What person that could afford to put at least $20,000 (5%) down and qualify for a $400,000 loan buys these houses? (Los Angeles: foreclosures, rent)

[ifif474]

I've been thinking about moving to Los Angeles from Houston as I have lived here all my life and would like a change. I have spent hours reading this forum and have found it invaluable in providing me with the tools I need for making an informed decision. However, there is one thing I can't figure out -the housing market.

Most people on this forum attribute the high cost of housing to one of three things: (1) The "relaxed" lending practices of the banks for the past 5 or more years, (2) the sheer volume of people wanting to relocate to Los Angeles to chase the fantasy advertised on shows like "The Hills" and "Lauguna Beach" or (3) illegal immigrants cramming 5 families to a house.

I have three questions. (1) Haven't people always flocked to Los Angeles? This can't be a phenomenon of the past 10 years. (2) How can illegal immigrants making $2/hr even when combining the income of five families save up for a down payment and qualifiy for a $400,000 loan on a house when they don't even have U.S. citizenship? (3) What person that could afford to put at least $20,000 (5%) down and qualify for a $400,000 loan buys the following $400,000 south central shacks? A person would have to put down $20,000 dollars just to make a 5% down payment. A 10% down payment would be $40,000 and god forbid a $80,000 20% down payment. Moreover, banks usually only lend up to 3 times the household income. Therefore, to qualify for say a $380,000 loan (after a minimum 5% down payment), one would have to have a househole income of approximately $120,000/yr (pharmacists, professors, lawyers, doctors, airline pilots, MBA's, corporate yuppies or the combined efforts of teachers, nurses, low-level corporate types, policemen, firemen, etc. etc.) The estimanted monthly payment on a 30 year 7-8% fixed loan would be around $2,000/month ($24,000 year) and this does not include taxes or insurance or closing costs. Also, 5% down is best case scenario that is usually only reserved for those with great credit.

So my main questions are: how can illegal immigrants even if they had 5 families pool there resource cover these financial realities and what person with the financial resources and the credit to cover these financial realities would live in these south central dumps. When I drove through south central I didn't see any of the above professionals, any whites or any non-hispanics. My conclusion is that I'm missing something here. Can anyone shed some light? What is the target market share for houses like these $400,000 south central shacks?

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[NYSD1995]

Slumlords buy them. That's who's selling them, too. Families who can afford to sell their house to a slumlord, move to Antelope Valley or Riverside. That leaves the renters, their absentee landlords, and shabby neighborhoods full of shacks like these.

[JackSparrow]

If you have $20,000 to put down, you dont buy any of those places, you buy an $800,000 place in LA. I'm just saying...

[lucero32]

You're assuming the illegal immigrants make $2.00 per hour, when in fact they don't. I've lived in a few "transitional" areas of L.A. (Silverlake, El Sereno) where many of my neighbors and fellow homeowners were immigrants and made good money. Many owned service businesses (landscaping, painting, etc...) and were able to save up substancial amounts of money. Also, they did what every one else in L.A. did, bought a home about 4 to 6 years ago for half the price of what it is today. Then, of course you sell, and trade up to a better area. Those homes pictured in South Central were likely half of that, or less, five years ago. They actually seem like a bargain when compared to most of Los Angeles. Considering the rent on a similar home, if you can save 10% (40K) your payment whould be about $1800.00 per month not counting taxes. I don't know of many places in L.A. where you can rent a house for that price, let alone build up equity, in South Central or anywhere else.

[ifif474]

Originally Posted by Sassberto

Slumlords buy them. That's who's selling them, too. Families who can afford to sell their house to a slumlord, move to Antelope Valley or Riverside. That leaves the renters, their absentee landlords, and shabby neighborhoods full of shacks like these.

Thanks Sassberto for your quick reply. Your responds does shed some light. But if that is the case, where dwells all the pharmacists, professors, lawyers, doctors, airline pilots, MBA's, corporate yuppies, teachers, nurses, low-level corporate types, policemen, firemen, accountants, mechanics, technicians, restaurant managers, hotel managers etc. etc.?

