Can Anything Force The Banks Hand?
Here we are into the 5th year of our market decline and nothing has improved to give buyers hope that we are close to the bottom. Delinquencies surged 5.9% YOY in October and an estimated 28.6 % of all mortgages or 14,300,000 mortgages are underwater according to Zillow. If you take into account the 6% selling cost and a minimum 10% down payment on another home, the effective underwater rate swells to 50% or over 25,000,000 mortgages. Those numbers are staggering and don't seem to be slowing down, as prices creep back further in to the early 2000s. Can anything cause the banks to foreclose on delinquent properties and mark to market? Or do we just head down the hill "Japanese Style" and slowly bleed equity, until inflation eventually catches up to our declining prices. The problem with the Japanese scenario is, wages are not keeping up with inflation and are now actually flat or have declined over the last 10 years. Is another 10 years of stagnating wages and creeping inflation (stagflation) in store ? Left up to the banks, this is what they would love to see.
The big problem with zombie banks and zombie homeowners is, it eliminates the move-up market so most people trying to sell, can't and the pool of buyers for higher end properties shrinks. How long before your neighbors say "why should I pump money into a losing proposition, when the banks won't foreclose? As more and more slide underwater, unless the gov't forces the banks to keep a real balance sheet, the housing market will continue to deteriorate.
Let's look at some recent area numbers from Dataquick, YOY, for September.
Beverly Hills 90210
14 sales, $1,455,000 median, (-48.7% ), $530/sqft
Beverlywood 90034
7 sales, $510,000 median, (-41.7%), $347/sqft
Brentwood 90049
19 sales, $1,580,000 median, (-25.1%), $541/sqft
Mar Vista 90066
29 sales, $634,000 median, (-19.2%), $501/sqft
Westwood 90024
4 sales, $995,000 median, (-32.5%), $532/sqft
Malibu 90265
18 sales, $1,475,000 median (-41.0%), $521/sqft
Pacific Palisades 90272
19 sales, $1,500,000 median (-25.0%), $740/sqft
And just for good measure,
Calabasas 91320
16 sales, $1,350,000 median, (-21.3%), $311/sqft
El Segundo 90245
7 sales, $670,000 median, (-24.7%), $429/sqft
Hermosa Beach 90254
10 sales, $1,068,000 median (-37.5%), $465/sqft
Palos VerdesPenninsula 90274
19 sales, $1,199,000 median, (-18.5%), $452/sqft
The number of sales, median price and price per square foot continue dropping. Even with interest rates under 4% , credit keeps tightening and this market gets uglier by the day.
Also, current weekly sales information for Santa Monica is now being posted on Santa Monica RE Meltdown
Posts
84 comments:
I just read that one of the ideas being considered by the bi-partisan committee on budget reduction is eliminating the mortgage deduction for 2nd homes. It seems likely they'll do something about the mortgage deduction -- perhaps lowering the $1.1 million cap on the deduction. It's hard to justify those deductions when they are such give-aways to the wealthy. If they change either one, look out for high-end real estate. Not good at all.
you forgot a few:
Venice 90291 10 $1,150 +66.8%
SM 90402 7 $2,581 +17.6%
Bel-Air 90077 10 $1,524 +21.7%
Rncho P 90064 25 $1,033 +18.0%
Check out Santa Barbara County, it's skyrocketing away!
Carpinteria 93013 3 $3,250 +396.2%
Up almost 400% YOY. LA County is next!!!
LA Times, 11/10/11: Foreclosure activity was up 7% in September because the banks are reasserting themselves after legal delays. 24% of all foreclosure notices in October were in California.
Carpinteria 93013 3 $3,250 +396.2%
Up almost 400% YOY. LA County is next!!!
You are being sarcastic right? There were 3 sales that averaged over $3mil in a city with 13,000 people who's average income is under $60k.
