LA Times article -- home prices surge (Los Angeles, San Jose: renting, credit)

[MtnSurfer]

Originally Posted by goodbyehollywood

The majority of houses on the Westside are small starter bungalows that are going for close to a mil. "Wealthy" people wouldn't be caught dead in these unpretentious little homes. These homeowners are the upper-middle earners-- the working professionals-- who don't earn enough to loan-qualify at these hyperinflated prices. Yet there they are... and there they stay.

Most buying since 2002 were forced to buy with teaser rate option ARMs, so how in the world are they all hanging on? And if those loans aren't available now, how are people still buying, keeping the prices at seemingly unsustainable levels? Because even with 11.5% unemployment, a sinking economy, rising interest rates and falling incomes, Westside prices have dropped little and the MLS shows many homes under contract at $650K and above. It is gravity defying.

Thats a very good question. It seems completely unsustainable. Yet there they are including transactions. Foreign investors may be buying some of these homes. Also dual income households possibly with a good size down payment might manage. But yeah, even if I was wealthy I wouldn't want to buy these scrapper homes. On second thought if I was a RE developer/investor then maybe. Scrape the old bungalow and built some monster house in its place. Hmm...

[mysticaltyger]

Originally Posted by EscapeCalifornia

Does anyone know why housing stats always quote median instead of mean price? It seems like the median is too easily skewed and doesn't reflect how many houses are selling at each price level.

Because usually, the mean skews the price data (usually up) more than the median.

[John23]

Originally Posted by goodbyehollywood

The majority of houses on the Westside are small starter bungalows that are going for close to a mil. "Wealthy" people wouldn't be caught dead in these unpretentious little homes. These homeowners are the upper-middle earners-- the working professionals-- who don't earn enough to loan-qualify at these hyperinflated prices. Yet there they are... and there they stay.

Most buying since 2002 were forced to buy with teaser rate option ARMs, so how in the world are they all hanging on? And if those loans aren't available now, how are people still buying, keeping the prices at seemingly unsustainable levels? Because even with 11.5% unemployment, a sinking economy, rising interest rates and falling incomes, Westside prices have dropped little and the MLS shows many homes under contract at $650K and above. It is gravity defying.

What I dont get, whats the appeal of the neighborhood? Sure, west la is nice compared to LA. But compared to the rest of california, its a pittance. If its foreign investors, why arent they buying homes in nicer cities?

Moderator cut: No direct real estate links, please

12055 Palms Boulevard, Los Angeles CA - Trulia:

A $1.8 mil home on palms blvd?!? Look what you're buying. The 405 near there is a mess. If you looked at venice ave, you'd never think there's million dollar homes in the neighborhood. The park on palms and sawtelle is not a million dollar park.

In Carmel right now you can buy a 3,000 sq ft house for $1.395 mil.

$400 k more to live on an average street in west la with decaying infrascture and schools around it, vs a bigger house in one of the nicest cities in the world.

I think some of these homes could crash by 50-70%. A place like carmel, maybe 10-20%, those are where the real wealthy people live.

[goodbyehollywood]

I don't think it's foreign investors. I think it's couples and singles who work in L.A. That's where they work, so that's where they live. Maybe they'd rather live in Carmel or Big Sur or Pacific Grove, but there are few jobs there.

I don't get it, either. Most of the really wealthy live elsewhere and rent in L.A. when they're in town. Most of the people buying these overpriced homes are middle wagers bringing in barely six figures. Put two of them together and they still can't qualify for a traditional loan. Supposedly, no doc (liar) loans are dead. Buyers can't all be TFBs or equity trader uppers, so what's the story? How are prices on the Westside not falling?

[ToadB]

Originally Posted by drshang

The core problem with LA real estate is pretty simple. If you go to any decent neighborhood in the city, like Culver City, Pasadena, Silver Lake, etc. and ask the people who live there one question..."could you afford to buy a home in this neighborhood at today's prices and still make a living?" A very large percentage will say no.

Exactly! And that's why I believe it'll take years till the LA housing market returns to any semblance to normalcy.

[goodbyehollywood]

Well, last time it took about seven years-- from 1990ish to 1997ish. So if L.A. peaked in 2006, we're looking at 2013. Of course I sold my house around then and that house has gone up every year since, so who the heck knows!

[drshang]

Japan's housing bubble took 15 years to correct.

[John23]

Originally Posted by goodbyehollywood

I don't think it's foreign investors. I think it's couples and singles who work in L.A. That's where they work, so that's where they live. Maybe they'd rather live in Carmel or Big Sur or Pacific Grove, but there are few jobs there.

I don't get it, either. Most of the really wealthy live elsewhere and rent in L.A. when they're in town. Most of the people buying these overpriced homes are middle wagers bringing in barely six figures. Put two of them together and they still can't qualify for a traditional loan. Supposedly, no doc (liar) loans are dead. Buyers can't all be TFBs or equity trader uppers, so what's the story? How are prices on the Westside not falling?

It can't all be jobs. In the 90's, all these homes were $200-250. Now they're $600-800 k or more. Jobs dont pay 3x as much as they did 15 years ago.

This is $639 k in palms/mar vista, 1,100 sq ft, 3 bed/1 bath.

http://media.cdn-redfin.com/photo/40...9-384913_0.jpg

This is $599 k in carmel, 850 sq ft, basically the same lot size, 2/1.

http://media.cdn-redfin.com/photo/8/...80837872_1.jpg

How does palms/mar vista catch up with a more desirable city? Seems mind boggling.

Even with great jobs, why dont they rent? Whats the urgency to buy?

Moderator cut: Unless you've taken the photo yourself, please post links only, per the T.O.S. Thanks.

[goodbyehollywood]

I don't mean an increase in job incomes correlates to the increase in prices; I mean jobs are why people stay in L.A. versus moving somewhere like Carmel.

The outrageous escalation in prices is due to those no-doc loans with teaser rates of 0.9% and little-to-no down. People falsify their income, then barely squeak by with unrealistically low payments, while the balance negatively amortizes upward. It's estimated that some 60-70% of the loans made in L.A. since the early 2000s are these sort of loans. These homeowners should be upside-down, tapped out and defaulting like crazy, putting significant downward pressures on prices on the ARM-heavy Westside. But that isn't happening. Prices are holding, even rising, homes are selling and loans are closing. There are qualified buyers and they continue to pay sellers' inflated prices, which continue to appraise out.

Purportedly, the no-doc/low-doc loans are no longer being written and traditional ratios are once again being required, which should have collapsed this house of cards. But no. How is this scenario possible, especially in this economic climate?

[JTGJR]

John23, unless I'm missing something, you're comparing apples and oranges. Carmel prices are sustainable because it's a small retirement, second home, vacation paradise. West LA prices are holding their values because, comparatively, they're in a desirable area of Los Angeles county with reasonable commutes to jobs. A better comparison to Carmel would be Big Bear or Arrowhead Lakes.