Do you think housing prices are STILL going down in California? (Los Angeles: house prices, neighborhood)

[greggd]

Originally Posted by karkyco

Greg, did you see this?

The-Next-Real-Estate-Crisis: Personal Finance News from Yahoo! Finance

Those "prime" areas don't exist in a vacuum. Certainly, there are extremely exclusive communities and cities/towns, but they have also been heavily developed over the housing boom, and will there be enough of the "haves" to sustain prices or keep them from sliding too much?

We've already heard and seen listings in prime parts drop 25% (or more) of the original asking prices, although many of those original prices were for peak value or even more.

I think that we on the west side simply haven't seen the problem yet...it's been delayed but it is on the way.

I've seen that chart and similar charts. The only difference is the numbers at the bottom change. I recall a year or two ago, the peak reset was predicted in mid 2009. The referenced chart is now into 2011. I havent seen any 25% drops in the areas I check, usually a place is 5-10% over what is should be, it drops 10%, sometimes a bit more and its picked up.

So many things can change in 3 years. I still wouldn't sit around and wait for 3 years to see if maybe that exclusive home drops its price 30-40%. Just don't think its going to happen in certain areas I mentioned. All you have to do is fly over los angeles county and you can get the picture.

[karkyco]

Yeah, I'm not happy about the waiting game, but I have the patience. I was never priced out, and if there's a good deal, I would jump on it. But now it's getting to the point that I will need to move to a larger home, and the stupid cliche be damned, "I don't want to catch a falling knife".

There's a beautiful house pretty much exactly on the border of Hancock Park, for example, that I've just kept an eye on since it has been on and off the market for a while. The previous owner bought it for 990K in July 2006, did extensive remodeling, then turned around and sold it for 1.25 to the current owner in April 2007.

Now this current owner has done some additional work, and turned around and listed it for 1.5 mil. Disregarding the absurdity of the pricing, it obviously sat. The owner then dropped it to 1.25, hoping to "break even" (but not really, considering the added work put in along with the mortgage interest and loan fees, fees and payment to the RE brokers for any sale, closing costs etc.).

It has been further reduced to 1.15 mil, and I've spoken to the current agent representing the owner who indicated that they would possibly be willing to take anything around as low as 990K. In fact, the owner has stopped making payments and the bank is well on its way to foreclosing on the property. Another 6 months and they will have it.

I laughed at the agent, and asked him why I would waste my time on making an offer for what "the owner would take" when it would be up to the bank on this obvious short sale, in fact why would I waste my time at all instead of just waiting 6 months for the bank to take it back and negotiate with them directly then.

Here's the info on the house, from redfin. Not very interested, mind you, because I would pay more than 750K for this property, and even that is pushing it.

Listing Price Information

• List Price (High): $1,150,000
• List Price (Low): $1,150,000
• Original List Price: $1,500,000
• Previous Price: $1,250,000
• Search Price (High): $1,150,000
• Search Price (Low): $1,150,000

[SIZE=3]Sales History[/SIZE]


[SIZE=3]Property Tax[/SIZE]


DatePriceAppreciationNov 09, 1988 $315,000 --
Apr 19, 1993 $2,000 -68.0%/yr
Mar 21, 1996 $215,000 395.9%/yr
May 30, 1996 $216,500 3.7%/yr
Jul 27, 2006 $990,000 16.1%/yr
Apr 27, 2007 $1,250,000 36.5%/yr

[motoman]

My boss lives somewhere in Pasadena. There is a house on his block listed for $1.1 million. A few houses down there is a nicer house, larger, on a bigger lot, listed for $899,000.

Let's see. Nicer, bigger, bigger lot, for $899,000. Not as nice, smaller, on a smaller lot for $1.1 million.

Seems to me that $1.1 million house is probaby worth something south of $850,000. But no, prices in higher-end neighborhoods never go down. Never. I should buy that $1.1 million place, because surely it's worth it. It could never be worth less than the nicer, bigger house down the block. Never.

[motoman]

Oh yeah. There is a builder now that is offering to give you a $400,000 house if you buy a $1.6 million house. See, prices never go down, you just get a free house so that the quoted price on the higher priced home stays the same, even though the effective price is reduced 25%.

