Monday, October 26, 2009

False Bottom in Real Estate

Here we are now, with many claiming the bottom is in for Westside Real Estate. Offers are flying around entry level properties ranging from $700K - $900K, and the bubble is beginning to re-inflate. Not so quick. All of this represents nothing more than a False Bottom aided by government stimulus and risky mortgages to first time buyers. What is going to happen once the Home Credit ends? Not to mention, the Unemployment and Underemployment figure reaching 19.6% in California. The facts are, there aren't enough qualified buyers to buy all of the over-inflated underwater mortgages. Sure, there are some who have built up equity that can afford to price their homes realistically, but most of the inventory both shadow and listed, are nothing more than future foreclosures.

Why would anyone would risk a down payment, while paying double the rental price to buy? With a good chance of properties continuing their decline and a slim one for appreciation in the near future, you better love that house. There's a good chance it will be 10 years, before you can move.

67 comments:

Anonymous said...

still flipping going on in the CC/Mar Vista. Flippers buying SHITTY place for 400k, and putting in 50-100k of work and then selling for 700k. I guess there's a market so why not flip?

Anonymous said...

I live in the South Bay and have watching a lot of properties sell - Redondo Beach & South/West Torrance. It's amazing how many are being sold and the prices are well above what they were earlier this year.
For example - an SFR on a 6000 sqft lot, about 1000 sqft in 90277 was as low as 600K~650K earlier this year. Now similar properties are selling for upper 700K to lower 800K. Over 17 SFR's are in escrow right now in 90277 - it is amazing how fast things picked up. I understand money is cheap and the 8K tax credit is available, but the frenzy of buyers is pretty real. I agree that the market is overpriced, but the reality is properties in my area are selling.
I also think the West Side / South Bay has room to devalue, but when I read these blogs and see the reality of what is happening, it makes me wonder if we are missing an opportunity to buy.

Anonymous said...

Yes, yes. Thats it LS2009 - fight reality - FIGHT IT! Remember, you control the market. If you say prices will go down 50% then dammit, prices will go down 50% regardless of the number of buyers out there now.

Ignore all your former bubble sitters who are now abandoning you in droves and snapping up all that inventory. Im sure you wont get left behind...again!!!

Anonymous said...

"Ignore all your former bubble sitters who are now abandoning you in droves and snapping up all that inventory."

And you go right ahead and keep ignoring all that *unsold* inventory priced above the FHA limits.

Jackass

Anonymous said...

Hmmmm, methinks there are some bulls and bears on this blog. Lets play nice !

I have to agree the non conforming market (over 729K) is in the shitter.....everything else below 729K is getting offer.

Thoughts???????

Anonymous said...

shell game can not continue forever folks..they call this a soft landing

Anonymous said...

It took at least six years to inflate, it's going to take at least six years to deflate. There will be come peaks in the downward trend. Than always happens. If you buy, don't buy because you think you're in the "bottom", buy because you like the house, you can afford it and you have a solid job.

Anonymous said...

Case shiller went up (seasonally and nonseasonally) again. How do we treat that here - do we just pretend that it didnt happen or something?

Anonymous said...

Plenty of bears that I know are rushing in to buy buy buy at the 800 thousand dollar level. Think about it - the FHA will let you buy with very low down payment.

The bears I know figure that they will buy today with minimal down payment. If they are right and prices move down over next five years, they just mail the keys back to the FHA and laugh it off.

If prices go up massively, they refi and put the profits in their pocket.

The point is, buying today is a no lose proposition. If prices go up you make a few hundred thou profit and if prices go down you stick the taxpayers with the loss.

What's not to like?

Why aren't you jumping on the gravy train?

Anonymous said...

if u got the money now, and you like the house and will live in it for at least the next five yrs, then pull the trigger.

however, if you do not have the money, and need a over leverage loan and two incomes to barely cover all the monthly costs, then you should probably wait until you have a larger down payment.

it is never fund to be in financial ruin even if you can walk away.

Anonymous said...

The US taxpayer is funding the mortgage market from front end to back - the govt bailout banks originate, Fannie/Freddie securitize, Bernanke buys. This will end badly.

Anonymous said...

