Do you think housing prices are STILL going down in California? (Brentwood: loans, lawyers)

[greggd]

Originally Posted by desertdawgx

No area is going to go unscathed as prices return to their historical values.

Historical meaning year 2003.

[Cubancoffee]

Originally Posted by moxiezbug

Everyone is talking about SoCal. What about SF and the surrounding Bay Area? Will they be subject to the same correction, or not as severe?

This is an LA forum, so the discussion sort of focuses on SoCal, you know? You might try the SF forum.

San Francisco Forum - Relocation, Moving, Local City Discussions - City-Data Forum

[goodbyehollywood]

Originally Posted by desertdawgx

No area is going to go unscathed as prices return to their historical values.

MDR is a very small pocket, and I know what every single home in there has sold for in the past two years. My broker checks new listings and pendings twice a day. MDR-- not including Mar Vista, Playa Vista and surrounding areas that are not MDR-- hasn't dropped anywhere close to 27%.

Who knows where these bogus numbers come from? The only way to know what's really happening is to watch the market yourself and see what's selling and for how much. Doing that on a macro view would be difficult, but taking a micro view lets you weed out misrepresented information.

Having these ultra-desirable areas return to historical values is unlikely to happen. A lot of us wish it would, but there's too much demand and equity on the sidelines. And people who think it's happening now are simply not in touch with the areas.

[motoman]

Originally Posted by goodbyehollywood

MDR is a very small pocket, and I know what every single home in there has sold for in the past two years. My broker checks new listings and pendings twice a day. MDR-- not including Mar Vista, Playa Vista and surrounding areas that are not MDR-- hasn't dropped anywhere close to 27%.

Who knows where these bogus numbers come from? The only way to know what's really happening is to watch the market yourself and see what's selling and for how much. Doing that on a macro view would be difficult, but taking a micro view lets you weed out misrepresented information.

Having these ultra-desirable areas return to historical values is unlikely to happen. A lot of us wish it would, but there's too much demand and equity on the sidelines. And people who think it's happening now are simply not in touch with the areas.

Why is it unlikely to happen? You act like there has been some new revelation in housing in MDR. Did it just take this long for rich people to get this stupid? Why weren't they willing to pay these prices 5 years ago? Things aren't any different now than they were then. So what's the logic supporting such high home values? Please tell me. I've yet to see anyone make a rational argument.

[motoman]

Originally Posted by greggd

Historical meaning year 2003.

Exactly. In fact, when we get back to long-term historical price to income levels, we will indeed be close to 2002-2003 prices.

[motoman]

Originally Posted by sheri257

Depending on how the numbers break down ... this could be one reason:

Try this rent versus buy calculator.

http://www.nytimes.com/2007/04/10/bu...T_GRAPHIC.html

I don't know how accurate that is, but let's assume it is. Good find by the way. Pretty cool.

Based on my current rent, if I bought a $350,000 house and put 20% down, it would take 10-11 years for me to break even on renting versus buying, assume home prices appreciated 5% per year and my rent increases 3% per year.

Remember that the graphic is just showing the annual savings. In the first four years I save by renting, on average, but then it shows it is better to buy after that. But it takes 6-7 years to offset the savings I had in the first 4 years, for a total of 10-11 years.

That's a long time horizon. And that's at $350,000. At $400,000, it's 14-15 years.

Given what I am paying in rent, prices would have to fall to about $250,000 to $300,000 for it to make sense for me to buy, given a reasonable time horizon of something less than 10 years.

I would be curious to know what the underlying assumptions are, such as do they include selling costs of about 8% of the property? At a 5% annual appreciation, selling costs alone will be about 2 years worth of appreciation. What are the maintenance assumptions? Do they include the tax benefits of the mortgage? Etc.

[karkyco]

Another great analysis, motoman. Well said.

[goodbyehollywood]

Originally Posted by motoman

Why is it unlikely to happen? You act like there has been some new revelation in housing in MDR. Did it just take this long for rich people to get this stupid? Why weren't they willing to pay these prices 5 years ago? Things aren't any different now than they were then. So what's the logic supporting such high home values? Please tell me. I've yet to see anyone make a rational argument.

Rich people own. Non-rich people pay rich people's mortgages in rent, while rich people take the tax deductions. Years down the road, the rich people own a property they've paid nothing for; the non-rich own nothing and have nothing to show for years helping someone else get richer. You and I clearly have a different definition of stupid.

[motoman]

Originally Posted by goodbyehollywood

Rich people own. Non-rich people pay rich people's mortgages in rent, while rich people take the tax deductions. Years down the road, the rich people own a property they've paid nothing for; the non-rich own nothing and have nothing to show for years helping someone else get richer. You and I clearly have a different definition of stupid.

Umm...there isn't a single house in MDR or anywhere around that area that could be rented at a high enough rate to even come close to covering the mortgage, given current price levels, let alone maintenance, property taxes, insurance, management, and a decent return.

So again, why is it you think prices in these areas are immune from reality?

[goodbyehollywood]

Whose reality? You're trying to make an irrational market fit your concept of what you think the correct valuation should be. And while I don't disagree with your thought process, our theoretically free market is being propped up, bailed out and jump-started by manipulators at every level, from lenders up to the Oval Office, then overseas to global financiers with much to lose. Applying fundamental logic to illogical manipulation leads to frustration and makes market timing virtually impossible. Not that anyone can ever really game the market, but we really can't, given the puppeteering going on.

L.A. is a dichotomous market. In some parts of L.A., you're buying a house; in other parts, you're buying a lifestyle. Some warrant a premium; others don't. People who don't want to pay the premium bottomfish elsewhere. A lot of people are willing to pay a premium to insulate themselves from the hoi polloi, so they do. High demand and low supply lead to artificially escalated prices in lifestyle locales.

For whatever reason, there is a psychological difference between renters and owners. I would hate paying someone else's mortgage and having them dictate what I could and couldn't do and when. So I choose to own and rent to others, who're content being on the other side of the equation. When I'm buying investment properties, I pencil it out. But that's a whole different scenario.

All JMO. I don't profess to know what will happen; I'm just trying to make smart decisions based on what I think will happen. And I don't see all of L.A. falling equally, for varied reasons. Others disagree, so time will tell.