Do you think housing prices are STILL going down in California? (Riverside: apartment, mortgage)

[sheri257]

Originally Posted by BRinSM

Some of these people may buy too early and others may wait too long, regardless, it still seems like most people are sitting on the side lines right now.

Well ... I'm not buying in LA but I am buying on the central coast, which is more or less just expensive than LA. I'm bidding on a foreclosure at 45 percent below peak price and (long story short) someone else has already tried to outbid me on this property by $50K so ...

There IS a lot of pent up demand out there and I'm seeing it first hand. I wonder if these people who make all these claims about prices are actually out there in the market bidding on homes ...

Because once you actually get in there ... you get a much better sense of where the bottom is ... and where it isn't.

[motoman]

Originally Posted by sheri257

No one is arguing that prices won't go down. What we're arguing is that prices won't go down as low as you say ...

As your link points out, the last time the average price in LA was $250K was 2001. You've got to figure on some normal price appreciation happening in the market since then ... at least 5 percent a year.

Which would put the average price at $340K ... about $100K lower than the average price now. I personally don't think prices will get that low but, at least that's a more reasonable estimate than your claim of $250K ... which is never gonna happen.

Sheri, did you not see the numbers? From 1991 to 1996 prices fell, by 21%. It wasn't until 2000/2001, almost 10 years later, that prices got back up to 1991 levels.

That house prices go up every year, at 5% or whatever, is just plain wrong.

Given that this bubble was significantly larger than the late '80s bubble in LA, it would not be unrealistic for prices to fall for at least 5 years or so from the peak. I've heard different answers as to when the peak was, so take it for what it's worth. Assuming we peaked 2 years ago, we could realistically assume that prices will continue to fall for at least another 3 years.

[JTGJR]

Another item of note is I keep hearing reference to the "average" cost of a home. Most numbers that I see state the "median" cost of a home. Big difference.

[motoman]

Originally Posted by BRinSM

I agree with Sheri to an extent. There is a lot of pent up demand out there, myself included. If you read any of the LA real estate blogs, you'll come across many people that are stashing their cash, waiting for the right price whatever that may be. These people that are waiting are the same potential buyers that sellers are looking for, those with cash and enough income to qualify for loans. Some of these people may buy too early and others may wait too long, regardless, it still seems like most people are sitting on the side lines right now.

Don't you think this has always been the case in LA? That people want to buy houses? Why are houses suddenly worth so much more than they were just a few years ago? People had to have a place to live then too.

[motoman]

Originally Posted by sheri257

Well ... I'm not buying in LA but I am buying on the central coast, which is more or less just expensive than LA. I'm bidding on a foreclosure at 45 percent below peak price and (long story short) someone else has already tried to outbid me on this property by $50K so ...

There IS a lot of pent up demand out there and I'm seeing it first hand. I wonder if these people who make all these claims about prices are actually out there in the market bidding on homes ...

Because once you actually get in there ... you get a much better sense of where the bottom is ... and where it isn't.

People have become numb to reality. The housing market got so big so fast that the average person thinks everyone can afford and should be living in a $500,000 house. During the boom everyone talked about it like it was owning a pair of tennis shoes.

Sure, prices have come down and they look "relatively" cheap, but that doesn't mean they are cheap or even worth the prices now.

Again, from 1991 to 1996 prices fell 21% in LA, following a bubble that wasn't nearly as large as this one, that didn't have subprime and fraudulent lending as a primary driver.

Take the creative lending away and you remove a very large number of people that are in homes now that would never have qualified using traditional underwriting guidelines, guidelines that have survived the test of time.

My guestimate is that the median home price in LA should be $300,000-$350,000. We're getting closer to that number, but the problem is that sales volumes are so low that they really aren't a good representation of the excess supply out there. People are pulling their homes from the market rather than face the fact that they are underwater. No one wants to sell at a loss.

But the average home owner is only in a home about 7 years. At some point these folks waiting to sell will be forced to for one reason or another.

It will all come full circle. It is just a matter of time.

[karkyco]

Originally Posted by BRinSM

I agree with Sheri to an extent. There is a lot of pent up demand out there, myself included. If you read any of the LA real estate blogs, you'll come across many people that are stashing their cash, waiting for the right price whatever that may be. These people that are waiting are the same potential buyers that sellers are looking for, those with cash and enough income to qualify for loans. Some of these people may buy too early and others may wait too long, regardless, it still seems like most people are sitting on the side lines right now.

Sure there are plenty on the sidelines, such as myself. I have a few properties but I'm looking for that gold at the end of the rainbow. I won't even bother lowballing at this point, as desperate owners have enough to worry about. Once the banks get with the program and start aggressively pricing their REO inventory, then we'll see how low we can go.