I can get a 15 year loan for four and a half percent, righ? My real rate after the tax deduction will be something like three and a half percent, right? That's pretty close to free money, isn't it? What does it matter what the price is if I'm pretty much using free money? Anything literally within reach seems like a good idea.

There's your affordability.

Until it ends.

When, yeah, then what happens?

Saying that the market is active now proves prices will hold up is nonsense.

But the pressure to get some of that pretty much free is strong, ain't it?

dog-walker

Anonymous said...

"Case shiller went up (seasonally and nonseasonally) again. How do we treat that here - do we just pretend that it didnt happen or something?"

More or less, yeah.

JBR said...

Case shiller went up (seasonally and nonseasonally) again. How do we treat that here - do we just pretend that it didnt happen or something?"

No, we understand that that's the headline number. Then we look at the numbers for individual cities and see that L.A. was *down* 12% from 2008.

Anonymous said...

Hey...anything decent that you can get a conforming loan with is flying off the shelf.....i'm seeing it in SM where prices are lower than ever, so activity is picking up!

Anonymous said...

Blah blah blah you real estate agents are so sad and obvious.

Anonymous said...

This should help...

Los Angeles leads list of job losers

http://washington.bizjournals.com/washington/stories/2009/10/26/daily75.html?surround=lfn

Anonymous said...

It's probably more anecdotal than statistical, but how do the flippers affect the units sold and prices? I have two family members buying foreclosures on the courthouse steps in the Sacramento and Gilroy areas and flipping them (one just started and the other has been doing it for several years with a break in 07 and 08) and a friend who bought a distressed sale of a condo in Santa Monica. Is a foreclosure sale at the courthouse and the flipped house a few weeks later counted as separate sales, with an increase in selling price?

Kinda reminds me of the top of the tech stock bubble when there was the saying When your waitress starts giving you stock tips you know the market is overvalued...

Robert said...

Markets do turn...both ways.
Those of you who continue to be negative are just like those who thought the stock market would go down forever. Instead the Dow, S&P are up 60% in 6 months. The bears are still waiting for that other shoe
to drop. They wait. And wait. The stock market pulls back for a day or two, they lick their chops but then the market shoots upward a day later. Hey, everyone, the Dow was 6600 and today it is about 10,000.
Let's bring that back to Santa Monica real estate which is the subject of this blog. Every decent property in the last 3 months has sold and many with multiple offers I myself just bought one with the non-conforming mortgage at 5.16%....a gift if there ever was one. Buying a home is about supply and demand and affordability. Those purchasing the prime areas of LA are not paying any attention to the national or even California housing statistics.
Some buy clothing at a flea market or at Walmart and others do so on Rodeo Drive. It does not take too many Rodeo shoppers to sop up any new listings in 90402 or 90210, etc.
And not everyone is worried about his/her job. DSome sold houses at the top. Some moved to LA for every reason people have always moved here. Many have been waiting for this pullback. Some are just rich. With money market funds yielding 0.04%
why would anyone leave future house money there?
The market has turned. Don't be concerned about unemployment in Kansas or Michigan....don't listen to the TV news or read the LA Times.
In your heart you know this is the time to buy. If you wait for all the good news, houses in Santa Monica will have gone up 50 % and the mortgage rates will be 7 or 8 %.
Just do it.

Anonymous said...

Like your style Robert....go get 'um!

Anonymous said...

@Robert... LOL,,, Very nice! Though anyone who listens to your advice is as deluded as you. :-) Couple points:

"Hey, everyone, the Dow was 6600 and today it is about 10,000."

Heh, and any true market bear could not be happier about this pop. It's a gift. Your citing this as evidence of some kind of lasting recovery indicates your total lack of understanding about the current market.

" It does not take too many Rodeo shoppers to sop up any new listings in 90402 or 90210, etc."

Seriously? 90210 has just over 300 SFR's listed, there have been 6 or 7 sales this month. That's around 42 months of supply. 90402, 40 SFR's, 3 sales, just over a years worth of inventory. Real healthy market huh?

You make a very convincing argument. Based on a complete fantasy, but very convincing nonetheless. Bravo!

Robert said...

How many listings did you say were north of Montana in single family dwellings? isn't that what this blog is all about?
only time will tell if you missed the market. or I was right.
as an old economics professor from NYU graduate school told my class...."the person who has the most money (or any money) at the bottom will be the most successful."
too bad Americans and others buy at the top and sell at the bottom.
methinks it should be Buy low ! Sell high!

