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I'll note that both places in this article are completely middle class homes in middle class neighborhoods. I'll also note that neither will sell for what the article indicates...at least not to the ultimate end user...I think $289K and $350K is whats insinuated.
However(and the point I've been making in recent posts), homes in LA WILL sell and WILL be properly priced once sales to end users fall into the above ranges...that is..an affordable to a middle class income level(for Los Angeles)...a family of 4 making roughly $80-120K a year.
Right now, the home prices should already be there. But due to REA and flipper game playing, along with artificially restricted supply, the prices are not there yet...not for the end user.
But as indicated in the article, each transaction pushes comps lower and lower. As the banks slowly introduce more homes onto the market, and as the supply of buyers available slowly diminishes(even with dropping prices, the number of sales is declining), the prices push further down.
Texas didn't go through what California, parts of Arizona, Las Vegas, and Florida went through. The point John is trying to make is pricing is still out of line for the income in LA for a variety of reasons. My experience in looking for a house in Sacramento is similar. A lot of inventory is being withheld from the market. Unemployment is high, income has decreased. State and local budgets are ultimately going to result in a lot of government employees standing in the unemployment line with the rest of them likely to receive pay cuts. The news about real estate out here is never positive. The latest article about the local real estate market states house sales increased. However, the fact that the majority of these sales were cash sales and there were further price drops indicates there is still a severe problem in the industry.
And despite the above real estate agents are still singing, "Now is the time to buy." Then tell you a story about how the improving economy is going to send housing prices back to 2005 levels in a few years.
And despite the above real estate agents are still singing, "Now is the time to buy." Then tell you a story about how the improving economy is going to send housing prices back to 2005 levels in a few years.
They will never stop singing this song no matter where they are! That helped fuel the current housing debacle along with the deregulation of the banking and securities industry under Clinton's reign in 1999 (Gramm-Leach-Bliley Act Gramm). REA are still preaching a recovery is "just around the corner". Unfortunately too many Americans bought into the RE boom and are still listening to the battle cries of REA. By the way I am not attacking Demoncrats as the Republicturds, as well as some independents, certainly helped the problem along!
What is hilarious, truly hilarious and not being facetious, are Texas REA's are still singing the battle cry. Texas REAs, Texas government, TAR and NAR, want everyone to believe that Texas was immune from the economic crisis because their homes did not accelerate in price like California and a few other places that really went crazy. The real fact is this economic crisis will leave no area unscathed and Texas is just behind the curve. Foreclosures are increasing here, unemployment is at an 8%+ rate, homes that in 1998 were going for reasonable amounts had accelerated greatly over the boom time.
I have a friend who bought a home at a reasonable $165K and watched similar houses go up around him, in his development, over the boom time accelerate to $285K. Those homes are back way down close to the $200K mark. As in the OP's story of HELOC craziness many people here have also done that. They had to replace those countertops with granite, new stainless steel appliances, new cabinets, swimming pools, etc. Many did it soon after buying their homes and are now handling high second mortgages. The REA are still advising people to go out and spend large sums of money for things like granite countertops, etc., to make homes more appealing for sale. And why not, the cost is on the homeowner even if the REA can't sell the home.
I am sure REA will pipe in here and try to rebut everything. But then that is to be expected. If anyone in Texas feels that they are immune all you have to do is look at the recent State budget crisis, local budget crisis', plans and considerations for massive layoffs, and the number of people flocking to Texas with no jobs still believing it is the land of milk and honey. As for the housing bubble claim that Texas is immune just look at the CBS news stor today about Seattle who also thought they were going to be immune from the housing bubble. Their price increases were also supposedly modest in comparison to other areas, and much the same as Texas likes to believe. You can see the CBS story here Housing crisis spreads to formerly immune Seattle - CBS News Video.