I am a bear, I will admit that this sword cuts both ways. There are just far to few samples to accurately determine YOY price increases or drops. I mean there are about 210 or so sales total for all the areas listed. This includes the missed YOY increases spotted by anon 6:48AM. The population count for these area is about 500,000. Rather than trying to argue on the YOY, I think the sales volum speaks much louder than anything else. Let's say the average family size is about 4. So for about 125,000 families 210 familes bought a house? Put it another way, 0.1% of the population in the above zip codes purchased a home.
Anon 2:34, my point is don't buy in those areas right now. And yes, sales volume is more important. The market is virtually dead right now. If you have homes that have increased in value, come to the conversation with evidence. I would love to hear where you are buying or would suggest buying right now. Instead of attacking, try bringing some real data that proves the point you are trying to make. Would you suggest buying in Malibu, Beverly Hills or Brentwood right now? If so, tell us why. I would love to hear your line of reasoning.
latesummer,
what "real data" have you provided? Do you honestly believe that one zip code in Beverly Hills is down 48%, and Bel-Aire is up 22% YOY?
It's only worth buying in lower priced housing.. Anything under $500K with 4+ bedroom and 2+ baths in good school districts will hold up OK moving forward...
Above that.. look out below.. There are only a small percentage of people that can afford a $500K+ mortgage or want to take the risk..
There are lots of buyers of under $500K homes... A dual income family making $150k a year (fairly common in good school districts).... Can easily afford a $450K home at 3x income.. At 4% interest rates... a $150K family can afford much more than $500K.. but they won't stretch beyond that if they are smart.
Re: "There are lots of buyers of under $500K homes...and a $150K family can afford much more than $500K."
So, taking Santa Monica, for instance:
90402 North of Montana. In the not too distant past, some thought livable homes may drop to $1 million there-- they haven't. The least expensive have been coming in around $1.5 million.
90405 Sunset Park. Livables are coming in around $750K nowadays. Will they get down to $500K like some have said?
And if 90402 ever drops to $1 million and 90405 to $500K, won't those who've been on the sidelines saving their pennies be competing with hundreds of others who want the same deal? (Not to mention those "rich immigrants" and "family wealth" people described in previous posts).
So, I'm thinking that various zip codes/neighborhoods may have a lower threshold that when reached, those who've been on the sidelines start jumping in and the prices start going up again. (More demand, less supply, higher prices.)
The goal is to figure out when that particular threshold is reached for the neighborhood/schools/safety you desire...
Geez, 6:11, keep drinking the cool aid. If you think prices are going up why don't you go out there and buy? Probably because you can't on a realtor's salary. And you know why prices are falling and will continue to fall? Because there is no one on the sidelines and there won't be for many years. The demographic shift alone is going to cause prices to fall for many years. Renting is much smarter and fashionable nowadays. And yes, I could buy one of your precious SM houses with cash, but I'm not stupid.
With move buyers virtually gone, the westside has no where to go but down.
I love the dual income income $150k statement. Google "dual income trap" and find out what the banks don't want you to know.
It's sad, but most bankruptcies and foreclosures happen to married dual income couples with kids. Look it up. Dual income trap... Indeed!
Bottom line : only retards stretch their dual income to buy a house "in a good school district". The first sickness or layoff and they are on the street.
Buy in SM only if you are SINGLE and RICH and can afford to take a loss. Otherwise you are really asking for it.
Latesummer2009
I am the anon that posted the sales volume comments. I am not attacking you at all, but just stating that with the limited number of sales, it's hard to look at usual metrics such as YOY. I think those number exaggerate the decline and makes people think that they can get such deals. I think housing will continue to decline, possibly for a very long time, so buying right now would not be a very smart move at all. My wife and I rent, and will continue to rent until we feel like buying a house will in some ways improve our quality of life.
So, I'm thinking that various zip codes/neighborhoods may have a lower threshold that when reached, those who've been on the sidelines start jumping in and the prices start going up again. (More demand, less supply, higher prices.)
