California prices all time high!?

[cashman]

Latest DataQuick article shows record prices for California February.

http://www.dqnews.com/RRSCA0307.shtm

I can’t f#*%ing believe this! Look at LA County, up over 7 percent! Is this some sort of alternate reality going on here?

[one_muggle]

Give it a bit more time. For my area (San Gabriel Foothills) I have never seen so many For Sale AND For Rent signs, nor have I ever seen it take so long for an otherwise good house to sell. I suspect a couple of things are going on:
1) The current labor market it freakin tight here–we are scraping the barrel looking for highly skilled technicians and engineers. Anyone smart enough with numbers (and you hope your engineers are) can see that even with a six figure salary, it is not such a good deal when houses here start at about $800k. Long term, this will hurt the area, but short term, people feel VERY secure in their jobs–hence risk taking is high.
2) Suicide loans–remember they only started going away a couple weeks ago (I know it seems like longer).
3) Some otherwise smart people I know, who were waiting for years to buy, just pulled the trigger. They claimed to get great deals during the recent “Buyer’s Market”.
4) Schiller effect. When I watch price/sqft it has been sliding downward over the past year. People are (or were) still trading expensive houses to each other from HUGE amounts of equity made over the past 36 months. The market for starter homes here is very quiet. This sends the median up as the lower priced homes stop selling.
Think about it: The 100% LTV and similar loans are GONE. Who do you know that can save $160k in cash to put up a downpayment for a starter home around here(without first selling a home)?

The water cooler attitude is still “I can’t wait for the housng market to drop so that I can buy a home (or second or third).” WHen the attitude shifts towards fear–that will be the time to look for dropping prices. As job losses start, some people will sell their homes and flee the region as fast as they can. Once 20/20 shows re-runs of the 90’s and TNT shows a ‘Falling Down’ marathon the slow but steady flow of what is left of the middle class in LA, likely will rocket.
God forbid we have a real earthquake.
I had left the area a couple years ago for business and the movers said that for every five trucks they send out of CA, three come back empty.

BTW: I’ve been getting warnings from my brokerage house: “The last recession caused the S&P to drop 30-40% IS your portfolio ready?”. It’s really hitting the fan–and possibly worse then I had thought.

-one muggle

[noone]

Just keep reading this part over and over:

Adjusted for inflation, current payments are 8.3 percent above typical payments in the spring of 1989, the peak of the prior real estate cycle.

[cashman]

I heard on the radio today that California is expected to add another 15 million residents by the year 2030, of which two thirds will be right here in good ol’ SoCal. I know that’s possible, but is it probable? And if so, wouldn’t that put upward pressure on housing prices, or at the very least keep them from falling very much? People wouldn’t keep moving here if they don’t have jobs or a place to live, would they? Or would they.

[LA_Renter]

Right now there is a net out migration from the state. Much of this is due to housing costs. IMO the housing correction is happening and will get much worse before it gets better. This will be a drag on the economy which can sustain the net out migration we are currently seeing. Once this correction plays out, California will go back to being California. Population growth will resume and businesses will want to be based here again. So can California add 15 million by 2030, sure its possible. Th next 5 to 7 years will not see much growth though. Of course this is my opinion.

[Author]

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