JBR said...

"How many listings did you say were north of Montana in single family dwellings"

40. Around a years supply at current sales rate, assuming no new listings. YOY listings up ~12% Sales prices still trending down.

"isn't that what this blog is all about? "

Actually, no. Unless you consider NOMO to be the entire west side of LA.

"only time will tell if you missed the market. or I was right."

Agreed.

"the person who has the most money (or any money) at the bottom..."

True. This is not the bottom. Obviously we disagree on that point. ;-)

Anonymous said...

Robert is a genius ! What was I thinking !

"Every decent property in the last 3 months has sold and many with multiple offers"

[WTF. I guess if every decent property is CC shacks at <750K. As others pointed out, check out the inventory, esp. that >1M in Brentwood, BV, Malibu, MDR. Prices dropping, inventory dragging]

"Buying a home is about supply and demand"

[Note inventory comment above]

"Don't be concerned about unemployment in Kansas or Michigan"

[Translation: Unemployment, esp. Calif. unemployment, obviously has no effect on any real estate. Awesome!]

Hey, everyone, the Dow was 6600 and today it is about 10,000

[Housing markets and stock markets are always correlated! Duh! Oops, except for the last SoCal RE bubble. (Check Case Shiller or any other Calif. house price data vs. equities from the 1991 recession through the roaring 90s. 100% inversely proportional. Also check out house prices from the 2001 recession through 2007 (rocketed) vs. equities (tanked). Again, completely inversely proportional. Silly me; this time is different!]

"Just do it."

[Yeah! Suzanne Researched It!]


What a f-n moron...

Jason

Anonymous said...

"In your heart you know this is the time to buy. If you wait for all the good news, houses in Santa Monica will have gone up 50 % and the mortgage rates will be 7 or 8 %."

Dude, if (when?) interest rates go up that high in this situation with this economy and with this inventory, houses will DROP 25% more!! You are pretty funny!

Anonymous said...

"In your heart you know this is the time to buy. If you wait for all the good news, houses in Santa Monica will have gone up 50 % and the mortgage rates will be 7 or 8 %."

Dude, if (when?) interest rates go up that high in this situation with this economy and with this inventory, houses will DROP 25% more!! You are pretty funny!

Anonymous said...

Some of the realtards who post here are unbelievable. I would rather wait and pay higher interest rates (which can be written off) than rush to buy some wildly overpriced property right now

Anonymous said...

I watch Venice and Mar Vista sales pretty closely, and I am sure that the properties with the multiple offers are more in the $650,000 - $850,000 range. For sure, properties just over that amount are sitting for MUCH LONGER. Because of a higher downpayment and not qualifying for FHA's. And the difference in quality of homes from a $800,000 home to a $900,000 home is very significant. But the $900,000 won't sell because of fewer buyers with that big down payment, so it sits, then eventually prices will have to be lowered. This will have to trickle down to the lower end as well - those low end homes have got to go even lower.

Anonymous said...

Option ARMs Enter the Eye of the Hurricane: The $189 Billion Recast Problem Targeted Directly at the California Housing Market. Of $189 Billion in Securitized Option ARMs $109 Billion in California.

http://tinyurl.com/ygagcsh

Robert said...

Gosh, I feel so much better about the purchase of my home. With everyone jumping down my throat about my bullishness of the pricing of high-end westside houses, I will sleep like a baby.
With everyone leaning one way in a boat, someone needs to save the boat from tipping over. You are all so negative that the "smart money" once again are picking up the bargains. Hey guys and gals, the market has already pulled back 30 % in our area. What are you looking for? The world may have looked as if it were ending early this year, but slowly things are turning upward. Isn't that the optimum time to buy....at the bottom???? Is it possible that there will be a double dip? Sure, but I
can afford that risk and have an emotional need to own a home here. Doesn't that count as well.
And finally when the bell rings (haha), y'all will find prices up so far so fast that you will be renting for the rest of your lives. This blog and others like it will be morte, inflation one day will return, and I will be fatter and happier that I took the risk in late 2009. Join me after you consider the above. Oh, and do you seru=iously believe that mortgage rates will be at 5% for very long? These were the rates my folks received as Veterans in 1948 when tghey bought their first home.