[NYSD1995]

Originally Posted by ifif474

Thanks Sassberto for your quick reply. Your responds does shed some light. But if that is the case, where dwells all the pharmacists, professors, lawyers, doctors, airline pilots, MBA's, corporate yuppies, teachers, nurses, low-level corporate types, policemen, firemen, accountants, mechanics, technicians, restaurant managers, hotel managers etc. etc.?

- pharmacists, professors, lawyers, doctors, airline pilots, MBA's, corporate yuppies

live in houses in the nice central neighborhoods in West LA, beaches, SFV hills.

- teachers, nurses, low-level corporate types, policemen, firemen, accountants, mechanics, technicians, restaurant managers, hotel managers etc. etc.?

Either live in a small condo in the above mentioned areas or buy a house in Rancho Cucamonga / Corona / etc... and suffer the commute.

[ifif474]

Originally Posted by lucero32

You're assuming the illegal immigrants make $2.00 per hour, when in fact they don't. I've lived in a few "transitional" areas of L.A. (Silverlake, El Sereno) where many of my neighbors and fellow homeowners were immigrants and made good money. Many owned service businesses (landscaping, painting, etc...) and were able to save up substancial amounts of money. Also, they did what every one else in L.A. did, bought a home about 4 to 6 years ago for half the price of what it is today. Then, of course you sell, and trade up to a better area. Those homes pictured in South Central were likely half of that, or less, five years ago. They actually seem like a bargain when compared to most of Los Angeles. Considering the rent on a similar home, if you can save 10% (40K) your payment whould be about $1800.00 per month not counting taxes. I don't know of many places in L.A. where you can rent a house for that price, let alone build up equity, in South Central or anywhere else.

But lucero, even if an illegal immigrant saved a "substantial amount of money," I don't think they saved up $200,000 (1/2 of todays $400,000) which means they had to qualify for a loan but how do you do that without a U.S. identity?

[NYSD1995]

Originally Posted by ifif474

But lucero, even if an illegal immigrant saved a "substantial amount of money," I don't think they saved up $200,000 (1/2 of todays $400,000) which means they had to qualify for a loan but how do you do that without a U.S. identity?

Having a US identity has nothing to do with getting a loan. Banks issue credit cards to dead people and dogs.

[bls5555]

Is the population of LA growing? I would assume TONS of people just rent and a lot of people who own houses out in California probably owned them before the market went absolutely crazy, thus they got free cash.

A lot of what got California into this housing mess, was the so called "liar" loans, or stated income loans. You don't have to prove anything, you just have to tell them what you make.

And anyone who thinks most people in California can afford their houses, you are nuts. There is a reason why their is so much panic about these ARMs coming due and worries of foreclosures. It's because the people who got these loans couldn't afford them in the first place.

You can spin it ANY WAY you want, but a person or family with an Income of $100,000 (which is much higher than median) can NOT afford your avg. housing in California. It is just not possible to afford a 500,000 house on $100,000 a year. And to the person who said that people with 20,000 down payments buy 800,000 houses, are you crazy?

On a side note, but not really since it is part of the mess that has happened, Quicken loans offers some mortgage where they advertise you can get a 400,000 house for $1,5000 a month or whatever. When you actually talk to them about this, they tell you how it actually works. It's amazing. You pay the $1500, BUT since you are only paying the minimum, that $1500 YOU JUST PAID, gets added on to your mortgage, so instead of owing your original mortgage, you now owe MORE!!! Loans like this are a MAJOR problem and lead people to believe they can take on more than they should.

Edit: Now that I think about when I talked to Quicken, it might have been the difference between the minimum amount and the normal mortgage payment that gets added on. Either way, each month you are adding on to the amount you owe. You get the point, and I would assume you can see why this is a horrible thing for people.

[ifif474]

Originally Posted by JackSparrow

If you have $20,000 to put down, you dont buy any of those places, you buy an $800,000 place in LA. I'm just saying...

Then who's buying these $400,000 homes? It takes $20,000 to make a 5% down payment on these.