both sides of the fence about this.

Some people say there is easy credit, and a lack of homes available, vs. population and demand.

Others say due to low wage growth, the current prices are unhealthy and unsustainable.

Some say L.A. is entering a new era, emerging on the stage of world Alpha cities.

Bottom line, it costs a lot to live here, and the market does not seem "normal" and mathematically speaking it is out of whack. However from a demand perspective, it seems on fire.

Is this Bubble 2.0, or the new norm???

[NickofDiamonds]

The answer to this will be revealed when the Federal reserve starts with their plan to raise interest rates.
The affordability factor will always determine what the new normal will be as people will either struggle or embrace the change in market conditions.
My guess is that we are seeing a market top in real estate now and especially with the wild card of water rationing precipitating a beginning of one factor in figuring the misery level, the others in business and manufacturing will fall in place giving California a tarnished image as a place to live and do business in.