FINALLY - rents coming down, big time. (Los Angeles, San Diego: lease, house prices)

[user_id]

Originally Posted by CAVA1990

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

The beauty about reading is that you can look things up that you did not experience yourself. I was not around 40 years ago. Anyhow, the vast majority of development in Laguna Niguel did not occur until after the mid 80's...hence the city being incorporated in 1989. 40 years ago there were just a thousand or so households in the area.

Regardless, to what degree Laguna is or is not middle-class does not really matter. The area as a whole is pretty solidly middle-class and declining rents will put further downward pressure on house prices.

[antarez]

Originally Posted by Charles

With all the people getting the boot on their foreclosed homes, I would have thought more people would be renting and driving rents up???? I guess not.

That's one angle.There are also a lot of younger people moving back in with their parents and also investors/speculators that own multiple properties,some that are underwater or have devalued significantly that they cannot sell without taking a serious financial hit that are trying to rent them out until the market rises enough for them to recoup or profit from.When the jobs return(UE rates decline)and or the Government stops trying to manipulate the market with foreclosure mods,bank bailouts and home buyer programs,then we will stop seeng the fluctuations we do now.

[John23]

I think this 2002-06/07 bubble has been 4 or 5 bubbles on top of each other. Like the mesosphere analogy on page 2.

-The problem is everyone thought it was *different this time*. The old rules don't apply, they aren't making any more land, etc. It's going to take a long time for people to lose all of that denial. We've seen it in the outer areas...san bernardino, riverside where prices have crashed 50-70%. With these $600-700 k homes, the denial is still there. There can't be that many high income earners from other parts of the country to fill up *every* $600-800k home in southern california. The country did not produce 200,000 new millionaires in the last 3-5 years.

-The job growth issue I think is sort of faulty. In the 90's, the baby boomers rode a huge economic upswing, and basically passed their home from one high income earner to another (from 90/91 to 96/97). Here, I don't see who they're going to pass the ball to. Where are all the super degrees that can afford these homes?

-If LA/OC was a small area, like carmel or half moon bay or something, I could see prices staying high for a while. But there's simply too many homes and not enough income to support them.

-On top of the economic changes from the 90's. The 90's were basically a long expansion (remember Clintons 20 million jobs). The 2000-2015/20 economy is more fractured. There are sea changes going on under the surface that will affect home prices in another 5-10 years. What happens when interest rates shoot up? If mortgages go to 8-10% or higher, the market will be crushed. The economic/interest rate changes will probably outway job growth/income growth in the next 3-5 years or longer.

-Also, everything in the world was thrown at this last bubble to keep it up. It was a once in 75 year anomaly. It will take a long time to unwind completely.

-I wonder what's going to happen to the market when money really gets scarce.The 90/91 bubbles and the 02-06 bubbles occured in this era of cheap money. I dont think that'll be the case in the next 10-20 years.

We have a whole generation of people (gen y to baby boomers) who have never seen scarce money. The top of this market could look how Nasdaq 5,000 looks now.

[CAVA1990]

So will prices return to historic levels? The price appreciation of the house my parents built in the area 40 years ago ($200K including the lot, worth $2.5MM now) is about double the 700% growth in national median income over that time period. Will the price drop to somewhere around $1MM-1.5MM? I would say probably not, because of the increased awareness of the area amongst the well to do along with better amenities (shoppoing and restaurants) and the limited number of properties with an ocean view.

[user_id]

Originally Posted by CAVA1990

So will prices return to historic levels? The price appreciation of the house my parents built in the area 40 years ago ($200K including the lot, worth $2.5MM now) is about double the 700% growth in national median income over that time period. Will the price drop to somewhere around $1MM-1.5MM?

Yes prices will return to historic levels in the aggregate, that does not mean every house or even neighborhood will return to such. There are of wealthy communities in Southern California and there will undoubtedly be new ones as well, but the idea that the entire coastal region is being transformed into the playground of the wealthy is outlandish.

[CAVA1990]

Originally Posted by user_id

Yes prices will return to historic levels in the aggregate, that does not mean every house or even neighborhood will return to such. There are of wealthy communities in Southern California and there will undoubtedly be new ones as well, but the idea that the entire coastal region is being transformed into the playground of the wealthy is outlandish.

Seems to have gone much more that way since I left.

[user_id]

Originally Posted by CAVA1990

Seems to have gone much more that way since I left.

Why? Because a bunch of people are buying McMansions with 0% down and driving leased BMWs? If the area was actually being transformed in this sense it would show up in income data, rents, and so on. Orange county is the playground of the phony...not rich.

[CAVA1990]

Well a lot more celebrities and high earners live around there now than when I was growing up.

[user_id]

Originally Posted by CAVA1990

Well a lot more celebrities and high earners live around there now than when I was growing up.

"A lot more" can mean 100 vs 1000. A few thousand celebrities and wealthy folks is not going to transform an entire region. Even in areas like Laguna Niguel the real median income has been flat over the last 10 years. It was ~$80k in 2000 and is around $100k right now, just keeping up with inflation.

[CAVA1990]

But isn't it true that the area along the coast is pretty much built out? That seems to me like it's going to lead to ever higher prices, even with normal population growth, particularly with the coming onslaught of virtual workers.