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Old 05-12-2008, 04:15 PM
 
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Hi-Those of you looking to sell/buy houses in Southern California, what is the general mood? Are housing prices still dropping? Or have they reached the bottom? I'm wanting to buy a home near or in the Tehachapi area (east of Bakersfield, in the mountains). When I was there in March, it seems every other house had a 'FOR SALE' sign in the yard, but prices were still a little high. Just wondering if I should buy now, or wait a bit. Your predictions?? Will prices still continue to drop?
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Old 05-12-2008, 04:18 PM
 
Location: LA
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In the far out reaches of LA (ie Tehachapi) prices have dropped drastically. I'm not sure how much lower asking prices will go down in those areas, but I'd imagine that the sellers will be willing to take reasonable offers. I would not pay the asking price for any property in CA right now.
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Old 05-12-2008, 04:26 PM
 
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Prices are dropping throughout Kern County,but I don't know if it's stabilizing or will continue to drop.
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Old 05-12-2008, 05:09 PM
 
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Prices will continue to drop until people can actually afford to buy. Right now, even though prices have dropped $100k plus in LA, the price-to-income ratio is still too high.

As an example, there was an article in the LA Times a week or so ago addressing price-to-income in San Bernadino-Riverside. The average from 1980 to 2000 was 3.7x. Meaning, on average, the median price of a house was 3.7x the median income. At the peak of the bubble that number was over 7x. Clearly not a sustainable situation. So from the peak, prices in San Bernadino-Riverside could reasonably be expected to fall by almost 50%. I don't know where they peaked there, or where they are now.

In LA, the median household income is about $60,000. If we assumed a 4x multiple, we could imply that the median home price should be around $240,000. The last I saw prices were still in the $350,000-$400,000 range. If you're making $60,000 per year, the absolute most you should be paying for a house is about $250,000. AT MOST!!!!!

So to buy a $350,000 house, you need to be making, at an absolute minimum, somewhere in the $85,000-$90,000 range, which is well above the median income for LA.

The California Assocation of Realtors says you can buy a $500,000 house with gross income of just $100,000 per year. Which may be true if you have $100,000 for a down payment (we all have $100,000 in cash lying around, don't we), no car payments, no credit card debt, no student loans, you don't save a dime for retirement, you have no major healthcare costs, and you live very frugally. Of course, that fits the description of eveyone in LA, doesn't it? In other words, the CAR is smoking crack.

Wait for another year or two. It will take at least that long for prices to bottom. This was a large bubble and it will not fully deflate overnight. Give it time. Don't be in a hurry. And remember that a $500,000, $400,000, even $300,000 house is not a bargain just because everyone else is ignorant enough to live above their means and pay that amount for a place to sleep.
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Old 05-12-2008, 07:15 PM
 
Location: Somewhere out there.
2,331 posts, read 4,075,810 times
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Quote:
Originally Posted by kitty3 View Post
Hi-Those of you looking to sell/buy houses in Southern California, what is the general mood? Are housing prices still dropping? Or have they reached the bottom? I'm wanting to buy a home near or in the Tehachapi area (east of Bakersfield, in the mountains). When I was there in March, it seems every other house had a 'FOR SALE' sign in the yard, but prices were still a little high. Just wondering if I should buy now, or wait a bit. Your predictions?? Will prices still continue to drop?
Well... Alan Greenspan recently said that housing markets are expected to slide for two more quarters then we should see an increase (though probably modest increase). I'm no Alan Greenspan but I think it's a great time to buy if you can talk a lender into giving you money. The fruit is ripe for the picking and my husband and I are looking into buying another place. With so much inventory, you can probably snag a really good deal. Just my opinion though so take it with a grain of salt.
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Old 05-12-2008, 08:08 PM
 
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I think they will come down more in the areas you mentioned. So much for sale right now and alot of talk but no action from the Govt.

You can always have a realtor check the areas your interested in and see if the houses are turning, how fast, and if its moving in a positive direction, and the % of foreclosures.

I'd check to see what the average rents are for the neighborhood. If you can make a positive return on your investment...rental income paying mortgage, tax, and expenses, then the market should be moving in a positive direction and it may be a good time to buy an investment property.

If you plan to live in the home, you may want to see who your neighbors will be and % of renters in the area.
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Old 05-12-2008, 08:10 PM
 
148 posts, read 313,273 times
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Quote:
Originally Posted by motoman View Post
Prices will continue to drop until people can actually afford to buy. Right now, even though prices have dropped $100k plus in LA, the price-to-income ratio is still too high.

In LA, the median household income is about $60,000. If we assumed a 4x multiple, we could imply that the median home price should be around $240,000. The last I saw prices were still in the $350,000-$400,000 range. If you're making $60,000 per year, the absolute most you should be paying for a house is about $250,000. AT MOST!!!!!
I agree with your post on all points except for the LA prices that you recently saw. Where in LA are prices in the 350-400K range, outside of the absolute worst parts aka the ghettos? Even in the outlying areas that everyone laughs at and mocks such as the 909/951 - San Bernadino, Riverside, Pomona all that overbuilt cookie cutter trash, while prices have fallen significantly, they are still in that 300K range (or higher). I check the LA Times Homes/Real Estate section every weekend Sat. and Sun. and the listing prices are still insanely ridiculous.