I totally agree with you in that there is much desire to get into such neighbourhoods. It's not the desire that limits the transactions, it's the financial barriers to owning that will determine the price. I would love to see nothing more than going back to the old standard of 20% -25% down to buy a house. Most of my friends are in the $150k range and I am ways surprised that almost none can come up with the 20% down. I will be more interested in buying once the FHA idiots are out of the equation and we go back to the old standard.
If the loan guarantees were at $417,000, we'd see the Westside prices tumble like Jack and Jill. Now they're just tumbling ever so slowly. Eventually, however, prices must come down to reality, which means that prices must reflect the incomes and rents for the locality. In the meantime, it's much better to be a renter -- you can rent the house for about half the cost to rent the money and you have freedome of mobility, plus your financial security is supremely greater.
Don't forget: the monthly cost of home ownership also includes that month's price depreciation. This is one of the reasons why renting is so much cheaper right now.
If you step back and weigh all of the factors related to the real estate market, it's hard not to be pessimistic at the moment.
People are still over their heads with personal debt;
At least 28% of all homes are underwater with their mortgage;
The banks are tightening the standards to qualify for a loan;
There are over 6.5 million houses in some sort of distress (from late payments to defaults);
Kids are coming out of college with over $25,000 in debt;
Baby boomers are retiring and downsizing;
The country isn't producing enough jobs to keep up with population growth let alone bring unemployment down;
The federal government is considering narrowing the tax benefit related to mortgage interest (either lowering the ceiling from $1.1 million or eliminating the deduction completely for 2nd homes);
Low mortgage rates are about the only thing going for this market, but that doesn't help if you can't qualify for a loan.
I'm not a perma-bear and I believe in the long-term success of our economy, but these factors seem to say prices are going to continue to fall for some time.
If someone can give me a list of positive factors that outweighs the list above, I want to hear it.
"If the loan guarantees were at $417,000, we'd see the Westside prices tumble like Jack and Jill."
I think many of you bears are underestimating how many people in LA make a LOT of money. And the vast majority of those people want to live on the westside.
"If someone can give me a list of positive factors that outweighs the list above, I want to hear it."
There are lots of people who make a lot more than you do, and your list has very little impact on what they do.
"There are lots of people who make a lot more than you do, and your list has very little impact on what they do."
Can you please quantify this generalized statement? And what makes you think people with money will make a bad decision on buying real estate right now? By the way, don't forget to include the list of all of those positive reasons for buying right now.
How do you know how much money I make? People who make good money are often prudent with their money. In this case, I prefer to wait to buy a house because of the factors listed above. I am looking forward to buying in 2 to 3 years, after we see how everything plays out and where prices settle. There is too much uncertainty right now -- too much downward pressure.
What about this strategy? Figure out what neighborhood you want to buy in and keep tabs on how prices and supply are moving. You will never be able to time a "bottom" because prices will have had to rise for you to know that the bottom has already passed.
Watch to see if home prices are rising at the same time that the number of homes for sale is declining in the neighborhood you like. When that starts happening, wait a year or so and be careful about any special incentives that crop up (like the first time home buyers credit which artificially propped up prices). You may ultimately buy at a higher price than at the actual bottom, but at least you will be more confident that prices are not continuing to fall. And, let's face it, they're still falling.
Personally I think house prices are going to fall for a couple of years and then they're going to hit bottom and just stay there. I don't believe there will be a bounce scenario. There's no magic turn-around coming for the economy. Prices are going to fall for a couple more years and then stagnate for a long time.
I went to a party on Friday, North of Montana.
It was an eyeopener.
The couples there were affluent, with small children, primarily in Franklin Elementary school.
I personally spoke to about 10 couples that night. I told them I was interested in buying someday in Santa Monica.
Of the 10 couples, NINE of them told me they would never be NOMO if it were not for their parents money buying them in.
This is something I don not feel is reported properly. It is not tracked.
All of these posts about unemployment, stock market losses, etc.
None of it mattered to these homeowners at that party.
?????
