Real Estate Price Predictions in Los Angeles City (Riverside, Santa Clarita: credit, loans)

[longbeachhomes]

Have you seen my crystal ball? I seem to have misplaced it. If you find it let me know and I can give you an accurate forecast of the future of real estate in LA>

[greggd]

Originally Posted by greggd

So how long can you continue on an interest only loan?

How long can one support or is willing to support the mortgage of a real estate investment property when rents wont cover the mortgage and expenses?

The real estate investor will sell when he/she speculates appreciation of his real property/investment to be less than or equal to his investment and/or less than what he could make elsewhere.

[JackSparrow]

Originally Posted by greggd

So how long can you continue on an interest only loan?

How long can one support or is willing to support the mortgage of a real estate investment property when rents wont cover the mortgage and expenses?

To whom are you directing your question? Is it general, rhetorical, or specific?

(And yes, I think the Californian is the name of the building on Wilshire that sold out. I know one of the construction managers for that building.)

[greggd]

Originally Posted by JackSparrow

To whom are you directing your question? Is it general, rhetorical, or specific?

(And yes, I think the Californian is the name of the building on Wilshire that sold out. I know one of the construction managers for that building.)

It's sounds rhetorical but there is a general question that could apply to rental units or a single family home.

I have seen several real estate sales of apartment buildings in the past 3-4 years where the rental income does not cover the monthly mortgage and expenses. The Idea is that after a few years, property appreciation will cover the all the investment costs. If values go flat, how long will investors wait before cashing out?

There is a 4 plex for sale on the 1500 block of Veteran Ave in Westwood for $1,750,000. With 20% down, that is an annual mortgage and prop. tax of about: $ 130,000.
The rental income is $85,000. So the buyer is paying $45,000 a year to own this property. If the property appreciates $45,000 a year, the investor has broken even if he/she is ok with making 0% on the initial $350,000 down payment. (Probably will be a teardown and a 9-12 unit condo or apartment will go up in its place).

The same goes for the homeowner who has bought a property that is unaffordable at fixed income, but affordable at interest only rates. If the market goes flat for awhile, how long will they continue? This can happen in any part of los angeles.

[JackSparrow]

Originally Posted by greggd

It's sounds rhetorical but there is a general question that could apply to rental units or a single family home.

I have seen several real estate sales of apartment buildings in the past 3-4 years where the rental income does not cover the monthly mortgage and expenses. The Idea is that after a few years, property appreciation will cover the all the investment costs. If values go flat, how long will investors wait before cashing out?

There is a 4 plex for sale on the 1500 block of Veteran Ave in Westwood for $1,750,000. With 20% down, that is an annual mortgage and prop. tax of about: $ 130,000.
The rental income is $85,000. So the buyer is paying $45,000 a year to own this property. If the property appreciates $45,000 a year, the investor has broken even if he/she is ok with making 0% on the initial $350,000 down payment. (Probably will be a teardown and a 9-12 unit condo or apartment will go up in its place).

The same goes for the homeowner who has bought a property that is unaffordable at fixed income, but affordable at interest only rates. If the market goes flat for awhile, how long will they continue? This can happen in any part of los angeles.

I agree. But the key to look for in YOUR scenario is longevity. You mentioned a scenario that is only 2-3 years in length. TO me, that is NOT what I would consider long term growth. If it ONLY accrues $45k/yr then by year three it's making money by year three. And, mind you making $45k/yr in equity on a $1.75m place is like a 2.571% increase. That is a VERY very conservative estimate, but as noted, with a little more foresight into your plan, it turns profitable within 5 years, almost no-matter-what.

Someone that is able to swing a $1.75m house should have better financial foresight than to leverage what they cannot maintain for a few months without income. (ie. anyone with half a brain can see that the rent isn't gonna pay the bills for a few years.) People with half a brain are only given enough "loan money" to buy a house.

[dramatic pause]

And THAT is where the issue comes in. Not in the fact that they want to rent the thing out, but in the fact that they tried to scrimp a few hundred bucks a month by getting an ARM. Once those rates balloon, then we will see problems.

[desertdawgx]

The mortgage companies this week have eliminated the funding source for more than 50% of the loans which fueled the boom over the last 5 years.Expect a major correction in prices here in LA over the next few years.Prices down 40% or more would not surprise me.

[Sorcerer68]

Originally Posted by desertdawgx

TExpect a major correction in prices here in LA over the next few years.Prices down 40% or more would not surprise me.

Dream on.

[desertdawgx]

Watch and learn grasshopper.

[JackSparrow]

Originally Posted by desertdawgx

The mortgage companies this week have eliminated the funding source for more than 50% of the loans which fueled the boom over the last 5 years.Expect a major correction in prices here in LA over the next few years.Prices down 40% or more would not surprise me.

Thats funny, from June 1 2006 to June 1 2007 my place is up 4% to 6% depending on which sources you use, and which method you calculate. I thought prices were down 44-46% more than that?

[desertdawgx]

You must be a Realtor,prices are falling and will fall hard.Think early 90's crash on steroids.