Is Los Angeles in a housing bubble? (San Diego, San Jose: sale, high crime)

[majoun]

Originally Posted by 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???

Bubble 2.0. Which is going to pop hard. Considering the drought situation, buyers paying huge amounts of money right now are essentially buying properties that could very well be worthless in a couple years.

[PDR2015]

Originally Posted by majoun

Bubble 2.0. Which is going to pop hard. Considering the drought situation, buyers paying huge amounts of money right now are essentially buying properties that could very well be worthless in a couple years.

I think it's pretty obvious to everyone that for many zip codes in Los Angeles, the housing market is far from cheap on a price to rent or price to median income basis. That said, I will play devil's advocate and argue that the same situation was seen in other global cities with similarly supply/demand imbalances and those cities have become even more expensive without the pullback people had been waiting for. For those who plan on staying in Los Angeles for a long time, not owning a home IS a bet against the real estate market and the combination of inflation, favorable tax policies for owners, and limited supply inevitably works against renting over time. I am not advising one discard all rationality in levering up to stretch for a home in the most expensive areas; nor do I believe it's a great idea to just keep renting and waiting for a worsening drought or a misstep in interest rate normalization to create an 09 type buying environment.

[jm1982]

Nobody really knows for sure. I feel we are getting close to crazy levels again. Over $400k for a house in areas that aren't too great.

It's made me consider selling for sure and putting money into a market that seems undervalued. Right now it doesn't feel there are any areas in the L.A area that are undervalued or cheap.

When you actually start looking at prices in other parts of the country (besides perhaps NYC,SF, BOSTON and a couple others) , the L.A prices really seem crazy.

It's important to look at rents in an area and compare it to the mortgage . This is the only reason I bought my house back in 2010, I knew that worst case the house could be rented out for more. I also saw that prices were historically low. Right now prices in most neighborhoods are historically high...yes they can go higher but to me it's a riskier bet.

As far as an investment...I feel that it's more likely for there to be areas of the country where homes might increase from 50k to 100k a lot quicker than a house in a rough part of L.A going from say $350k to $700k.

In investing, it's dangerous to listen to the media. Most of the mass media writers don't really know much about investing.

One myth that i've learned is things like, "Homes in L.A and NYC appreciate, but not in the midwest"

There was a particular area of Ohio , where homes were dirt cheap and now it's a super hot area where people are paying $300,000 or more for units. If I had invested in property in that area instead of L.A in 2010, I would of made a lot more percentage wise than in L.A .

Regarding wages versus current home prices in L.A that has been 'out of whack' for a long time now. It's nothing new really.
If you look at the average in area in L.A , most of the homeowners there bought in when prices were significantly lower. There are tons of people that couldn't afford the area if they had to buy again at todays prices.

Prices stay high because not enough people want to sell at the same time. If everyone in a neighborhood put their home on the market a the same time, prices would fall drastically. Of course this is very unlikely to happen in L.A .

[disgruntled la native]

Originally Posted by majoun

Bubble 2.0. Which is going to pop hard. Considering the drought situation, buyers paying huge amounts of money right now are essentially buying properties that could very well be worthless in a couple years.

Please please please be right!

[MordinSolus]

Originally Posted by disgruntled la native

Please please please be right!

You must really hate this city to want the drought to wreck it and for the housing market to crash so hard.

[disgruntled la native]

Originally Posted by MordinSolus

You must really hate this city to want the drought to wreck it and for the housing market to crash so hard.

Pretty much. Not just this city, though.

[CA4Now]

Thread merge. Is Los Angeles in a housing bubble?

[John_marts]

From what i've found LA is still relatively "cheap". I live in northern NJ and the apartments I find in LA are only a bit more money than where I live. If I wanted to live in a city near me, hoboken is just as expensive with MUCH less to do, and NYC is ALOT more money. And I say "cheap" based on what here is to do in the area. Sure I could move midwest for a lot less money, but the is there to do? Eat at chain restaurants and shop at wal mart? NO THANKS

I honestly think the state should just legalize marijuana if they want a boost in their economy. I'm really surprised it hsnt happened yet.

I do feel if any city is on the verge of becoming near NYC expensive, it is LA.

[Count David]

Originally Posted by 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???

The answer to all of your questions is yes.

The good thing about California real estate, is that it's California real estate. The bad thing about California real estate, is that it's California real estate.

If this is a bubble, it's nothing like the last one. This one is much more sane.

Some people don't understand that income has no correlation to housing prices. They're just two numbers that people like to divide by each other. A nice suburb of Dallas might sell for only 2.3 times the local median, and Compton sells for 5.2. The prices are set by what buyers are willing to pay, and doesn't necessarily reflect how inherently desirable a certain location is, sales/sale prices/other RE indicators do.

[jm1982]

Originally Posted by John_marts

From what i've found LA is still relatively "cheap". I live in northern NJ and the apartments I find in LA are only a bit more money than where I live. If I wanted to live in a city near me, hoboken is just as expensive with MUCH less to do, and NYC is ALOT more money. And I say "cheap" based on what here is to do in the area. Sure I could move midwest for a lot less money, but the is there to do? Eat at chain restaurants and shop at wal mart? NO THANKS

I honestly think the state should just legalize marijuana if they want a boost in their economy. I'm really surprised it hsnt happened yet.

I do feel if any city is on the verge of becoming near NYC expensive, it is LA.

Good point. I know that from NYC 'metro' places (places commuting distance from Manhattan) prices are pretty insane, just because manhattan prices are insane. I've seen that even Queens prices how gotten crazy too, especially around Long Island City which isn't too far from Manhattan by subway.

I don't really know the east coast too well as I've only visited at different times and never lived there. I am surprised that prices are so high especially with the extreme weather many times of the year.

I'm not convinced that the midwest is only filled with chain places and walmarts though. Believe it or not there are foodie scenes in the Midwest . There are hipsters in the midwest too, and they usually don't eat at chains or shop much at Walmarts.

Chicago is the obvious one that has a huge food scene and Cincinnati is another one as well.

There are other ones as well.

I haven't been there yet, but to me it looks like there are a ton of interesting things to do in Cincinnati
Top 30 things to do in Cincinnati, OH: Cincinnati Attractions