Anonymous said...

@ Robert. You are wrong. Good luck.

JBR said...

" You are all so negative that the "smart money" once again are picking up the bargains."

lol. The "smart money" is doing no such thing. The "smart money" is still on the sidelines. Again, you have no idea what you are talking about.

Seriously, do you even understand the implications of what you're saying about interest rates?

That, of course, was a rhetorical question. You obviously don't.

Anonymous said...

Robert can afford the house and it is his call as to buy or not to buy. He is just being a proud owner, but this blog is not the place to do it.

I think a lot of readers on this blog including myself are just frustrated that housing is so expensive in W. LA, and we are taking it out on Robert.

W LA will never be affordable for the avg income ppl household income of 100-150k without help from 1. dad and mom, 2. disciplined savings for at least 8-10 yrs or 3. profits from a previous sold house during the boom yrs.

I am in the 2 category, and have a few more yrs to go before I save enough for a decent size down payment.

blahblahblah said...

Many blogs are talking about the current "buying opportuntiy" and low interest rates. In reality, it makes better financial sense to buy when interest rates are HIGH, not low. Here's how it works:

In general, home prices are determined by what the monthly payment is, not by the dollar price of the home. You qualify based on what your income is per month, right? (exotic toxic mortgages tried to hide this fact with teaser payments. We all know how that worked out!)

What happens when interest rates go up? The price of the home has to go down keep the monthly payment the same, or the property becomes overpriced.

example:

a $500k mortgage @ 4% = $2387/mo

if rates go to 8% ( i dont think they will ,but illustrates a point)

then to get a payment of $2387/mo, the same mortgage has to be less than $325,000.

In the first case, if you borrow when rates are low, eventually, since everything is in cycles, rates go back up, and your home value falls. You cant refinance because your load is (possibly, at a 20% down payment)upside down. Plus, who would refinance for a higher rate?

If you borrow at a higher rates, you buy the house at a lower price. Later on, rates fall, and the value of your home goes up. PLUS you get to refinance at a now lower rate, LOWERING your payments. Since you now have more equity, refinancing will be easier.

If you think this only works for a traditional mortgage buyer and not the cash buyer, you are wrong. Since prices are tied to rates, the cash buyer would need to sell to another cash buyer. BUT, that cash buyer will have other investment opportunites, ie, higher rates on CDs, bond, etc, that he could look at. the home you are selling would have to be priced low to make it attractive to other non-real estate options. (rate of return)

I am not saying rates are going to spike. But rates are artificially low. "Taking Advantage" of low rates now will bite you in the ass later.

Did i add in taxes? nope, even better. Higher prices = higher taxes.

As a home buyer, let rates spike! the higher the better!

Latesummer2009 said...

Hit the nail right on the head blahblahblah! Many forget that it is always better to buy at a lower prices and higher rates, than at higher prices at a lower rates. Govt has kept rates artifically low, TRYING to reinflate the bubble. Those jumping in now with conforming loans to 729K are in for a big suprise IMHO. Who are you going to sell to once rates get back to normal (8-9%), and your stuck with an overinflated price? When we finally see rates increase, prices will go down and that will be the time to buy. Then you can refinance later, once rates drop again.

Anonymous said...

October 31, 2009 10:40 PM:

I don't think $100K - $150K is average household income, even in Santa Monica. I think it's closer to $50K-$70K.

Right?

Isn't THAT the number we should keep in mind when thinking about prices?

Or maybe that's wrong. Maybe we shouldn't be thinking about the average household income in Santa Monica, but the average household income of potential home-buyers in Santa Monica. But what is that?
dog-walker

Anonymous said...

50-70k/worker works out to be 100-150k per household with two adult workers.

speedingpullet said...

A quick perusal of the Santa Monica wiki shows stats for 2007:

Median male income around $56K, female around $43K and household median around 72K.
Family median (ie those who have employed kids) is around $100K

So, even for people with kids bringing in their share of the monthly nut, buying a house doesn't really make much sense when the prices are over $400K.

For a working couple with school-age kids - they'll be hard put to afford much more than $250K, and good luck finding something big enough for a family here for under $250K!
(go see Dr Housing Bubble Blog's 'Real Homes of Genius" entry for Nov 1st, and you'll see why I'm so amused).