Yes, perhaps these are just the BS listings that RE companies like Coldwell Banker, Prudential and the others post to make suckers think prices are holding up and values are being maintained, or maybe these are the properties being marketed overseas to the nouveau riche who are buying up properties thanks to the ever weaker dollar. It's also the westside edition, which will obviously have more the more expensive listings but still it is crazy. And yes, most of the listings are just the same ones week in and week out, sometimes with "huge" reductions that amount to maybe 10 or even 20% off the original list price, but the original list prices are inflated even beyond the peak 2006 prices (often by what appears to be 25% or so). It is truly absurd.

And I'm not even talking about the absurdly overpriced uber rich areas and properties of 5 millions and up, just the barely decent parts. West Hollywood border shoeboxes for 900K to WAY over a million. South of Pico "Miracle Mile" 1950's shoeboxes for over a million. Brand new crap McMansions in semi-decent areas filling up an already tiny lot for 2.5 million. Where are these 350K homes you are talking about? Even in Compton, Inglewood, Highland Park I still see listings for half a mil. And what about the insanity of cities such as Santa Monica - 2.5 to 3.5 or more million for an average US home. Something that would cost 150K to 200K max almost anywhere else in the nation. Yeah, location location location, but please! Santa Monica isn't all that.

The prices still have not dropped anywhere near where they need to. The outlying and overbuilt areas, along with the poor parts, have gotten hammered over the past year (along with forerunner areas that shot up earlier in the housing boom such as San Diego, Vegas, and the OC), and it is slowly trickling into the better parts of LA County. It will take a while for the effects of the housing and mortgage implosion to hit the better parts of LA - the liquidity crisis and mortgage loan money dry up have really just started...we've shaken out a good chunk of the overextended, alt A and ARM fools that have gotten rightfully foreclosed on left and right, and are just starting to get the middle and upper class people that can afford to pay but are now under water starting to hand over the keys and walk away.

Prices have a long way to drop, it's not going to be over any time soon.

Last edited by karkyco; 05-12-2008 at 08:22 PM..
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Old 05-12-2008, 09:51 PM
 
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Quote:
Originally Posted by karkyco View Post


And I'm not even talking about the absurdly overpriced uber rich areas and properties of 5 millions and up, just the barely decent parts. West Hollywood border shoeboxes for 900K to WAY over a million. South of Pico "Miracle Mile" 1950's shoeboxes for over a million. Brand new crap McMansions in semi-decent areas filling up an already tiny lot for 2.5 million. Where are these 350K homes you are talking about? And what about the insanity of cities such as Santa Monica - 2.5 to 3.5 or more million for an average US home. Something that would cost 150K to 200K max almost anywhere else in the nation. Yeah, location location location, but please! Santa Monica isn't all that.

The prices still have not dropped anywhere near where they need to. The outlying and overbuilt areas, along with the poor parts, have gotten hammered over the past year (along with forerunner areas that shot up earlier in the housing boom such as San Diego, Vegas, and the OC), and it is slowly trickling into the better parts of LA County. It will take a while for the effects of the housing and mortgage implosion to hit the better parts of LA - the liquidity crisis and mortgage loan money dry up have really just started...we've shaken out a good chunk of the overextended, alt A and ARM fools that have gotten rightfully foreclosed on left and right, and are just starting to get the middle and upper class people that can afford to pay but are now under water starting to hand over the keys and walk away.

Prices have a long way to drop, it's not going to be over any time soon.
Some of the areas you mention are not considered middle income/average wage earner neighborhoods. Sorry but Santa Monica, etc is not going to drop down to 350k so everyone in the rest of the nation can afford it. Supply & Demand. Los Angeles is a huge city and with its considerable population is an equally large population of upper income, professionals etc. They will make more and will pay more to live in certain areas.

The comptons, inner cities, and outlying 80 mph commute areas that saw speculation and first time buyers are where prices are dropping to the point where the real estate can be rented at a profit.

The bottom is not determined by what you can realistically afford based on your income. It's where the average rental income will pay the bills of the investor for these previously first time buyer, & way too late speculator/flipper homes.
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Old 05-12-2008, 10:18 PM
 
1,695 posts, read 4,231,488 times
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greggd, I don't know how much I agree with you, in general, but I tried to rep you and was told I needed to "spread my reps around," so I guess I only rep those who post a very accurate reply, in my opinion. So KUDOS in lieu of the board letting me rep you!
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Old 05-13-2008, 01:17 AM
 
1,297 posts, read 3,733,000 times
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Quote:
Originally Posted by JTGJR View Post
greggd, I don't know how much I agree with you, in general, but I tried to rep you and was told I needed to "spread my reps around," so I guess I only rep those who post a very accurate reply, in my opinion. So KUDOS in lieu of the board letting me rep you!
Same happened to me when trying to rep you. Thanks.
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