Los Angeles housing mania is back. But without loose lending...bubble, or new reality? (Pasadena: foreclose, rent)

[JustMike77]

Originally Posted by rmreel

The market trend relies heavily on first time homeowners, and most people making these irrational decisions are first time homeowners.

The 20% down payment here statement is untrue because lenders and mortgage officers jump at every lead that lands on their door. Regulations allow approval of loans as low as 3%. When they are approved, they are tagged with mortgage insurance which can range from $200 to $500/month depending on the loan amount.

And I'm sure families making $150k are not buying $450k homes which would mean Inglewood or similar. They're probably looking at 700 to 900k depending on their capacity to repay the lender.

I doubt LA will return to 2006/2007 values but a 20 to 30% fall in the next 2-3 years should not be ruled out.

For the most part values have recovered to their 2007 levels. The big question is will they also adjust to their 2009 levels.

[rmreel]

Folks... the 3% or 3.5% down (conventional or FHA) applies all over the US other than rural areas. One needs a good enough credit score to get approved.

There is no 0% downpayment unless its a USDA insured farmland. Even VA loans require a 3% minimum.

I know this because I'm in the lending business.

[rmreel]

Originally Posted by JustMike77

For the most part values have recovered to their 2007 levels. The big question is will they also adjust to their 2009 levels.

I mistyped... you're right they are already about/over those levels. I meant to levels after the bust in 2009/2010.

[thelopez2]

Originally Posted by rmreel

Folks... the 3% or 3.5% down (conventional or FHA) applies all over the US other than rural areas. One needs a good enough credit score to get approved.

There is no 0% downpayment unless its a USDA insured farmland. Even VA loans require a 3% minimum.

I know this because I'm in the lending business.

Local programs allow for 0% and 1% down or should I say area specific programs.

[thelopez2]

Originally Posted by ryanms3030

so exactly what I said

no, about anyone can get 3% down, you don't have to be a first time buyer.

[rmreel]

Originally Posted by thelopez2

Local programs allow for 0% and 1% down or should I say area specific programs.

What programs are those? Who's sponsoring them? I'm curious. That is even better for a potential bubble... Don't you think?

[Mr_Geek]

I think this is a bubble. We are above the prices from before the last bubble. I hope it bursts soon in dramatic fashion.

[thelopez2]

Originally Posted by rmreel

What programs are those? Who's sponsoring them? I'm curious. That is even better for a potential bubble... Don't you think?

I make no comments on bubbles, but when people have no skin in the game, why stick around. The last bubble bust when people couldn't afford adjusted payment, lost jobs, credit was tighten, became hard to run businesses.

Even with these higher loan amount, I'm seeing mortgage/housing PITIA cost close to rents. Locally prices have shot up back to pre recession prices, which I think were actually artificially low, but that is another story. People will think that they only have to hold on to their house with a decline value for only a few years before it increase back, so they won't be walking away from them. If jobs are lost, housing prices will drop as a given, bubble or not.

These 1st time buyer programs have always been around, downpayment assistance programs (DAP), 2nd mortgages that you don't have to repay if you live there long enough (community 2nds) , lender credits towards down payments. I'd say these programs contribute to the gentrification of neighborhoods.

Do you work for at bank or broker?

Who's sponsoring them? Typically the local city, but are still conforming 1st, regional portfolio lender do them too.

[Finper]

3% down on a 800,000 house is a huge mortgage!! How many people can afford that?? Not many I imagine when you add in all the other COL it takes to live here. This must be foreign buyers still buying up our real estate. Makes me nervous on when I should sell my place

[Mr_Geek]

Here's who buys houses in LA county:

1. The well off (100k+ salary and then some)
2. The foreigners (then they rent to Americans)
3. Families living 10 under a roof and more (5k/month mortgage isn't much split amongst 10 adults)
4. The savers (been saving for that downpayment for a decade or more)
5. Those with questionable bankers and are bad at finance (borrow more than they can afford and are house poor and end up getting foreclosed)

I'm closest to #4 but by the time I have 20% down, I'll need way more.