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August 17, 2006 at 1:17 PM in reply to: The Real Story Behind the Los Angeles County 6.6% Median Price Increase #32187August 17, 2006 at 1:10 PM in reply to: The Real Story Behind the Los Angeles County 6.6% Median Price Increase #32186
socalarm
Participantflogging a dead horse here, but i think rent is really crucial above all other parameters. speaking from my peer – 30 something service professionals working in LA, household income 110k+ – if you can rent a decent 2-3bed place for under $2500, most people would stop considering a purchase. until that happens, there will be enough serious people considering real estate. i know a lot of people who didn’t buy in this market but will take the plunge very soon. it’s still a herd mentality in either direction. the moment they see their friends purchase they will assume the market has bottomed out.
i don’t think it’s the price as much as the idea of the price. “am i buying at a good time?”
the flippers and the starters are obviously going to get burnt. most of the blue collar segment was chased out by the bubble here. the people who bought these homes are likely to have more stable income and reasons to stay. until rents dive in those areas i don’t see a total bloodbath (don’t kill me i’m just assuming from first hand experience and can be wrong)…August 16, 2006 at 8:39 PM in reply to: The Real Story Behind the Los Angeles County 6.6% Median Price Increase #32098Participanti agree. that’s what we did just on the cusp of the vertical climb. most of our neighbors had also bought their properties 20 years ago because they’d been priced out of the ‘gentrified’ areas.
i don’t know about smaller cities in california, but people in LA are still pretty open to living in less desirable areas. places like silverlake, echo park and mt. washington emerged from such emigrations out of the westside. they were and still are pretty edgy but people will not blink before considering an expensive home next to a crackhouse.
i think there are still too many overpriced rentals on the westside, and the P/E ratios are not as crazy as in smaller places like san diego.
not to doubt that there will be a slide here, just that it will probably take longer to reach the metro…Participantlol. NAR feng shui. it probably is, but we’re beginning the listing process in a few weeks. he’s researching the comps this week. i guess he means by the time the buying happens it will have been two months. i don’t think he’s saying anything different. this will easily take till thanksgiving.
my neighbor has been trying to sell his house for three months. he overpriced the hell out of it (815k), put it on the market in summer, then cut the price like crazy (730) and it’s still sitting there. his ludicrous sign says ‘price REDUCED’ and ‘buy me i’m gorgeous’ in case you thought you couldn’t get both gorgeous and cheap. it’s resembling the crossdressers who frequent our street corner. i have to love this city. i’m trying to sell a million dollar home. a house opposite our street has a family of 15 that hangs washing to dry on a tin roof and hookers park their car on our street. and people who visit say “how did you find such a pretty little street?”
maybe the broker’s cracking up at home thinking of me…Participantour agent came over today with his team — they work together and pool their resources.
they estimated anywhere between 850 to 1.1. that’s a huge variation, but the paradox is this. it’s a great house in an okay neighborhood. so in a way the comps aren’t similar.
he wants to price it at the lower end – like 900, but wants to wait for thanksgiving and use this period as a ‘run-up’ to market it. he’s sold a lot of high profile homes and is known for selling stuff like this, and he was very careful in repeating to me he wouldn’t ask me to sell at some outrageous price because that’s not how he does business. so far i like his approach.
he says traditionally october is much better than august and since the fed paused the edge has abated (temporarily for now i suppose)…Participantthanks. i use zillow a lot, though it changes the value dramatically if you include your remodel budget.
also, since staying for me technically means dipping into a saving account, i’m really choosing house over savings. i’m self employed and if income slows down in the future it may not be the best investment. seen from that POV, i’d rather have savings but live in a rental.
i agree it is about 6 months after the party’s over, but even if i get january values (idle assumption) i don’t mind. i’m only back by 10 months, and i had a nice space to live in the meantime.
my biggest worry is getting a buyer with 5% down…LA has no shortage of people big on ambitions and short on fundamentals.Participantyou’re right i’m more on the sell side, though i’m open to counter arguments.
i mentioned the 400k figure since that is a comfortable profit with which to return to RE in a year. i agree, it isn’t about the amount, but with anything less (300k) it will all get absorbed in the new house+remodel, judging from my remodel experience.
also, i plan to sell all my furniture and literally move out with basic stuff like books, computers, necessities. minimize moving hassles.
if i stay, my ARM resets and payment goes up. i have saved for that eventuality but can’t see why i should use it now.