Yes, there will always be a small amount of obscenely wealthy people who will buy houses in select areas of Westside.They've done so for decades, and will continue to - but there's not nearly as many of them as you might imagine...

And yes, we will always pay a little over the odds for a 'Sunshine Tax' -our penance for wanting to live in this beautiful city.

But if we're swooning over $700K "starter homes", then this is still an unrealistic and hugely overpriced market, no matter how beautiful and/or desirable the neighbourhood.

Seriously, wake me up when housing prices fall to even twice the National Average. Or three times - we all know how 'special' the Westside is...

Otherwise I'll just keep on renting until we eventually move to another part of the country where it makes financial sense to buy.

Robert said...

To latesummer and others:

I just do not understand what buy signal you are looking for.....prices locally and nationally are stabilizing if not going up. and interest rates are also firming albeit at very low rates.
For instance, just over 3 weeks ago, my new home went into escrow at a rate for 30 years fixed at 5.18%.
Last Thursday the rate was 5.44%. That is 5 perfcent more i would have had to pay for the same house, or another $100,000. plus all the accumulated interested over the 30 year period.
latesummer you suggested that interest rates must stay low or the market will fall apart. who says so? the market already fell apart. what are you looking for in terms of prices and interest rates. when is this low, The Low. To simply expound continuously that the prices on the westside must go down to 2003 or 1999 or whatever is meaningless, especially to people who have a need for a house, have waited for the market to fall apart, and have secured a mortgage rate as low as the USA has seen since World War II.
Please remember 5% mortgages. You will never see them again in your lifetime. Everyone, and i mean everyone will see higher interest rates and inflation in the future.
Someone here wrote that higher rates will kill the market once again. Yes, if you wait for them to rise it will kill your market, your future home.
Higher rates will ensure higher housing prices. Why not buy now and enjoy the ride.
For those who say that there is massive unemployment, I say, 90% of the USA IS working,, and the earnings of future homeowners are not laid off from an assembly line. They re highly trained, educated people---sometimes double wage earners who one day will see the bargains and buy.
Negativity works only so long. We have a very motivated population who want better for their kids and grandkids. If you get down on yourself and on the country there is little hope for you. That is not who we are.

Anonymous said...

robert just stop before you piss everyone off. good for you that you can buy your family a house on the westside. do you also want a dog biscuit with that?

Higher rates will ensure higher housing prices = DEAD WRONG

as for latesummer2009 and his followers, prices will not drop to 2003 levels. They just won't.

A more reasonable outlook would be: prices fall another 10-15% and stay at that level for yrs to come with gov't/bank controlled manipulation.

There's really no reason why a family that earns less than 150k/yr should be able to buy a house on the westside even if the prices come down to 500k for starter homes. It just doesn't make economic sense for them do so esp if they have kids UNLESS they have saved for a few yrs or get help from family. Start paying more attention to IMPORTANT aspects such as help from family members and discipline savings from high earners. These are intangibles that help ppl afford houses on the westside, and NOT hoping that prices will go back down to 2003 prices.

Anonymous said...

Robert, I don't understand your argument that higher interest rates equal higher housing prices...? Higher interest rates means affordability goes down reducing prices. Higher interest rates also means less people are willing to take out debt which also negates your inflation argument...

Anonymous said...

If they raised rates TOMORROW to 9%...

That would crush real estate prices in the westside...

Why? Because NO ONE would be able to afford them at the prices they are at now... Not even millionaires..

It's simple mathematics guys... Do the freaking math!

Now will interest rates rise to 9% tomorrow... no... But that's the statistical average... So if we drift back to 9% over the next 15 years... No one's home will appreciate in value. So what's the point in buying anymore?

Anonymous said...

What was the dramatic change that occurred that home prices in So Cal shot up so much in the late 90s-early 2000s?

Wasn't the weather just as nice in the 1970s and 1980s in So Cal?

What's the deal?

Also if we have a "2012" style earthquake out here... Good luck selling your home after that mess...

Anonymous said...

Robert is a troll. Where is this mythical house you just bought? Who's the lender?

Matthew said...

I've given up on the idea of a home on the WESTSIDE... Mainly because I don't want to live in a 900 sq foot shack.

