FINALLY - rents coming down, big time. (Orange, Laguna Niguel: 2015, foreclosed)

[CAVA1990]

Originally Posted by EscapeCalifornia

That is exactly what's changed in the last generation. It used to be possible to buy a house in a nice part of OC near the coast (but not right at the beach) on a middle class income.

The "middle class line" has moved steadily back from the coast over the years. It's all about supply and demand. They're just not making any more coastal property. Plus now that you have remote workers bringing their incomes from other places it's only going to get worse. More people will be able to live whereever they want, not necessarily near their employer.

[user_id]

Originally Posted by CAVA1990

What was the relationship of income to home prices 10 years ago? It seems like it's almost always out of whack in CA, partly because you have ever more affluent people wanting to buy in to the desirable areas, which are now pretty much all built out.

The relationship was around 3~3.5 10 years ago, which is higher than the nation as a whole but still reasonable.

Originally Posted by CAVA1990

Keep in mind though that real estate prices are sticky downward and people who don't have to sell will just keep their homes priced high or take them off the market until prices rise to the point they're attracted to sell.

Sure, prices are sticky and that is exactly why busts in real estate end up taking a long time. My guess is that there will be another fairly rapid leg down in the mid/high end areas of California and than the market will slowly adjust over a few more years with slightly negative or flat nominal prices.

Originally Posted by CAVA1990

If you think you're ever going to be able to buy a house along the coast on a middle class income, you're dreamin'.

People mean different things when they say "along the coast". If you mean actual coastal properties, well those have never really been middle-class areas. But if you just mean the areas that are "close to the coast", then I'd suggest you're dreamin' if you think they will not adjust to local incomes the vast majority of which are middle-class or lower.

In the mean time the middle-class can easily rent in these areas. Why people think the prices can stay inflated when the rents are not only much less than the costs of ownership but are declining is beyond me. The only reason to hold real estate in this case is future appreciation...but what can't last forever must end.

[CAVA1990]

Originally Posted by user_id

People mean different things when they say "along the coast". If you mean actual coastal properties, well those have never really been middle-class areas. But if you just mean the areas that are "close to the coast", then I'd suggest you're dreamin' if you think they will not adjust to local incomes the vast majority of which are middle-class or lower..

Read my last post. What's considered "coastal" has changed over time. Pretty much all of present day Laguna Niguel and Saddleback Valley used to be middle class.

[user_id]

Originally Posted by CAVA1990

Read my last post. What's considered "coastal" has changed over time. Pretty much all of present day Laguna Niguel and Saddleback Valley used to be middle class.

The notion of "coastal" has not changed. Laguna Niguel has been mixed between middle-class and upper middle-class for at least 20 years and its still a mix today. The incomes in the Saddleback valley suggest it is still a largely middle-class area. What information suggests otherwise? Let me guess, the house prices?

You can use the "They aren't making any more X" with any sort of land. It is possible for areas to become very polarized between rich and poor, just look at San Fransisco. But cities require a massive number of low to moderately skilled people to function, so let's get real about what this means. The lower skilled workers in the city will have to be willing to live much reduced standards of living (really 3rd world standards) and the moderately skilled will have to commute. And gee....isn't that just what happens in cities like San Fransisco? Yes. But both of these have limits, people are only willing to commute so far and sooner or later having a large fraction of your region living in substandard conditions starts to effect the region as a whole.

That is to say, the conditions that the income polarization will create will make the area less desirable and as a result reduce demand. The situation you are describing won't happen...its all supply and demand There will be at best localized areas of wealth. No way is the entire "coastal California" going to become upper-middle class and above.

[user_id]

Also, just to point out. You can find rentals in many areas of Laguna Niguel are still affordable to the middle-class, here are some listings from craigslist:

4 Bed/2Bath/Pano views/Single story (http://orangecounty.craigslist.org/apa/1559565659.html - broken link)
3Bth This Laguna Niguel Home has it all! (http://orangecounty.craigslist.org/apa/1559666250.html - broken link)
3Bth Quiet Cul-De-Sac Home in Laguna Niguel (http://orangecounty.craigslist.org/apa/1559651589.html - broken link)

There are tons of homes in the saddleback valley that have "middle-class rents". So the incomes are middle-class, the rents are middle-class....if it quacks like a duck its a duck.

[CAVA1990]

Not talking rents. I'm referring to home prices. Most people in SFHs in South Orange County own, not rent. My time horizon there is 40 years, not 20.

[user_id]

Originally Posted by CAVA1990

Not talking rents. I'm referring to home prices. Most people in SFHs in South Orange County own, not rent.

You are not getting the point. If the area was actually turning into a wealthy community you'd see rents as well as house prices go up in unison. As it stands a middle-class joe can rent in a community that he can't afford to buy in and what does that indicate? That house prices are inflated. To make matters worse, as this thread is pointing out, the rents are actually going down!

You see areas with real wealthy are correlated with high incomes, high rents, etc.....not just high house prices. You can hardly rent a closet in Manhattan for what you can easily get a 4-bedroom home in south orange county.

Originally Posted by CAVA1990

My time horizon there is 40 years, not 20.

Great than you'd know that Laguna Niguel was incorporated in 1989 and there was not much there before 20 years ago. But look, its pretty easy to see that Laguna Niguel has always been a mixed community. Many of its homes are much bigger than those that were purchased by the middle-class 10~30 years ago.

[CAVA1990]

Originally Posted by user_id

Great than you'd know that Laguna Niguel was incorporated in 1989 and there was not much there before 20 years ago. But look, its pretty easy to see that Laguna Niguel has always been a mixed community. Many of its homes are much bigger than those that were purchased by the middle-class 10~30 years ago.

So tell me, what do you think was there 40 years ago? Where were you then and how would you know?

[drshang]

Originally Posted by EscapeCalifornia

Real estate has been overpriced here for more than a generation. Even "normal" here is still twice as expensive as the national average. Why should this correction bring prices down to affordable levels when the last three haven't?

Well the biggest difference is in the 1990s, California basically led the nation out of the recession. California's economy has been much better than the US as a whole for decades.

...Not any more. That's why this correction matters more, will hurt more and last longer.

[CAVA1990]

So how'd you screw things up so badly? Sad to see what's happened to my home state.