That could be very well true in families with small children that live in NOMO. But does that mean all homes have small children in NOMO? What makes Franklin so much better than other SM schools? Could it be real estate agent hype, or do they have the magic public school formula?
Realtors are not to be trusted. But franklin is generally considered to be the best public school on the w side
And why is that. What makes it so different than other public schools? Say Roosevelt for example.
I'm trying to gauge whether we're going to have a V-shaped real estate recovery, or whether the market is going to flat-line. Any thoughts?
More like a "U" shape at best. But probably an "L" shape, once we hit bottom and then flatline over the next 5 years.
Franklin vs roosevelt? Just visit the two and you will see
10:59, stop with the realtor bs. I live in the neighborhood and you are full of it. Just stop pretending and bsing.
Not even an L. It's going to be like Japan -- another 15 years of a slow, tedious decline.
Why is it so hard for some here to believe that wealthy parents may help their kids buy a home in a desirable neighborhood with fine schools? If I were in the top 1 percent or even the 5 or 10 percent and had the money, I might very well do that too. And, I'm neither 10:59 am above nor a realtor. Parents usually do what they can for their kids, and, if they have money, they help out.
the other thing to consider about (some) grandparents helping out their children to live in santa monica is that if these children purchased homes where they could afford it is likely they would live far away from the westside. If you assume the grandparents live on the westside they want the grandchildren nearby where they can see them often not the other side of the 405 or outside the county.
If I had the money (lots of it) and were older I'd give/loan my child a lot to have my grandchild 5 minutes drive away as opposed to 45 minutes or more
Time to examine the "Franklin" premium and find out if it really is worth $200 - $300 grand more than being in the Roosevelt school district. It all has to do with parent involvement. Save yourself a nice chunk of change and get involved with your child's education. You have good and bad teachers in all public schools. It's the nature of the beast. Real estate agents are laughing all the way to the bank as they prey on parent fears that their child will fall into inferior hands. Those type of sales are known as "slam dunks" in the real estate business.
Now let's hear all the reasons why Franklin is worth 2-3 times the price of private school.
As a teacher in the Santa Monica schools, I can say with certainty that you have indeed figured out one of the secrets of the Santa Monica schools. The actual content of the education that children get is the same at Franklin vs the other schools. That is to say that the same material is taught at the same speed. And since funding is provided by the state, the actual school funding is similar at all of the schools.
The PTA at Franklin is active in raising money so if your student is at Franklin then a little more money is spent on him or her - but really these dollars do not have any impact on the knowledge that the kids pick up.
I would say that if you send your kids to Franklin they will have exactly the same knowledge base that they would have if you send them to another Santa Monica school
The benefit of going to Franklin is not in the actual learning, but in the habits and attitudes of your child's peers. The parents of children at Franklin tend to work in more intellectual professions. They impart on their children a bit more love of learning, love of knowledge. There is a subtly different value system among the parents at Franklin and this filters down to the kids.
So once again, do NOT expect your child to have more knowledge or a higher IQ if you send him or her to Franklin. Just expect a subtly different value system
Latesummer you should be familiar with the academic literature showing how much influence a child's peers have over him, if the peers have the right value system and future time orientation it can have a big impact.
So I guess peer influence is more important than parental influence and that justifies paying up to $50,000/year for your house, while your child goes to Franklin for K-5. If your so worried about the "value" system of Roosevelt, why don't you put them in private school for half the price?
Putting your kids in public school has more value than money. You know the kids/parents in your community and it adds to making a good neighborhood stronger.
Also, when you send your kid to private school, they don't form strong bonds with kids on the block who don't go to the same school.
Its $25-30 grand per kid per year for private...why not ride out 9 years through Franklin and Lincoln MS for 2 kids and save yourself $450K?
Hell, my kid went through SAMOHI and got into an Ivy league college...save yourself $650K
I agree that the real estate recovery is going to look more like a U or an L than a V. There doesn't seem to be anything on the horizon that is going to pull the economy out of the doldrums. Now Europe is falling like dominoes. Things are going to remain soft for quite a while. Prices are going to continue for fall, and then bounce along the bottom.