if i rent, my payments go down substantially, my tax liability goes up marginally, and i earn reasonable interest by not buying for a year. by early 2008, the picture should be clearer either way. in the rosiest scenario, if RE has plateaued, i could still buy an entry level home (same as before) with the capital i created here. if RE has plummetted, even with a high inerest loan, i could put more money down and bear the increased cost. i will buy to move in permanently if needed.
i understand these sound vague without numbers, and honestly i haven’t run them diligently. but based on mortgage calculators i can’t see how i gain by staying here and paying more for an increasingly turbulent asset.Participantgreat points. i did run some similar numbers earlier, except for some differences in the situation. i didn’t mention them clearly before or at all, so my fault. here goes:
1. i want to rent for a year, probably travel for two months without worrying about mortgage, taxes and maintenance. we’re still young with no kids and can take the chance.
2. i don’t want to net less than 400k. that means the absolute lowest offer i could consider would be 950k. anything less, you’re absolutely right, i will stay put.
3. my wife and i have our own small business, so far live/work from home. comfy but not workable in the long run. i’d like to focus on leasing a commercial space, business development, possibly hiring, etc to grow.
4. i could leave the profit in a CD or investment for RE only. our regular income would pay for rental+commercial space. meanwhile a CD would guarantee 6 or 7%, so i would probably gain more than sitting through a 3-5 year slump.
5. i could use previous construction experience in value engineering the second project. contractors are also far more eager to work well in a down market, materials are cheaper. i will only buy a 400k property, regardless of the market situation.once my ARM resets, i will be able to pay but i can kiss 3 and 4 goodbye, and keep getting stretched to survive the slump…
Participantvcjim. i’m near culver city, but in metropolitan LA, which tends to have lower values. i see ‘for sale’ signs slowly increasing. most of them seem to be in the better areas, so i think their sale could lead to better comps.
no such reality. thanks, i’m really happy you stuck your neck out for the contrarian view. that helps me a lot. my theory is this. i moved the place ‘up’ one category from wretched first home to a desirable place to live in. in a sense i created supply for a higher end category which has alway sbeen limited, and i assume less prone to the vicissitudes of RE values. i may not make a loss on the place, but wouldn’t i lose the chance to maximize my profit at least within the next 3-5 years, by not selling now ? again, contrarian views are welcomed. i’m still working on my rationale.
Participantthanks, you’re right about that. i did try last year but they rank at the bottom of lender ratings (i checked a survey later) and they resoundingly said non !
i’m at 500k with my mortgage, and i’m assuming my home value is currently about twice that based on fundamentals. large lot, impeccable construction, quiet street. i still think the tsunami will take time to reach this category. not saying if, just when. and i want to eject from RE before it happens in this city. backpack and travel to return in 6 months and get back in if it’s a ‘soft landing’. if it isn’t i can’t lose by renting.
thanks PD. i checked online and it said there are two kinds of prepay penalties – ‘hard’ and ‘soft’. the former does not distinguish between a sale and a refi. i suppose you had a soft penalty clause. with my lender i’d put the chances at zero. they’re the quintessential predators.
i just hope our buyer is not the ARM kind. ‘the greater fool’ theory depresses me and i’d rather someone with real savings bought it…Participantthanks,
it’s b. they calculate 6 months worth of interest. there are other factors and i forget the exact method but it translates to roughly that basis.
of course, relative to the way prices are plummeting or about to, that figure is paltry.
if in a bind, i have the means to refinance but i don’t think it’s worth it any more to invest in “you can’t lose with housing”ParticipantARM background. we bought a fixer with 5% down. we had no debts, no loans, sterling credit. bought under the market value in ’03, lower by 100k. put in that extra 100k in extensive remodeling. taking out those loans however, dinged our credit really badly. that left us in a temporary debt hole and we had to ultimately settle for a refinance with a 2/1 ARM that resets this fall and has a 6 month prepay. the bank has a reputation for being the worst of the subprime lenders.
i have taken care to keep track of my reset period, though i believe i’m not the typical ARM holder. it helped me come out of my temporary construction debt. i have kept an amount aside for the ‘missing’ principal. the house value has meanwhile gone up to twice our outstanding loan. it seems as good a time as any. but i wonder if already it’s too late out here. but like i said before, i don’t think anybody here cares to learn from other markets…Participantsorry, it never showed the complete post and i couldn’t get back in to edit it.
to continue the thought. is metropolitan LA relatively more insulated than smaller cities? by the time the tsunami reaches here, won’t it have affected all other places already?
we own a SFR. if we sell it this fall, i can’t say if i’m timing it really badly or getting out in the nick of time.
i couldn’t get out earlier because my ARM resets this fall… -
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