See, higher-end homes never fall in price. That's why this builder is giving away a $400,000 home. Because the $1.6 million homes are selling so well they don't need any incentives to get people to buy.

La la land!

In Escondido: Buy one (house), get one free. | L.A. Land | Los Angeles Times (http://latimesblogs.latimes.com/laland/2008/06/in-escondido-bu.html - broken link)

[greggd]

Originally Posted by motoman

My boss lives somewhere in Pasadena. There is a house on his block listed for $1.1 million. A few houses down there is a nicer house, larger, on a bigger lot, listed for $899,000.

Let's see. Nicer, bigger, bigger lot, for $899,000. Not as nice, smaller, on a smaller lot for $1.1 million.

Seems to me that $1.1 million house is probaby worth something south of $850,000. But no, prices in higher-end neighborhoods never go down. Never. I should buy that $1.1 million place, because surely it's worth it. It could never be worth less than the nicer, bigger house down the block. Never.

You should also not base the price of your home soley on the price of a neighbor's listing. There are several factors that may account for the difference in price. Anyways, most of pasadena is not part of the higher end neighborhoods, at least the one's I was referencing.

[Charles]

From Talking Indexes - Inside The Home Price Indices -

[greggd]

Originally Posted by motoman

Oh yeah. There is a builder now that is offering to give you a $400,000 house(in escondito) if you buy a $1.6 million house( way out in the Eastern part of San Diego County, Escondito CA equivilant to the tract homes on the eastern end of la & riverside counties) See, prices never go down, you just get a free house so that the quoted price on the higher priced home stays the same, even though the effective price is reduced 25%.

See, higher-end homes never fall in price. That's why this builder is giving away a $400,000 home (in escondito). Because the $1.6 million homes are selling so well (actually, poorly since they are in the middle of nowhere) they don't need any incentives to get people to buy.

I fixed your post above a bit. It was kind of misleading.

You forgot to mention the so called "hi-end" home is located in Escondito CA which is geographically undesirable. There are many 1,000's of these tract homes all across inland areas of California that are dropping in value because they are out in the middle of "no where land". Not even close to los angeles either.

[orthopodfrancis]

Prices will always revert to the average. Take a look at the Case-Shiller graphs. L.A. is in one of the biggest housing bubbles in the last century. Prices are STILL 2-3X more than what they should be. Go look at some older pre-bubble house prices from 2000-2002.

Sustainable prices are typically 2.6-3 x the average income for an area, which in Los angeles - the average income is 48K dollars - there fore typical historical housing prices should average 150,000.

Santa Monica median household income is 75,000 - so average price should be around 225,000


There is a huge bubble, and it will likely be over in 2010, when all the Alt-A loans have reset (se Credit Suisse mortage graphs).

The ongoing recession, and possible upcoming depression may even further depress housing prices.

Expensive areas are being hit too, as Bev Hills/Pallisades are facing increasing short sales, and gasp! foreclosures.


Median prices going up, just reflect that the low end stuff is not selling, which means a troubled market.

[CA4Now]

Originally Posted by orthopodfrancis

Prices will always revert to the average. L.A. is in one of the biggest housing bubbles in the last century. Prices are STILL 2-3X more than what they should be. Go look at some older pre-bubble house prices from 2000-2002. Sustainable prices are typically 2.6-3 x the average income for an area, which in Los angeles - the average income is 48K dollars - there fore typical historical housing prices should average 150,000.

What? Housing prices in LA haven't been 3 X the average income since about the mid-1980's (if then). Prices will probably never fall to that level here. If you want prices that low, you'd have to move quite a distance from the greater Los Angeles area.

[Charles]

Originally Posted by CA4Now

What? Housing prices in LA haven't been 3 X the average income since about the mid-1980's (if then). Prices will probably never fall to that level here. If you want prices that low, you'd have to move quite a distance from the greater Los Angeles area.

I still want to know why Los Angeles/SoCal housing prices jumped so much higher as a percentage than most of the rest of the country.

Access to the "funny loans" was everywhere. The mortgage rules are pretty much the same across the country. What was it about LA?

Why the huge increase in LA and not Denver (which is sort of representative of most of the country)?