I'm 29 and my finance and I make combined just under $150K... We both are well-educated.. (her even more than me). I'm a fairly well-paid editor in the entertaiment industry and she works in insurance and is currently underpaid for her skill level, but the job market is horrid at the moment so she's stuck a bit. We both have our highest earning years ahead of us... But we know we want to have kids in the next 2-3 years.

We both want to buy soon.. But our list of wants are pretty high. We want a 3bed/2bath around 1800+ sq feet...If we live in the valley a pool is on our must-have list.. along with a decent yard for BBQing ect. Oh and a good school district is a must too... All of this we want for under $500K.. Ideally closer to $400K... I think that's reasonable. It's not like we want a Mansion.

So our list has been Woodland Hills, westside of Granada Hills (westside near Northridge Granada Hills High), even considering Simi Valley.

Westside just seems over-rated for how over-priced it is...

Robert said...

Robert is a real buyer....deal closes in about a month. I will return to this site the day after closing and tell you the address and you can look up the price somewhere on the web. I am not a broker---just a buyer who moved here recently from another state. If there is an earthquake, i have earthquake insurance. Don't you?
Interest rates are already rising as I wrote.
For the anonymous person who doubts that prices can go up as interest rates go up....give us all a break.
Are you saying that prices never went up over the 64 years since World War II. interest rates were at low of about 4.75% in the late 1940's to 18% in the early 1980's and everyplace in between. your typical westside house at the same time I would guess rose from 25,000 to 2 or 3 million in some areas..all in a generally rising interest rate environment. If someone told you that rates would be around 5%, would it not normally be intuitive that that would be The Buying Opportunity of a lifetime. Someone responded that the price declines have another 10% to go. Who can time such a large purchase so perfectly. The price of housing in general might be down 10%, but we are not buying in large developments where inventory is ever present. I bought because the prices declined dramatically, the rates are low and I found a home I loved.
Now the rates are very low and prices are as low as they have been in many years, and the anonymous writers are scared to death to buy but they surely can demean someone who can be bullish and frespond to the readers of a site called "westsidemeltdown."
mr latesummer....your blog is about yesterday's newspaper. think about a blog called...."realestate iscomingbackslowlybutcomingback.com"

Blah balh blah said...

Robert,

"90% of the population in the USA is working"?????

According to the latest US Employment data, published 2/19/09, and compiled approximately 9 months prior, WELL BEFORE the Unemployment spike, less than 65% of the US population aged 16-65 is currently working.

If you are going to even remotely earn any credibility, get your numbers right. You DO NOT subtract the unemployment rate from 100% and get the number of employed.

Also, although in the long term, prices have gone up for real estate, in periods of increasing inflation home prices have declined. These cycles are quite long, anywhere from 5 to 15 years.

Again, have your info straight.

I personally am waiting for more declines. I am, however, shopping now. If i find something i like at a good price (not a crazy vulture price, just a good price)i will buy it. There are other factors besides price (family, schools, lifestyle, etc). I will not, however be deluded, or try to delude others as to my motivation. If i buy tomorrow, i will fully expect another 10-15% decline. If the price doubles in 12 months, i will be wrong, but happy.

Anonymous said...

Interest rates in 2003 were 5%. In 2007, 6.5%. In those four years prices increased dramatically. Currently, interest rates are 5% while prices have plummeted from 2007. I just refinanced my house at 4.5%. Now is the time to buy or refi.

Anonymous said...

"Interest rates in 2003 were 5%. In 2007, 6.5%. In those four years prices increased dramatically."

lololol And everyone was getting an option ARM with an ultra-low teaser rate...and this caused the greatest financial crash post WWII

GOOD EXAMPLE!

Anonymous said...

"Interest rates in 2003 were 5%. In 2007, 6.5%. In those four years prices increased dramatically."

lololol And everyone was getting an option ARM with an ultra-low teaser rate...and this caused the greatest financial crash post WWII


Everyone, not me. These rates are 30 year fixed with no points. It kinda debunks the myth that prices go down when interest rates go up and vice versa. Remember, when interest rates go up so does inflation, which is reflected in home prices. Even in the seventies home prices appreciated 10% after inflation as interest rates went from 7% to 15%. Many people back then bought in cash so their cash wasn't worthless 12 months later. Historically, real estate is a hedge against inflation.