But for all of us out here that are waiting with the money on hand and ready to go and the credit to qualify, there really aren't that many of us compared to the general population in LA and the amount of properties that are and will continue to be available. Plus, we won't be buying at the insanely high, braindead prices that sellers continue to ask. The psychology has come full circle - where once buyers were at the mercy of sellers, who could clearly smell the blood in the water, the roles have reversed. So we will bide our time. Plenty of delusional sellers out there think they can wait it out, or continue to ask incredibly unreasonable asking prices, but their properties will sit unsold for a decade or longer.

Me? I'm not so secretly, semi-hoping we get to outright open gang warfare and rampant crime of epic proportions, sort of like NY in the 70's through the 80's/early 90's. Okay, maybe not so much. But it definitely does help bring prices down rapidly, only thing quicker would be natural disasters.

You think LA prices can't tank to 3x income levels?

How about the blighted buildings in freaking Manhattan that were practically given away a few decades ago...I'm talking either for literally pennies on the dollar or where the city/state/fed pretty much gave away or gave people huge incentives, basically paid them to take. Buildings now worth millions if not 10's of millions of dollars.

Unfortunately I don't have all of the specifics, I believe this sort of occurence at the time was due to the recessions of the mid 70's and late 70's/early 80's coupled with legislation that no longer allowed high earners to take massive losses on income property, along with high property taxes. A lot of wealthy landholders simply walked away from properties or handed them over to government...those properties were liquidated for next to nothing and are now some of the most valuable pieces of real estate in the world.

[BRinSM]

My point is that pent up demand is going to keep prices from getting too low. Defining too low is pretty difficult, but I'd imagine that if sellers started listing 3/2 SFHs in decent areas of the city (on the south side of the hill) for around $500k, they would be bought up instantly. That's a 33% price reduction.

Right now, atleast in the areas of the westside that I see regularly, post war 3/2 SFHs, sellers seem to be asking for around $750k. I bet if they got down to $600k they wouldn't be on the market for very long. That's a 20% drop from current prices. I hope it gets lower, but I'm also being realistic and I'm not going to get my hopes up that it will drop any lower than that.

[karkyco]

Originally Posted by sheri257

Well ... I'm not buying in LA but I am buying on the central coast, which is more or less just expensive than LA. I'm bidding on a foreclosure at 45 percent below peak price and (long story short) someone else has already tried to outbid me on this property by $50K so ...

There IS a lot of pent up demand out there and I'm seeing it first hand. I wonder if these people who make all these claims about prices are actually out there in the market bidding on homes ...

Because once you actually get in there ... you get a much better sense of where the bottom is ... and where it isn't.

So wait, you're bidding at 45% below the peak pricing, someone else is bidding 50K higher (this number is useless outside of the context of what it represents %-wise in relation to your bid). I.e. if that 50K only represents 5% of the peak price, the guy is still bidding 40% below the peak price, a HUGE drop.

Sure, it doesn't mean you or him are going to get the property at that level, but within a couple of years since the peak, to be bidding at that level? It's an incredible drop. And foreclosures aren't even selling at 1/2 of peak 'values' in the inland, overbuilt areas like the 909/Inland Empire/Riverside and San Berdo counties.

[sheri257]

Originally Posted by motoman

Sheri, did you not see the numbers? From 1991 to 1996 prices fell, by 21%. It wasn't until 2000/2001, almost 10 years later, that prices got back up to 1991 levels.

That house prices go up every year, at 5% or whatever, is just plain wrong.

Motoman ... sorry but, the way you're looking at this is completely screwed up. Look at your chart. For the last 18 years prices appreciated at least 5 percent a year on average.

Of course there are boom and bust cycles. Somehow you seem to think that prices wouldn't have appreciated at all during the boom cycle 2001-2007 ... which is ridiculous.

You can certainly argue that subprime drove up prices out of wack but, you can't argue that home prices wouldn't have gone up at all. It was, afterall, a real estate boom driven by lower interest rates.

And, you're conveniently forgetting that prices increased by more than 80 percent before we saw the 20 percent drop from '92-'96 ... still leaving 60 percent price appreciation in the market overall.

We can argue about how much homes appreciate but you can't deny that homes do appreciate over time. Even during a bust cycle, you have to factor in some price appreciation overall when trying to call the bottom of a market.

[motoman]

Originally Posted by BRinSM

My point is that pent up demand is going to keep prices from getting too low. Defining too low is pretty difficult, but I'd imagine that if sellers started listing 3/2 SFHs in decent areas of the city (on the south side of the hill) for around $500k, they would be bought up instantly. That's a 33% price reduction.

Right now, atleast in the areas of the westside that I see regularly, post war 3/2 SFHs, sellers seem to be asking for around $750k. I bet if they got down to $600k they wouldn't be on the market for very long. That's a 20% drop from current prices. I hope it gets lower, but I'm also being realistic and I'm not going to get my hopes up that it will drop any lower than that.

Again, what you are saying is that every homebuyer in LA is making $150,000-$200,000 per year. You have to be in the top 5% of wage earners in the entire country to afford a house in LA? Do you not see the flaw in that logic?