Europe falling like dominoes?? Dont believe the media scare tactics. The euro is worth 40% more than th us dollar. The real problems ar right here at home!
think about it
rent a three bedroom town house in Franklin district for 5k a month or 60k per year
with the town house you get to send two kids to franklin
you save 50k per year in private school tuition
net real honest cost to live in Franklin is only 10k per year
Renting in Franklin is a bargain.
Ignore the turds. rent don't buy
Anon 6:25, have you read the business news this past week? The debt crisis in Europe is spreading to Italy, the 3rd biggest economy in Europe and (unbelievably)the 3rd biggest bond market in the world. It sounds rather serious.
Anon 7:52 pm. The news is propaganda. Italy and euro will not crash. If this is true why is the euro worth 40% more than us dollar? Our media is trying to scare investors to buy us dollars.
(Reuters, 11/14/11) - German Chancellor Angela Merkel said on Monday that Europe could be living through its toughest hour since World War Two as new leaders in Italy and Greece rushed to form governments and limit the damage from the euro zone debt crisis.
(CNN, 11/14/11) -- The Euro crisis is not just a Greek crisis, or an Italian crisis, or now even a French crisis. It is an American crisis, too, a crisis that may thrust the U.S. economy back into recession in 2012.
According to the State Controller, California ended last fiscal year with a cash deficit of $8.2 billion. The combined current year cash deficit stands at $20.3 billion. Those deficits are being covered with $14.9 billion of internal borrowing (temporary loans from special funds) and $5.4 billion of external borrowing.
This does not bode well for the economy. We are going to see spending cuts, tax increases, or both. Not good for the economy. Not good for real estate.
No move up buyers! And the prayer for "wealthy parents" is a joke. Can you say "crater"?
It's not wealthy parents, it's wealthy foreigners!!
Meanwhile, there is virtually no good inventory in any desirable westside neighborhood.
Has anyone seen 1321 LINDA FLORA DR, BEL AIR 90049? 4,452 square feet, giant lot, prime location -- it's a short sale, $2.59 million. Seems like a very low price.
In a study released Oct. 31, ratings firm Moody's said that based on its analysis of mortgage-backed bond portfolios, homeowners with jumbo mortgages now constitute "greater strategic default risk" than any other type of borrowers, including subprime.
Interesting. So people with money are not stupid. In fact they are smarter than most with their money. Probably why they have more and are more likely to do the strategic default. So what does that say about the westside?
You didn't quantify the level of strategic default risk- wouldn't that be kinda sorta maybe relevant??? And assuming what you wrote is even true, maybe it's higher because all of the subprime people have already strategically defaulted.
latesummer,
how many posts are you going to delete?
You didn't quantify the level of strategic default risk- wouldn't that be kinda sorta maybe relevant??? And assuming what you wrote is even true, maybe it's higher because all of the subprime people have already strategically defaulted.
My bad. Here is the link to the full article, you can read it yourself.
http://www.latimes.com/business/realestate/la-fi-harney-20111113,0,6538728.story
November 15, 2011 10:11 AM
this post smells like possible strategic default and RE Spirit.... Checked it out on RedFin - not sure how $2.5mm is a bargain here. Maybe "market" - typical, nothing unusual here folks, keep movin'.
LA Times (11/16/11): "...higher-priced home sales fell in Southern California in October in the wake of the federal government's moves to shrink the size of mortgages it will back.... sales of more expensive homes took a dive.... Overall, the median price was $270,000 in October... the lowest point since January, a 3.6% decline from September and a 4.6% drop from October 2010."
A 3.6% price decline in one month!
Not to mention a 71% decline in the homes sold in the $625,000 - $729,000 market. Gov't support is the only leg left standing.
What phase do you think the westside market is in? I think for many it is still the denial stage.