Anonymous said...

Housing as a hedge against inflation... That does make sense... Especially if we go into hyper- inflation... I still think inflation is 3 years away... So ill be waiting til this spring/ summer to start seriously house hunting ... Another 10% slow season haircut to house prices is definite before a slow rise.... Then explosion with inflation.. But then again... We will all have bigger problems.. But atleast we will have a large asset

Crash Burn said...

Just judging by the amount of unemployed or idle real estate agents who have nothing better to do than to make anonymous posts about how the West Side Real estate marked has "bottomed out", "hit the sweet spot", "really is different", just takes a "doctor married to a lawyer" with a big inheritance in order to afford a starter home next to the projects, I would estimate that Westside housing prices have a lot further to go down. When you start looking at things like "data" then you really start to worry.

I think it is unfortunate that there is so much unemployment going on, but can't help but think your time could be used more productively.

I think LateSummer 2009 was an OK guess, just a guess, no one know how this is going to play out. Maybe they'll start graduating 5,000,000 doctors a year from now on who will all want to live in the West side of LA and prices won't fall.

Anonymous said...

"I bought because the prices declined dramatically, the rates are low and I found a home I loved."

Hey, Robert: Two out of three ain't bad -- Where exactly were the DRAMATIC price drops on the Westside? You have to be in the below $1,000,000 market to see big drops, and even then only for fixer and awkwardly located properties. There is more to come on the downside, and you will enjoy feeling it. If you stay put for 20 years or so I am sure you will be fine, but THAT is a big IF. Best of luck to you, but I am betting on 2010 or 2011 for top quality properties (in PRIME - aka $1.5-$3mm areas) to make the move down closer to reality.

Robert said...

To all the anonymous here, real estate is not a stock with an exact price. Even if the housing prices begin going up, though naysayers will never admit that possibility, you will never know it until months later.
IBM or Exxon quotes or the Dow Jones averages are to the minute, or mili-second. Prices of homes in the "westsidemeltdown" inconveniently do not work that way.
To the contributor above who does not believe that prices have NOT pulled back in the past 3 years, you are beyond help. There is nothing wrong with renting or living with your folks my friend.
To the writer who wrote that in February that only 65 % of Americans were employed, was that survey counting toddlers? I suggest you wait until Friday morning for the announcement of last months unemployment statistics. 10% or so is terrible, but it has little to do with multi-million homes in the area under discussion.

Anonymous said...

Robert -- Happy high-end renter here, with a quick note for you: Just because housing is down from "impossibly crazily disgustingly high" to just plain old "way out of whack high" does not mean that a "dramatic" price drop has happened.

The question you need(ed) to answer (because you are a buyer) is: Why is this house "worth more" than it was in 1999 or 2001?

There is no good answer, and for that reason, you will lose as the market corrects itself. The bubble that is being re-inflated on sub $1.2mm properties is temporary. If you are buying above $1.6mm, there is a way to go on the way down. Sorry, bud.

blahblahblah said...

"To the writer who wrote that in February that only 65 % of Americans were employed, was that survey counting toddlers?"

Robert, read my post again. Its aged 16 to 65. Since you obviously don't know what "Unemploymnet" means in the government numbers, i will explain:

The Unemploymnet Rate is those filing for unemployment claims. If you are out of work, and your unemployment insurance runs out, you are no longer "unemployed". (yes, i think its dumb too, but you gotta know what the number is)

If your benefits run out, or were part-time and dont qualify, or if you work as an under-the-table paid laborer, and you arent working, you are OUT OF THE LABOR FORCE AND DONT QUALIFY AS "UNEMPLOYED".

(Even worse, if you have a new job that pays half, or 25% of your current income, because thats all you can get in a bad labor market, you are EMPLOYED.)

Thats the difference between 65% employment and 10% unemployment. 25% of US people aged 16-65 are not being measure in the work force. So, again, knowing what you are talking about when you post a comment is always helpful.

Jeff said...

Once the government money runs out prices will correct back to normal ratios. Annon 7:41 has it correct when asking what has happend to make prices change since 1999. The answer is only insane loans and the only justifiable answer would be a massively increased median income level. The only question is how long will it take. I'm unfortunatley thinking slow bleed...

Robert said...