With LA and other big cities, the real estate market is determined by 2 huge factors:
1. Cost to purchase home
2. Cost to rent safe single family home in safe neighborhood
Without boring everyone with funky math:
Say X home is worth 500-600K in 2010(was 800K in 2006)....mortgage/principal/interest/property taxes with 10% down will run around $3500 per month (not factoring in tax deductions [interest and property taxes money factor].
But a good quality home in a good school district to rent will cost you between $2500-4000 a month.
It all boils down to rent vs. buy cost factor. Right now, it's extremely hard to find good quality affordable rental (unless you are out of LA/Orange county proper).
Same thing with my old location in Washington DC proper. Going to cost you $2500-3000 just for townhouse rental close to 4000 for single family rental while the average selling price in the DC proper areas in good neighborhood go for about $700K.
A lot of inventory is being withheld from the market.
That's the most maddening part. We are in Alaska (with a reasonably balanced housing market for now) looking for a retirement home in warmer climates. We have no doubt about our ability to sell out being in a neighborhood with property still turning over quickly as long as it's in decent shape and not ridiculously priced. We see interesting properties in areas of interest sitting empty with no signs and no really good way to figure out who owns them. Even city or county records might not be accurate. For us, it is the waiting game...
And despite the above real estate agents are still singing, "Now is the time to buy." Then tell you a story about how the improving economy is going to send housing prices back to 2005 levels in a few years.
As someone posted earlier, not every market is California. My market has some area's that have fallen to 2005 levels but homes that are still above that mark.
With LA and other big cities, the real estate market is determined by 2 huge factors:
1. Cost to purchase home
2. Cost to rent safe single family home in safe neighborhood
Without boring everyone with funky math:
Say X home is worth 500-600K in 2010(was 800K in 2006)....mortgage/principal/interest/property taxes with 10% down will run around $3500 per month (not factoring in tax deductions [interest and property taxes money factor].
But a good quality home in a good school district to rent will cost you between $2500-4000 a month.
It all boils down to rent vs. buy cost factor. Right now, it's extremely hard to find good quality affordable rental (unless you are out of LA/Orange county proper).
Same thing with my old location in Washington DC proper. Going to cost you $2500-3000 just for townhouse rental close to 4000 for single family rental while the average selling price in the DC proper areas in good neighborhood go for about $700K.
This just isn't true IF product is being withheld from the market. In otherwords, a mini false bubble/market is created by only making a small amount of product for sale.
IMO, selllers OUGHT to be aware that there is a significant amount of inventory being withheld from the market place with the intent of proping up prices for a finite period of time. It does play into the "investment" factor and also in future property values.
Quote:
I’ve also noticed some people down playing the Alt-A and option ARM fiasco. Ironically the people saying it is a problem that has gone away forget that much of this bubble was created by a corrupt and unethical investment banking and housing industry. Yet they now trust their data? Not sure what to think here but maybe they are just naïve. For example; 1 foreclosure is listed in the 90210 via the MLS. Yet 100 are part of the shadow inventory.
This just isn't true IF product is being withheld from the market. In otherwords, a mini false bubble/market is created by only making a small amount of product for sale.
There is a difference between a bubble and a lack of an implosion. I have no doubt that non-performing inventory is being intentionally withheld from the market. If the banks tried to sell all their inventory at once the pop you'd hear would be the implosion of the banks.
Quote:
Originally Posted by JohnG72
IMO, selllers OUGHT to be aware that there is a significant amount of inventory being withheld from the market place with the intent of proping up prices for a finite period of time. It does play into the "investment" factor and also in future property values.
I'm just trying to imagine for a moment that there's anybody interested in buying or selling houses that is so naive as to believe that inventory is not being withheld, for the reason I stated above.
Mortgage lenders are withholding property because they'll go out of business if the housing market truly implodes. Government elected officials are in on the deal in at least some form because if the housing market implodes the economy will implode too, implode far worse than it has now. Government could even collapse although I don't expect that.
Wow, I never used 'implode' so many times in one post!
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