Associated Press, 11/17/11: Millions of taxpayers who take advantage of deductions for mortgage interest, charitable donations and state and local taxes would be targeted for potential tax hikes under a GOP plan to raise taxes by $290 billion over the next decade to help reduce the nation's deficit.
Interesting article.
However, in areas that had strong housing appreciation before the collapse, such as California and Nevada, the opposite is true. In these areas, middle- and higher-income borrowers have been most likely to fall into foreclosure, according to CRL's study of 27 million mortgages over five years.
http://latimesblogs.latimes.com/money_co/2011/11/study-risky-loans-punished-the-rich-as-well-as-the-poor.html
Do sm schools still accept kids from outside sm?
Anon 10:05 -
No, as far as I know you need to reside in SM or work for the City of SM full time to have a kid enrolled.
Since SAMOHI is the only HS in the City, all the kids end up there, swelling enrollment to 3400 kids for a school meant for 2600.
However, the teachers union depends on # of kids to keep their teachers employed. So a drop of enrollment is seen as bad and they might look to open up to out of district permits again soon.
Doesn't the Santa Monica school district get $$$ from the state for each out of district kid they accept
I have heard that if you live in a single family house in Culver City and both parents work in Santa Monica, you just have to show Santa Monica proof that you work in Santa Monica and they will let your kid in to the schools.
The state pays an extra incremental 9 thousand dollars for each extra kid
Anyone confirm this please
Here is the SMMUSD policy
http://www.smmusd.org/StudentServices/permit_info.html
any thoughts about Obama reinstating the FHA loan Amount to $729K?
http://latimesblogs.latimes.com/money_co/2011/11/fha-loan-sizes-are-back-up-for-higher-cost-markets-like-california.html
Sounds like the Feds realized that if you lower the jumbo loan amount to $629,000, there's nothing holding the market up.
any thoughts about Obama reinstating the FHA loan Amount to $729K?
Where to begin. First of all, how much extra per month would the fee for $700k house be? You still have to verify income to debt ratio for the FHA no? So what does your income have to look like to get the $700k loan? The FHA is so screwed, they just might need a bailout very soon.
The government will do whatever they can to prop up this house of cards. In the end it won't matter because prices will adjust to reflect local incomes.
Foreign money, mom and dad money, etc. will only delay the inevitable. For proof look to Japan - 25 years of real estate decline and counting!
If the stock market keeps tanking like this, mom and dad and the rich foreigners aren't going to be able to buy junion a million dollar house on the west side anyway.
I'm not going to even consider buying until the govt takes the $729k support away because when that support does fall away prices on the westside are sure to tank. Patience is the only way to play this market. Don't get left holding the bag!
Keep on fighting the Fed, and let me know how that works out for you.
"I'm not going to even consider buying until the govt takes the $729k support away because when that support does fall away prices on the westside are sure to tank. Patience is the only way to play this market. Don't get left holding the bag!"
consider too how long that may be and how much rent you pay in the interim:
If your rent is 2500mo and the govt keeps the policy in place for 5 years, you will have paid 150K in rent. Will the prices fall more than 150K to justify your waiting?
If its 10 years, you will have paid 300K in rent. Will the prices then fall more than 300K to justify your waiting?
Now I know, I know, que the adhominem attacks about how im underwater and or a realtard. Once thats done with, why dont you consider the limits you will go to to wait out some BS policy that may or may not have the impact some envision it to have.
Dont get me wrong. If you cannot afford to buy now, it makes sense to continue to rent - possibly indefinitely. There is no problem in doing so.
However, for those who (a) can buy and (b) will buy at some point, you should consider how much more you will pay in rent waiting for some far off 5-10-15 year expiration of some policy before you buy. What is your threshold?
If your rent is 2500mo and the govt keeps the policy in place for 5 years, you will have paid 150K in rent. Will the prices fall more than 150K to justify your waiting?