Mr Anonymous....on Friday morning at 8:30 EST the Labor Dept will issue its monthly jobs report for October. There are 2 main numbers to look at: one of the unemployment rate which we agree is about 10%. The other rate, which you misunderstand, is the under-employed rate which currently is about 16-17%" Your number of 65 % not working is just plain silly...did you hear this from Glenn Beck?
Since you a renter and not in the market to buy, I suggest you go out one Sunday to the better properties be they condos or houses on the west side and see the action, speak to the realtors and then do further work on your own to see how many fine homes have been sold with multiple offers. Pontificating from your living room, while easy, will not answer these questions.

Anonymous said...

FHA loans have replaced the toxic mortgages given out during the bubble years. Without these, prices would come crashing down. Anyone who reads financial news or even just CNN knows that the FHA default rate has gone through the roof. Unlike a business, the FHA is legally bound to have enough reserve to cover their losses. how long do you think it will be before they tighten their lending guidelines? The FHA was established to provide housing assistance for low income families, but is currently being used to prop up high prices on the westside. For example, and there are many, WestEndLiving, a newly built condo complex in the Marina Del Rey Art Distric is offering FHA loans on their penthouse series priced right at the conforming limit. My wife and I make 200k a year and have 200k in savings, but no matter how we work the number $600k mortgage is beyond us. So we will just wait and buy from the bank after they foreclose on the fools that jumped in at these prices.

Anonymous said...

I agree - today's prices are not sane and not sustainable

That being said, I was fortunate to have sold a few of my properties before the market started to crash in 2006. I am not planning to buy a house in the neighborhood between 15th and 26th North of Montana.

You may not be aware of this, but a really very nice five bedroom house sold in this neighborhood for 2.3 million recently. Down from 3.3 million at the peak. So prices have already come down pretty hard.

I am looking to buy something with four or five bedrooms for around 2.3 million - I want to know what the homes are that have notices of default filed against them in that neighborhood. Perhaps I will contact the banks involved and see if they are interested in a short sale -

if anyone else is carefully following that neighborhood - from 15th to 26th North of Montana, let's start discussing specific houses

thanks

Anonymous said...

Again, I am not saying now is the time to buy. In fact now is probably not the time to buy - 99% of sellers are delusional

That being said, go to http://www.45724th.com/ and see the very nice house that closed at 2.3 million

There is a lot of reason to discuss nice houses for sale in that neighborhood since there are likely to be more of them selling cheap in next few mos

Anonymous said...

Robert,

You can't seem to grasp simple macro economics concepts or simple statical reasoning. This is a good indication of the types of people that are buying now! I, for one, am glad you bought, there will be less competition when the nice houses comes on the market.

roamingirl said...

Hey, who cares if Robert bought a house he's happy with? (Although if you ask me, he sounds a little angry.)

We've got a lot of substantive reasons to believe we're in for further decline. Doesn't mean you can't ignore them, or find a decent value anyway, or buy emotionally and ride it out.

Did you notice how quickly he went from "In your heart you know this is the time to buy" to "I can afford that risk and have an emotional need to own a home here"?

The second sentiment seems like the best reason to buy at the moment, minus the denouncement of others who aren't all in on your emotional risk.

If I find the right value on the right house, I'll buy, too. But "my heart" says there aren't many sustainable prices on the Westside yet, and I really wouldn't mind the rates going up and the prices down first.

Enjoy your house, Robert. A little downside isn't the end of the world.

blah blah blah said...

i already cited where the govt statistic of 65% employment was. God, Robert, you are a dumbass

Anonymous said...

Robert,

Everyone is just really jealous of you. You can buy, and they can't for whatever reasons. Enjoy ur house with your family.

Robert said...

Thank you.

I guess that's the bottom line.

Anonymous said...

JBR said...
Case shiller went up (seasonally and nonseasonally) again. How do we treat that here - do we just pretend that it didnt happen or something?"

No, we understand that that's the headline number. Then we look at the numbers for individual cities and see that L.A. was *down* 12% from 2008.

Sigh -- apparently you werent here for the beat down given to LS2009 about when prices are up in a YOY series. It was called "find the bottom" when prices are down on a YOY basis, yet 2nd derivative was declining.

I can explain it again if you want, but you might want to just ask LS2009 as he probably doesnt want to be embarassed in public once again.