New Bubble? : $610 a sq foot in Atwater Village

[JohnG72]

Originally Posted by OyCrumbler

Hopefully this kind of ridiculousness drives people with some, but not much, purchasing power to go into other parts of the city that have some fixer-uppers.

That market is almost entirely cash only investors.

[jm1982]

I think that's the difficult thing in L.A . There aren't really these 'undiscovered' areas where real estate is cheap.

I guess you could go to Highland park where Median price per sq ft is $380/sq ft... and it does seem like people are fighting over properties there too.

Highland Park Real Estate & Highland Park Los Angeles Homes for Sale | Redfin

JohnG72 , do you have any recent data, like transactions that closed this month or so that were cash buyers?

I know there are still a lot of markets that have a lot of cash buyers, but they also have a lot of foreclosure inventory too.

The market has changed a lot in SoCAL in the past 6 months even. If you do a search for Bank owned homes there are very very few. There used to be many daily .

These were 'deals' because they could be fixed (usually without a ton of money) and resold ...but now that cheap inventory isn't there. A lot of the 'news' is about transactions from last year.

I know funds were buying in my area when the could get cheap REOs because they figured their profits were priced in so to speak (buying at the bottom of the market)...but now that prices have gone up it's a lot riskier..they'd be losing money on rentals every month (if they weren't losing money on the deals bought at the bottom of the market) ...

I just don't see the funds( or even regular cash investors) buying for cash in areas like Atwater Village at $610 a sq ft...

I would be pretty surprised if the majority of these homes are being bought by cash buyers..
They would just be really poor investment property choices...

[JohnG72]

SoCal home prices up 21%; February sales volume hits 6-year high - Los Angeles Times

This is all Southern California, not just LA, but it cites 35% cash buyers which is still near record levels. That was for February and I'm pretty sure it's gotten worse since then

[jm1982]

Thanks for link. Yeah, it seems like cash transactions would go down as credit eases up and it turns into more of a normal retail market versus a market that is advantageous to investors due to lack of lower priced REOs and low priced homes in general versus rents that don't go up as much.

[JohnG72]

Originally Posted by jm1982

Thanks for link. Yeah, it seems like cash transactions would go down as credit eases up and it turns into more of a normal retail market versus a market that is advantageous to investors due to lack of lower priced REOs and low priced homes in general versus rents that don't go up as much.

You would think, but apparently REIT's are the fad of the day. Cash purchases will continue to make up a decent portion of the market until that's no longer the case.

Anyway it's a sure sign that real estate has jumped the shark. It may be a few years until the blow up, but people jumping on from this point onwards will probably be the ones left holding the bag.

[buzzkillb]

Originally Posted by Dunbar42

Sounds a lot like the inland empire housing market in 2009-2010 including the low inventory despite high foreclosure rates.

BTW, aren't these institutional investors looking to flip these houses? That means they'll (most likely) be sold to people getting a mortgage at these insanely low interest rates. In other words, low interest rates can still drive up the prices being paid by cash buyers.

We were mainly looking in NELA, except the bidding wars were insane. One of the last houses we bid on was a short sale that eventually sold for around $325k. Started at around $275k if I remember right. They had 20 plus offers and the eventual owner was going to just rent it out without fixing anything up. All cash buyer too. We ended up switching to this Realtor to help us look, which is why I got a bit more info. She even seemed pretty surprised.

I went to see about 25+ homes with her and eventually made an offer on a house in Glassel Park. There were some major issues with the house that ended up being found and the owner wouldn't budge on the price. So we walked away and within 2 days another buyer got in and bought it for the same price. One major fix was needing a $10k+ sewer lateral installed as the plumbing didn't work. That sort of made this house a bit overpriced for the area without the other issues like an actual kitchen. The stove was sitting randomly in the kitchen blocking the drawers and cabinets with no vent. And no room for a fridge. It was very weird. And both bathrooms were done wrong as a strange partial flip which both leaked under the house. And yet someone still bought this house at the full asking price with no working sewer or kitchen.

[jm1982]

When was this again?

Wow. That makes my house sound like a true GEM lol.

[jm1982]

Yeah. I keep a pretty close eye on the market and have been for years.

I did buy a house in Summer 2010...so it wasn't too far off from 'the bottom' but prices in the area probably did go down overall..but I did buy low enough below the general market that I could of still sold to break even back then if I wanted to.

But now things are heating up for sure. Prices still have a ways to go ..but if they continue at this pace they will easily surpass the previous highs of 2007.

Actually many of the 'prime' areas in L.A are at or above those highs. Of course 2006/2007 was still 6 or 7 years ago and there would of been normal appreciation and inflation too making the real prices higher.

I do see other markets that could double within the next few years or less ...but they aren't in CA

These are markets with homes for $40,000 that were like $150,000 or more at the height of the market.

It's not crazy to think that one those REOs get out of the system they could go up to $80,000 .

I think that will happen way before the $400,000k house in the valley goes to $800,000.

It's interesting how different different markets can be.

This is a good example of what I mean..

710 East Elm Street, Tampa FL - Trulia

Asking price $24k ... sold in 2007 for $226,000! Almost 10 times as much..