Yes. I am betting that it will, so I will gladly put $150k where my mouth is. Besides, the bs about throwing money away on rent really is a spin. You gotta live somewhere. When you buy a car, do you consider that as throwing $30k away? When you buy a burger do you consider that throwing $5 away? No because it's a consumption. While I am not suggesting that buying a house is purely consumption, I am saying that renting is throwing money away is pure financial bs.
Also, the fed is not all mighty, they can print all the money they want, but markets will always prevail. Meaning there are market reactions that will offset each of their moves. It will take time for all this to play out, so be patient.
I have money to buy a house but I prefer to rent for now and probably for at least another 2 to 3 years. Buying now would be throwing my money away. Even technically, for those who have an amortizing mortgage (many are interest only), there's very little equity built up during the first 5 years. Anyway, prices are tanking and there's so much uncertainty about government polity -- not just the jumbo loan threashold, but more importantly, the mortgage interest tax break, which many experts believe will be reduced when the country finallly gets serious about debt reduction after the election. There seem to be only downside risks ahead. I'm very happy to be rending, particularly when I talk to my friends that are carrying fat mortgages as they watch their equity disappear.
"When you buy a car, do you consider that as throwing $30k away?"
No, but most financial advisors consider leasing a car to be throwing money away.
No, but most financial advisors consider leasing a car to be throwing money away.
Agreed, but you cannot compare renting a house to leasing a car.
I think a more fair comparison to renting a house would be renting a car. When you rent a car or house you don't loose the downpayment. You don't have to pay for tax or tags or registration. You don't have to pay for repairs. Only the rental charge and gas.
Leasing a car is more like buying with an interest only loan or ARM or something of that nature. You have to put a downpayment plus fees. Then you have to pay for tax and repairs, and in a length of time you have to return you car or house and loose the money you have put into it.
I have to agree that leasing a car that you cannot afford to buy is the biggest waste of money but so is buying a house you cannot afford with interest only loans or such.
Another interesting analogy we can make is this. Renting a car is more expensive than buying a car and or leasing a car. Historically, it's been more expensive to rent than to buy a home. But right now, it is actually much cheaper to rent than to buy almost 2x cheaper. So if you can rent a car for 2x cheaper than buying a new car, what would you do?
Would you also consider renting that car throwing money away or saving money? Now granted that cars never appreciate in value and your house may or may not appreciate but you get my point.
Forget about the cars. If you have a long term mortgage even with the tax deduction most of the payment in the early years is going towards paying the interest to bankers. A smaller portion is going to the principal. And if you overpaid for the house it's possible the house value is declining faster than you're paying down the principal.
Therefore all the talk about renting being a waste of money is misleading. It all depends on how you are financing the purchase. And if it was really true that the houses on the westside were bought with family money/rich foreigners you wouldn't see foreclosures/short sales/stale long term overpriced listings.
Plus I can rent the house for half the monthly payment!! Buying now is stupid.
There are renters and then there are the 1 percenters. Recently, I've seen several Westside MLS listings (in Beverly HIlls and West Hollywood) with statements like "Cash transactions are subject to special deed restrictions for 60 days."
Is some governmental agency now requiring realtors to put this in listings? Does this mean 1 percenters are swooping in gobbling up the "deals" that many have been patiently waiting for with their 20 percent downpayments, which mean nothing when there's all cash?
What's going on here?
I'm at .01 % and I wouldn't buy in this market. That's why I'm a .01%er.
First of all, it is not accurate to say that renting is cheaper than buying.
In most of America right now, buying is cheaper than renting. In most of America it makes more sense to buy than to rent.
That being said, on the West side of Los Angeles in general and in Franklin specifically it can cost 2 times as much to own as to rent.
Renting makes more sense.
And when you do the math, renting in Franklin for $60k per year allows you to put children in to Franklin schools and save $50k per year in private school tuition
So the net honest real cost of renting in Franklin is only $10k per year. A bargain. That is why the smart people are RENTING in franklin not buying in Franklin
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